DTN Before The Bell Grains

Morning CME Globex Update:

The Dow Jones futures are down 5 points early Tuesday, August crude oil is up 1-cent per barrel, the U.S. dollar index is 0.0090 higher, and August gold is up $10.20 an ounce.

Other Markets:

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

Corn:

July and September corn gapped higher overnight as planting progress and crop conditions were worse than the trade had anticipated. Progress was 96% complete compared to 100% average, and conditions fell by 3% to 56% good to excellent as heavy rains of the previous week continued to impact the corn crop. That compares to the rating of 77% good to excellent last year. Eastern Corn Belt states are the worst, especially Ohio and Michigan. There are rumors of Ohio farmers trying to buy back new crop corn sales. Traders had expected a condition rating just slightly lower than last week's 59% good to excellent. Corn is now 89% emerged, and it is now likely that the primary pollination period has been pushed out to the last week of July and into early August. Ahead of Friday's USDA stocks and seeding report the average estimate for planted acres ranges from 86-87 million compared to last month's 89.8 million, but nobody will truly know until August. The weather forecast is mostly warmer and drier Tuesday and more of the same into July 10, with only light rains expected and no soakers on the horizon. Sunshine and warmth is what this crop needs. While certainly supply of new crop U.S. corn is on the decline, the June 1 stocks estimate could hold a bearish surprise. June 1 corn stocks are estimated to be the largest since 1988. Export sales continue to lag, and it is thought that ultimate U.S. exports could fall another 100 to 150 million bushels (mb) from here. The recent rally has priced U.S. corn out of contention in world export markets, and U.S. corn is the world's most expensive feed grain as rationing has begun. Domestically, the expected low protein content of the hard red winter (HRW) wheat crop will likely compete with corn in Southern Plains feedlots. Taiwan's MFG is reported to have bought 65,000 metric tons (mt) of corn for October Tuesday, likely to be sourced out of Brazil. Managed funds were again buyers on Monday and are thought to be increasing their net long position reported as 155,000 contracts long as of last Tuesday. DTN's National Corn Index closed at $4.29 on Monday, with an average basis of 18 cents under July.

Soybeans:

The soybean planting pace, reported at just 85% compared to estimates of 88-91%, is beginning to get more attention. That would leave nearly 13 million acres of soybeans still left to plant, based on intentions. That pace, and the first condition rating of just 54% good to excellent, compared to 73% last year and the third lowest rating in June behind 1988 and 2012, has sent soybeans higher to begin Tuesday morning. July and August soybeans gapped higher in the overnight as the trade begins to pay more attention to both the soybean planted acres and detrimental yield impact of late planting. As in corn, it is the Eastern Corn Belt, where the major problems exist, with Ohio and Michigan the worst in soybeans. Although the supply of new crop soybeans could fall as both acres and yield fall, stocks of soybeans are expected to be nothing but bearish, with June 1 stocks anticipated to be record-large. Demand has also wavered with the sharp rally. Export inspections last week were well below the amount needed to reach the USDA projection again, and exports remain sharply under a year ago. The amount of unshipped sales is bothersome with just 10 weeks left in the crop year. China's May imports, at just 7.3 million metric tons (mmt), are down 24% from last year according to Dow Jones. African swine fever (ASF) continues to spread unabated, with Vietnam the latest victim, now having found that ASF has spread to 60 of 63 provinces, leading to the culling of 10% of the total pig herd, according to the Vietnam government. The final leg of soy planting should accelerate in the coming week, with a mostly dry and warmer pattern ahead. Managed funds are still net-short soybeans, and if they choose to cover the balance we could certainly go higher. November beans are once again approaching that area of major resistance of $9.40 to $9.50. DTN's National Soybean Index closed at $8.34, and reflects an average basis of 75 cents under July.

Wheat:

Both winter and spring wheat conditions fell on Monday's crop progress and condition report. Winter wheat was down 3% to 61% good to excellent, and spring wheat fell 2% to a still hefty 75% good to excellent, and above the 5- and 10-year average for June. Aside from the hot and dry pattern ongoing in parts of the EU wheat belt, wheat has mostly bearish fundamentals, and seems to be rising in sympathy with corn and soybeans. The winter wheat harvest, at just 15% done, lags the 34% 5-year average, and Kansas is just 5% done. Kansas is typically 36% done at this time of the year. However, the weather ahead should be conducive to rapid harvesting progress. Wheat quality of hard red winter (HRW) appears to be much better than expected with less disease, but protein is said to be running about 1% lower than normal, signaling the potential for more HRW to make its way into feed channels. Soft red winter wheat quality on the other hand could be severely compromised with the constant deluge of rains and flooding. High pressure should dominate over the next few weeks, and in the north, rains have helped both U.S. spring wheat and the Canadian Prairies this week. Funds have been recent buyers, but at this point should have covered all of their net wheat short. DTN's National HRW index closed at $4.46, and the average basis is at 20 cents under July.

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

Follow him on Twitter @Mantini_r

(CZ)

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