DTN Before The Bell Grains

Wheat and Corn Lower, Soybeans Stable Ahead of USDA June Report

Dana Mantini
By  Dana Mantini , Senior Market Analyst
(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

Following Monday's 78-point gain in the Dow Jones industrial, Dow futures are again higher early Tuesday - up 143 points. July crude oil is up 66 cents per barrel, the U.S. dollar index is up .0380, and August gold is down $2.80 an ounce.

Other Markets:

Dow Jones: Higher
U.S. Dollar Index: Higher
Gold: Lower
Crude Oil: Higher

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Corn:

Ahead of Tuesday's all-important June USDA report, corn is under pressure and once again approaching that open chart gap on July at $4.04 3/4. USDA's Crop Progress report showed corn planting 83% done, in line with the average guess, but well behind the average pace of 99%. Several key states made major planting progress last week. Conditions at 59% good to excellent are the lowest opening conditions dating back 17 years. The radar is mostly clear and should stay that way for much of the week, allowing much planting to finish. There is an estimated 15.6 million acres, based on intentions, to complete. Indiana, Michigan, Ohio and South Dakota are the states furthest behind the average planting pace. Tuesday's USDA report is widely expected to show cuts in both acreage and yields, but nowhere near what some private analysts are already penciling in. U.S. corn 2018-2019 ending stocks are expected to move higher as demand is cut in the old-crop slot, but the average estimate for new-crop carryout is pegged at 1.731 billion bushels compared to 2.485 bb in May; private analyst estimates well below that. World corn stocks at 301.6 mmt on a pre-report estimate, compares to 314.7 mmt in May. Once the acreage and yield are revealed, it is likely the market reverts back to weather and demand in coming weeks. Ag Rural in Brazil raised their second corn crop (safrinha) production by 2.2 mmt, and competition for U.S. exports will remain formidable. South Korea's MFG reportedly bought 70,000 mt of corn on Monday and likely from South America for October, and South Korea's NOFI is said to have picked up 68,000 mt of corn for December, also likely South American. Managed money funds have covered all of their once record net short and now are thought to be long corn futures. Look for the gap areas of $4.04 3/4 on July and $4.20 on December to be the next support areas. DTN's National Corn Index closed at $3.91 on Monday, with an average basis of 25 cents under July.

Soybeans:

Soybeans are slightly lower again and both July and November are hovering just above their 20-day moving averages, threatening to break down and fill the remaining open chart gaps. Soybean planting is 60% done as of Sunday, and that compares to a trade estimate of 56%, and the average planting pace of 88%. Soybean acreage and yield, unlike corn, have not been cut much, and the USDA report at 11 a.m. CDT is likely to show production close to that of May, and world stocks are expected to increase to an estimated 114.7 mmt from 113.1 mmt in May. Aside from the very slow planting pace, soybeans have little in the way of bullish news with slack demand, an ending stocks number near 1-billion bushels, a world-record supply, and the prospect for more acres to be shifted to soybeans all weighing on prices. The trade expects U.S. old-crop export demand could be reduced in Tuesday's report. U.S. soybeans remain priced cheaper than Brazil and Argentine beans to non-China destinations (no tariffs), but the loss of China exports, and the impact of demand-dampening African swine fever (ASF) continue to pressure soy. Another case of ASF was reported in a southern province of China on Monday. There is a lot of trade talk that U.S. farmers have record old-crop stocks of soybeans they need to move by August. At least China continues to move part of the 245 million bushels of unshipped sales each week, shipping out nearly 15 mb last week. Look for $8.60 to be the area of support on November beans, while the $8.90 to $9.00 area is likely to be resistance. Managed money funds are thought to still be net short over 120,000 contracts of soybeans as of Monday. DTN's National Soybean Index closed at $7.79 and reflects an average basis of 80 cents under July.

Wheat:

Wheat is lower to begin with Kansas City July just above the 20-day moving average. With a clear radar Tuesday, hard red winter (HRW) harvest should advance, but Oklahoma is just 4% harvested compared to 32% average due to heavy rains and flooding. Winter wheat conditions remained unchanged at 64% good to excellent, with conditions even improving in some key states, while spring wheat condition, with 97% planted, is 81% good to excellent, the best rating since 2010. While radar is clear Tuesday, there are still heavy rains expected in the 7-day forecast likely for Kansas, Oklahoma, Missouri and Arkansas -- four states that do not need any more rains. Tuesday's USDA report is likely to keep U.S. wheat production close to that of May with world wheat production likely to be a bearish input. Dryness and heat in Russia, Canada and Australia will be closely watched, but recent rains in some of those areas are helping. DTN's National HRW Index closed at $4.34, and the average basis is at 21 cents under July.

Dana Mantini can be reached at dana.mantini@dtn.com

FollowDana on Twitter @mantini_r

(CZ)

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Dana Mantini