DTN Before The Bell Grains

Morning CME Globex Update:

Dow Jones futures are up 92 points early on Thursday after reaching a new all-time high. August crude oil is up 2 cents per barrel, the U.S. index is down .2120 and August gold is up $5.90 an ounce.

Other Markets:

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

Corn:

Ahead of a very uncertain USDA report, corn futures are trading a few cents lower. While USDA is not expected to change acreage again and will likely utilize the June acreage number of 91.7 million acres, the trade wonders if a yield change will be forthcoming. Ending stocks for 2018-19 are expected to rise as U.S. corn demand has been waning and exports remain well behind both last year's pace and the pace needed to achieve the USDA final projection. The net result of the report will likely be corn stocks at a much higher level than many private analysts have penciled in, leaving the trade waiting for the August report, which should feature a more accurate acreage reading. Weather is mostly dry Thursday, with only light rains in the Midwest and Plains, and Tropical Storm Barry's expected weekend landfall should bring rain and flooding to the central Gulf coast and Delta areas. The storm is expected to take a more easterly track. The next 10 days promises above normal temps in much of the central Corn Belt, and for the most part is what the delayed crop needs, but some dryness is developing in parts of Iowa, Missouri and western Illinois, and those areas desire some moisture soon. Iowa in particular looks to be mostly dry for the next week. The Chinese Ag Ministry said China's corn use will be lower due to African swine fever, with 2 million metric tons lower feed use this coming year. The U.S. interior corn basis continues to be very stout, especially in the Eastern Corn Belt states, with some areas in Ohio and Indiana on Wednesday reporting end users paying 60 to 72 cents over September futures. Managed funds come into Thursday morning with a still large net-corn long, estimated to be 150,000 contracts. December corn remains stuck in a $4.20 to $4.50 range. Corn export sales for the week ended July 4 were 19.9 million bushels for 2018-19. Shipments last week of 44.3 mb were above the 42.9 mb needed each week to achieve USDA's 2.200 billion bushel projection. Total commitments for 2018-19 of 1.946 bb are down 15% from a year ago. DTN's National Corn Index closed at $4.25 on Wednesday, with a stronger average basis of 10 cents under September.

Soybeans:

Soybeans are just slightly lower to begin Thursday in quiet trade as we await the USDA report. Although assuming the 80 million acres are used, soybean stocks for 2019-20 are likely to fall to an estimated average of 812 million bushels versus close to 1.1 billion in 2018-19, there is little that can change an overall bearish soybean supply and demand picture other than a sharp fall in yield. Traders assume yield could be dropped just over 1 bushel per acre (bpa). Managed funds come into this report net short roughly 48,000 contracts of soybeans. New-crop November soybeans are just below a very key resistance area of $9.15-$9.25, with even more selling likely on an advance to $9.30. Weather is mostly beneficial over the coming 10 days and that should benefit bean conditions, which, at 53% good to excellent, is one of the worst ratings in recent history. Although U.S. soybeans are said to be priced at a sharp discount to Brazil, exports continue to severely lag last year, and unshipped sales are worrisome in the absence of a U.S.-China trade deal. African swine fever continues to raise its head with another case in China on Wednesday and now six new cases reported in Bulgaria. USDA could slash U.S. soy exports even more in Thursday's report. The U.S. could be one step closer to a trade deal, with the allowance of U.S. firms to now sell product to Huawei -- China's technology giant. Watch for the $8.85 area on November beans in the event of an unlikely bearish report, with a break and close under that sure to begin a new leg lower. Soybean sales for the week of July 4 were 4.9 mb for 2018-19. Shipments last week of 25.4 mb were below the 30.7 mb needed to achieve USDA's 1.700 bb projection. Total soy commitments of 1.786 bb for 2018-19 are down 15% from last year. DTN's National Soybean Index closed at $8.23, reflecting an average basis of 72 cents under August.

Wheat:

All three wheat markets are trending lower to begin Thursday as we await what should be an uneventful wheat portion of the USDA report. With hard red winter (HRW) harvest advancing rapidly and glowing reports of yields continuing, the surprise is likely to be to the upside on U.S. production. With the average trade estimate for HRW around 800 million bushels, many private analysts see that number moving sharply higher. Spring wheat, as well, with improving conditions -- 78% good to excellent -- could see higher production. The by-class breakdown of supply and demand is likely to show generous supplies of the hard wheats and tight supplies of soft red winter (SRW). A few changes may be forthcoming on both Russian and EU wheat production due to the late season heat spell, but so far, reductions are thought to be minimal. The Russian Agricultural Ministry pegs Russian wheat at 75 million metric tons (mmt), below USDA's 78 mmt estimate and earlier private estimates of 80-83 mmt. However, they are still calling exports to be higher at 36 mmt compared to 35.2 mmt in 2018-19. Strategie Grains consultancy pegs EU wheat at 140.6 mmt -- down from 142.8 mmt due to heat, but still some 11% above year ago levels. There is no shortage of wheat in the world!Wheat export sales for the week ended July 4 for 2019-20 were 10.4 mb. Shipments last week of 24.2 mb were above the 17.2 mb needed each week to reach USDA's 900 mb projection. Total commitments for 2019-20 of 276 mb are up 23% from a year ago. DTN's National HRW Index closed at $4.20, and the average basis is at 21 cents under September.

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

Follow him on Twitter @Mantini_r

(CZ)

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