DTN Early Word Grains
Grains Mixed to Higher as Wet Weather Concerns Persist
July corn is up 5 1/2 cents per bushel, July soybeans are up 4 cents, and July K.C. wheat is down 3/4 cents.
CME Globex Recap:Equity markets are mixed on Thursday and the energy complex is recovering after WTI crude oil slipped into a bear market for the year after falling 20% from its April peak. Crude oil supplies remain plentiful with weekly stocks in the U.S. almost 60 million barrels larger than the same week a year ago, and nearing the highest level of the last five years. Grains are mixed to firmer with row crops higher and wheat contracts slightly easier. Bulls are starting to express more concern over the number of soybean acres left to plant and the current forecast putting rain over the central and Eastern Corn Belt. The soybean market has a long way to go before it will entertain fundamentals as supportive as the corn market, but there is no better way to curb excessive supply than drastically reduce production from one year to the next.
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Previous closes on Wednesday showed the Dow Jones Industrial Average down 43.68 at 26,004.83 and the S&P 500 down 5.88 at 2,885.72 while the 10-year Treasury yield ended at 2.127%. Early Thursday, the June DJIA futures are up 74 points. Asian markets are mixed with Japan's Nikkei 225 down 97.72 (-0.46%) and China's Shanghai Composite up 1.36 points (0.05%). European markets are higher with London's FTSE 100 up 26.7 points (0.41%), Germany's DAX up 83.14 points (0.69%) and France's CAC 40 up 17.05 points (0.32%). The June euro is up 0.000 at 1.130 and the June U.S. dollar index is down 0.025 at 96.945. The September 30-year T-Bond is up 6/32nds, while August gold is up $3.90 at $1,340.70 and July crude oil is up $1.55 at $52.69. Soybeans on China's Dalian Exchange were up 0.47% while soybean meal was up 1.86%.
| BULL | BEAR | ||
| 1) | Weekly ethanol production surged to the third highest level on record last week and was the highest weekly production total since August 2018. | 1) | Wet weather and cooler temperatures are being forecast the next 7 to 10 days in the Canadian Prairies and North Dakota, limiting stress on spring wheat. |
| 2) | Corn spreads have shown strength the last two sessions as the market acknowledges supply tightness in proximity to the delivery market with CN/CU rallying to the highest level since March 26. | 2) | Cash HRW is trading at 91.4% of the weight-adjusted price of corn in the Triangle Area of Texas as wheat gets closer to working into a feed bunk. |
| 3) | Current major corn exporter ending stocks are projected at 58.448 million metric tons (MMT), a four-year low with stocks/use at a six-year low. | 3) | The spread between MATIF Milling Wheat futures and Chicago wheat futures fell to $5.26/metric ton (MT), the lowest since July 2017. |
CORN Corn prices are firmer as King Corn attempts to close higher for a fourth session in a row with eyes on the May highs. The corn market received everything it needed in Tuesday's WASDE to make fresh highs, and the demand figures provided Wednesday did nothing to harm that intention. Weekly ethanol production surged by 52,000 barrels per day (bpd) to 1.096 million bpd. This was the third largest weekly production average on record and the highest since August 2018. Ethanol margins have been improving thanks to a bump in DDGs prices. After having run below year-ago levels for so much of the winter and spring, it now appears ethanol production could end up proving modestly higher than the USDA's latest target. Weekly ethanol stocks fell 751,000 barrels to 21.801 million, the lowest stocks total since late last summer. With the energy complex decline and the corn rally, the spot month RBOB/ethanol spread is down to 16.7 cents per gallon, which is the weakest this spread has traded since Feb. 14. This sort of spread will not reinforce discretionary blending. Corn spreads trending higher is supportive of flat price and is in keeping with basis moves in the Corn Belt. If the supply situation ends as badly as it appears Thursday, the Eastern Corn Belt and Southeast feed market will be in rationing mode quickly. Export sales need a big bounce back after last week's net cancellations.
SOYBEAN The soybean market is firmer as beans attempt to keep pace with corn while new-crop November soybeans are firmly above $9.00. The concern the last 24 to 36 hours in soybeans seems to be centered on the latest forecast models and the acknowledgement we still have a huge number of soybeans to plant. Soybeans are a daylight sensitive crop, so at some point in late summer, acres will begin changing and maturing for harvest. However, if soybean planted acreage ends up 4 million to 5 million below the USDA March report, it would drop carryout to 850 million bushels. This is still an incredibly comfortable balance sheet with a tough justification for prices being higher. That said, the yield debate hasn't even begun yet in soybeans and will ultimately decide if this balance sheet is tight or not. There is still a sizable large spec short position in the soybean market, one which is probably spread against either corn or wheat or both. If the funds are intent on maintaining a short leg as a partial hedge against a bull corn market, it might be difficult for soybeans to make substantial gains above current prices until the weather market takes hold.
WHEAT Mixed wheat prices as winter wheat contracts are lower and spring wheat maintains light strength. Technically, most wheat contracts look solid with potential developing to take a run at last week's highs. Harvest remains delayed across the Southern Plains, which will limit hedge pressure and keep producers bullish. Dryness in the Canadian Prairies and U.S. Northern Plains is back in focus, although the best chances for rain in a couple months appear on tap for Canadian wheat growing areas as well as most of the US-HRS belt next week. No hard evidence on this year's protein content, although areas in Kansas, Oklahoma and Texas remain concerned about low protein, low test weight and potential vomitoxin. The major wheat exporter ending stocks projection is expected to bounce back to 67.391 MMT vs. 59.419 MMT a year ago. Still no firm handle on spring wheat planted acres, although most agree it has been coming down most of the spring. We are getting close to feeding wheat in Texas and Kansas as that cash ratio settled at 91% Wednesday evening. This should be supportive HRW and bearish corn, although unlikely the corn market will be paying attention to demand changes this early in the growing season.
| DTN Cash | Change From | National | Contract | Change from | |
| Commodity | Index | Prev Day | Avg. Basis | Month | Prev Day |
| Corn: | $4.07 | $0.03 | -$0.23 | Jul | $0.010 |
| Soybeans: | $7.99 | $0.19 | -$0.79 | Jul | $0.002 |
| SRW Wheat: | $5.10 | $0.08 | -$0.17 | Jul | -$0.003 |
| HRW Wheat: | $4.44 | $0.05 | -$0.19 | Jul | -$0.004 |
| HRS Wheat: | $5.21 | -$0.04 | -$0.44 | Jul | $0.005 |
Tregg Cronin can be reached at tmcronin31@gmail.com
Tregg can be followed throughout the day on Twitter @5thWave_tcronin
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