DTN Before The Bell Grains

Morning CME Globex Update:

The Dow Jones futures are up 30 points early Wednesday following Tuesday's 353-point gain, July crude oil is up 7 cents per barrel, the U.S. dollar index is down .1060, and August gold is down $4.30 an ounce.

Other Markets:

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

Corn:

The corn correction continues Wednesday morning with both old- and new-crop futures close to challenging the old breakout areas of $4.38 on July and $4.54 on December. Although this rally might be far from over, the correction is not a surprise. Much of the bullish news has been injected into the market, but ultimate planted acreage and yield are still way up in the air, with some very bullish yield numbers from Iowa State economists on corn, and much larger prevented planting ideas than a few weeks ago. The U.S. has rallied so far that demand has already begun the rationing process with global barley prices said to be a huge discount to U.S. Gulf corn -- over $1.20 per bushel -- and Gulf corn now over 60 cents per bushel more expensive than that of Ukraine and Argentina. South Korean feed buyers were said to have bought 180,000 mt of feed wheat from optional origin, but likely to be Black Sea. That has not stopped the interior corn basis from moving higher, especially in the short Eastern Corn Belt, but also now in the Western Corn Belt, as end users scramble to secure supplies. Rumors of not only corn being ultimately imported into feed operations in the U.S. southeast, but also of ethanol plants looking at importing corn threaten to cut corn demand more than earlier thought possible. The 7-day forecast promises even more rain for the central and Eastern Corn Belt, with 2 to 4 inches of rain and even 4 to 5 inches in some areas of Missouri, Illinois, Indiana and Ohio. The trade is resigned to the idea that corn planting may now be over. The forecast does turn favorably warmer and drier in the 6- to 14-day part of the period; a welcome thought with crop maturity so far behind. Funds, which had reversed a record net short and become long, were estimated to have bought in 15,000 contracts on Wednesday, leaving them still net long about 160,000 contracts. Although Presidents Trump and Xi Jinping are scheduled to meet at the G-20 next week, and U.S. trade representatives before that, the announcement by China's Ministry of Commerce to keep tariffs on U.S. DDGs in place was certainly ill-timed. Some of the weakness in corn the past two days may be related to unwinding long corn/short soybean spreads. DTN's National Corn Index closed at $4.29 on Tuesday, with an average basis of 21 cents under July.

Soybeans:

Soybeans, which had set a new recent high in the Tuesday overnight session as short funds continued to cover, have now set back again, with July still just 15 cents below that high. Positive news from President Trump and confirmation of a G-20 meeting to be preceded by both U.S. and China trade representatives meeting, injected some optimism about a renewal of stalled talks. Soybean yield and acreage ideas have become front and center as corn has likely neared the end of planting efforts. Thoughts earlier were for soybeans to gain some acreage at the expense of corn, but the delayed planting and unfavorable conditions, especially in the Eastern Corn Belt, have many slashing not only acreage ideas but also yield to some extent. Unlike corn, the soy market is much better supplied with huge stocks to cushion any new-crop loss. The very wet 7-day forecast is set to impact the lagging Eastern Corn Belt, with anywhere from 2 to 5 inches of rain expected to stall soybean planting further, with an estimated 19 million acres left to plant. Unlike corn and wheat, which have both priced the U.S. out of world markets, U.S. soybeans are said to be almost 40 cents per bushel cheaper than Brazilian beans, and that discount widens into August-September. Agroconsult from Brazil has raised Brazilian soy exports by 3.5 mmt to 70.5 mmt, as they continue to satisfy Chinese demand. Funds are thought to be short roughly 60,000 contracts of soybeans still after buying in 6,000 on Wednesday. DTN's National Soybean Index closed at $8.37, reflecting an average basis of 77 cents under July.

Wheat:

Wheat is leading all markets lower to begin Wednesday with Chicago July, after having rallied $1.31 from the mid-May lows, dropping close to 30 cents just since Monday's high. Wheat conditions in hard red winter (HRW) areas continue to defy logic with the deluge of rain not affecting crop conditions as much as many had thought, so far. Conditions on HRW were revealed at 64% good to excellent as of Sunday, and early yields from Texas and Oklahoma have been staggering. Harvest is lagging badly, and more heavy rain is expected to curtail harvest activity in Kansas and Oklahoma, but the forecast next week appears to signal a pattern change to warmer and drier. While quality and yields so far appear better than expected, it is almost a foregone conclusion the HRW crop will be lower than normal protein; early returns suggest 1% lower than average. Much of this is likely to compete with corn for Southern Plains feed rations, helping to ration the expected corn shortage. Spring wheat conditions in major states are excellent early on. As in corn, the U.S. wheat rally has effectively squashed export chances, with French and German now said to be a $20/mt discount to U.S. HRW offers, and a $30/mt discount to U.S. soft red winter (SRW). Black Sea feed wheat appears to be displacing corn in Asia feed operations. DTN's National HRW Index closed at $4.49 and the average basis is at 18 cents under July.

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

Follow him on Twitter @Mantini_r

(CZ)

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