DTN Before The Bell Grains

Morning CME Globex Update:

Following Thursday's ascent to new highs and a 249-point higher finish, the Dow Jones futures are down 39 points to start. August crude oil is again higher, up 30 cents per barrel, the U.S. dollar index is down .0500 and August gold is up $1 an ounce.

Other Markets:

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

Corn:

Following Thursday's nice recovery from the lows, corn is down slightly on an improved weather outlook following another three days of very wet weather. On Friday morning, storms are moving across South Dakota, Nebraska, Iowa and northern Missouri. Midweek a pattern change to warmer and drier is expected. What crops need now is sunshine and warmth to accelerate growth. However, midday Thursday a July forecast from the government suggested a cool and wet pattern, and the market rallied on that. The trade continues to ponder the amount of corn prevented planting acres with estimates by some analysts as high as 8 million to 12 million acres. USDA on Thursday announced growers can hay, graze or cut cover crops for silage on prevented planting (PP) acres on Sept. 1 and still maintain full PP indemnity. Also, the Farm Service Agency (FSA) will extend the deadline to report PP acres in select counties. Corn usage is already being rationed with huge and cheaper South American supplies ready to satisfy demand, and cheaper wheat values leading to substitution in some cases. South Korea on Wednesday chose to buy Black Sea feed wheat at a $5 to $8/mt discount to corn values. Export sales from last week showed a meager 1.5 mb of corn sold and sales are down from last year with 11 weeks left in the season. Analysts expect USDA may be forced to reduce U.S. corn exports again. Domestically, U.S. wheat is expected to be substituted for corn in feedlots and, although USDA pegs wheat for feed at just 140 million bushels, private analysts see that moving as high as 300 million to 400 million bushels. Although the bull story may not be over on corn, a further correction is likely ahead of the warmer and drier pattern coming. Look for the old resistance of $4.38 on July and $4.53-$4.54 on December to be the first support challenged. DTN's National Corn Index closed at $4.31 on Thursday with an average basis of 21 cents under July.

Soybeans:

Soybeans are under pressure to begin following Thursday's impressive rally from the lows. The focus seems to have shifted from corn to soybeans, as it is likely corn planting has ended. Expectations are by Sunday soybean planting could be 88% to 91% done. USDA's June 28 stocks and seeding report is expected to show an all-time record large June 1 soybean stocks number and some 650 million bushels higher than last year. Although last week's export sales were decent at 21 mb, they are still below the weekly amount needed to reach USDA's projection, but it is shipments where soybeans really lag. China alone has 6 mmt of unshipped sales, leading to thoughts of rolling forward some of those sales. New-crop soybean sales, at just 73 million bushels, are the lowest in years at this stage. President Donald Trump and President Xi Jinping are set to meet at the G-20 and renew trade talks. Hopes are that some resolution will be forthcoming, but confidence is not high for a quick solution. African swine fever (ASF) continues to ravage hog populations in Asia with China finding its 136th case. Vietnam now seeing ASF in 57 of 63 provinces. And the disease appeared in Laos, leading to a Chinese ban of Laotian pigs and pork products. On a further setback, look for $8.90 on July and $9.10 to $9.20 on November to support a break. DTN's National Soybean Index closed at $8.39, reflecting an average basis of 77 cents under July.

Wheat:

Wheat markets are just slightly lower and look vulnerable to a further break with the midweek forecast calling for warmth and dryness, leading to an acceleration of harvest. Last week's export sales on wheat, at 6.9 mb, were below the weekly amount needed to reach the USDA projection; but the pace is still 27% above a year ago. Minneapolis wheat is attempting to avoid a 5th straight lower close, as rains in both the Northern Plains and Canadian Prairies have improved conditions, which are already above average in key U.S. spring wheat states. As in corn, U.S. wheat is losing market share with much larger competitor stocks and cheaper prices set to cut into U.S. export sales. Egypt this week bought 390,000 mt of all Russian and Romanian wheat, priced at a huge discount to U.S wheat. French AgriMer reported wheat conditions there are 80% good to excellent compared to 75% a year ago. Positive for wheat is the idea that the expected low protein nature of this year's wheat crop is likely to lead to sharp gains in usage of wheat for feed. The recent break in the U.S. dollar should be a positive input for wheat. DTN's National HRW Index closed at $4.42, and the average basis is 18 cents under July.

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

Follow him on Twitter @Mantini_r

(CZ)

Copyright 2019 DTN/The Progressive Farmer. All rights reserved.