DTN Early Word Grains
Sharply Higher Grains as Wet Weather Persists
July corn is up 8 3/4 cents per bushel, July soybeans are up 16 1/2 cents, and July KC wheat is up 8 cents.
CME Globex Recap:Global equity markets are higher around the globe Monday with tensions between Iran and the U.S. dominating weekend headlines. Energy markets remains subdued, so it would appear the threat of transportation being halted through the Strait of Hormuzremains low at this time. Grain markets are sharply higher overnight as forecasts call for more wet weather in the coming week with producers still trying to finish soybean planting. Prevented planting ideas for soybeans are nowhere near those expected for corn but expectations are growing with each passing day. Aside from weekly crop progress, the next major event will be the June 28 acreage and stocks report, which could give further clues into the supply picture. Even that report will be suspect, however, given how much planting progress was still occurring in June as the survey was being conducted. The path of least resistance will remain up until the market is more comfortable with the supply picture of both corn and soybeans.
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Previous closes on Friday showed the Dow Jones Industrial Average down 17.16 at 26,089.61 and the S&P 500 down 4.66 at 2,891.64 while the 10-year Treasury yield ended at 2.093%. Early Monday, the June DJIA futures are up 32 points. Asian markets are higher with Japan's Nikkei 225 up 7.11 (0.03%) and China's Shanghai Composite up 5.65 points (0.2%). European markets are higher with London's FTSE 100 up 10.4 points (0.14%), Germany's DAX up 18.2 points (0.15%) and France's CAC 40 up 9.75 points (0.18%). The June euro is up 0.001 at 1.120 and the June U.S. dollar index is down 0.035 at 97.535. The September 30-year T-Bond is down 8/32nds, while August gold is down $7.60 at $1,336.90 and July crude oil is down $0.24 at $52.27. Soybeans on China's Dalian Exchange were down -0.06% while soybean meal was up 1.26%.
| BULL | BEAR | ||
| 1) | Heavy rains are forecast for all of the central and Eastern Corn Belt in the coming seven days, raising prospects for prevented planting soybean acreage. | 1) | New-crop soybean export commitments as of June 6 of 65.9 million bushels are the lowest total for this date since the 2004-05 marketing year. |
| 2) | The Chinese National Grain and Oils Information Center said state reserve corn sales in 2019 will be half of 2018 levels as stocks decline swiftly. | 2) | The Association of American Railroads said last week grain railcar volume fell 8.7% from the same week a year ago and is down 4.9% year to date. |
| 3) | A Bloomberg survey of analysts revealed the average guess for prevented planting acreage is 6.7 million on corn and 2.2 million on soybeans. | 3) | The gross commercial short position in corn rose to 1,158,974 contracts last week, the largest position for the group since May 29, 2018. |
CORNCorn prices were higher overnight with the front end of the curve once again leading as end users in the Eastern Corn Belt raise concern about securing supplies. July corn is now at the highest level for a spot contract since June 2014 with the next meaningful resistance from prior price action up around the 2014 highs of $5.22. Corn prices are likely to face stiff resistance between $4.75 and $5.00 but it should be noted momentum indicators from a weekly perspective are showing no hints of slowing or diverging from price. Funds actually paused their buying in the previous reporting week, picking up just 1,948 contracts to push their net long to 66,933 contracts. While this is the first meaningful net-long position held by funds in a year, they have much more room to add to get anywhere close to the net-long positions witnessed between 2010 and 2016. 200,000 net-long positions were common, leaving funds ample room to add to current positions if they truly believe in the fundamental story of corn. Elevator hedging is picking up based on the gross commercial short position, which should be a good indicator when prices have gone far enough. Trade estimates for Monday afternoon's Crop Progress report expect planting progress at 95% to 96% complete vs. 83% last week and 100% las year. This commentator knows firsthand planters were still rolling on corn in both South Dakota and Iowa over the weekend. The extreme prevented planting ideas could be off the table, but the yield component is what will make or break this market.
SOYBEAN Soybean prices were higher overnight as concerns mount over final soybean planted acreage. Soybeans have the added benefit of still having a sizable fund short position underneath the market with that group growing more uncomfortable by the day. As of June 11, funds held a net-short position of 115,169 contracts, up 7,029 on the week. Commercial positions barely changed on the week as price traded weakly early in the period only to regain strength by the end of the reporting range. The Crop Progress report on Monday afternoon is expected to show 78% to 82% of soybean planting complete vs. 60% last week and 93% average. This would leave 15 million to 18 million acres left to be planted based on the March Prospective Plantings report. All of the Northern Plains, Nebraska and northern Wisconsin hit final plant dates on June 10 while Iowa, southern Wisconsin, northern Illinois and Michigan hit final plant dates on June 15. Remaining areas have until June 20 to plant and still receive full insurance coverage. On the demand front, we continue to monitor the outstanding soybean commitments to China, which totaled 233 million bushels as of June 6. Until these sales ship in full, there remains risk they are either rolled to 2019-20 or canceled, which would send bushels directly to ending stocks. Shipments to China have picked up gradually the last few weeks but those purchases remain at risk.
WHEATWheat prices are higher following corn and soybeans with funds still net short all three wheat markets. As a percent of open interest, their net short is largest in Minneapolis at 8.0%, but funds still hold 44,055 contracts worth of a net short in Chicago wheat. Harvest remains delayed in the Southern Plains with U.S. Wheat Associates reporting test cutting is just beginning in Kansas. Only a limited number of samples from Texas and Oklahoma have been tested for quality so far but averages show 59.7 pounds per bushel for test weight and 10.9% protein. Quality will remain a concern the longer harvest is delayed with eastern HRW areas on tap for additional rain in the coming week. Dry areas of the Canadian Prairies and Northern Plains also remain on tap for needed moisture in the coming seven days with production estimates still very much up in the air. The USDA expects Canada to harvest 34.5 million metric tons (mmt) in the coming season, which would be the second largest production total on record. Boots-on-the-ground think this estimate is lofty by 2 million mmt to 4 mmt, but plenty of growing season lies ahead. As long as corn and soybeans maintain their sharp uptrends, wheat prices will be forced to tag along, although U.S. FOB prices continue to put premium over competitor origins.
| DTN Cash | Change From | National | Contract | Change from | |
| Commodity | Index | Prev Day | Avg. Basis | Month | Prev Day |
| Corn: | $4.31 | $0.12 | -$0.22 | Jul | $0.005 |
| Soybeans: | $8.19 | $0.09 | -$0.78 | Jul | -$0.001 |
| SRW Wheat: | $5.23 | $0.03 | -$0.16 | Jul | $0.005 |
| HRW Wheat: | $4.56 | $0.07 | -$0.20 | Jul | -$0.014 |
| HRS Wheat: | $5.16 | -$0.07 | -$0.47 | Jul | -$0.037 |
Tregg Cronin can be reached at tmcronin31@gmail.com
Tregg can be followed throughout the day on Twitter @5thWave_tcronin
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