DTN Before The Bell Grains

Morning CME Globex Update:

Dow Jones futures are up 22 points early Tuesday after reaching a new all-time high on Monday again. August crude oil is up 25 cents per barrel, the U.S. dollar index is up .3730 and August gold is down $2.00 an ounce.

Other Markets:

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

Corn:

The euphoria of corn rising following a bearish USDA report was sure short-lived as corn is now down for the second straight day, having plunged 25 cents from the high made Monday. A change in both the weather outlook and crop conditions has encouraged the bears. Corn's good-to-excellent ratings, expected to decline by 1% to 2% on hot and dry conditions, actually rose 1% to 58% good to excellent. Although well behind the average of 71% and last year's 72%, the improvement was widespread and notable as Illinois, Ohio and Missouri -- three states with the worse corn ratings -- all improved by 4% to 5%. Silking was at 17% but is still 25% behind normal. Most in the trade expect pollination to be widespread over the next 2 to 4 weeks, and following some very intense heat into this Saturday, the forecast is for temperatures to cool off as we move into pollination. On Tuesday some light to moderate rains are falling in eastern Nebraska, and the eastern Midwest, while moderate to heavy rains and some flooding move across the southern Midwest and Delta areas. Managed money funds are thought to have sold 17,000 contracts of their large long, leading to Monday's price plunge, and coming into Tuesday are still thought to be long an estimated 157,000 contracts. U.S. corn exports have been waning and, with total inspections now down 11% versus last year at 1.699 billion bushels with just 7 weeks left, corn exports need to pick up or risk being lowered by another 100 million bushels (mb), leaving a huge carry in of over 2.4 billion bushels (bb). The trade will be watching a few developing dry spots in the Corn Belt -- most notably northern Missouri, southern Iowa and western Illinois. The break under $4.48 on December corn was a bearish omen and now $4.35 should be next support and under that $4.30, the 50-day moving average. DTN's National Corn Index closed at $4.33 on Monday, with an average basis of 12 cents under September.

Soybeans:

Soybeans are plummeting on improving conditions and weather, and November soybeans have once again been solidly repelled at major resistance of $9.30-$9.40. November is now down 29 cents from the high made Monday. Crop ratings, expected to be modestly lower, instead rose 1% to 54% good to excellent, and while still well below last year's 69%, the improvement, as in corn, was 5% and Missouri up 6%. Only 95% of the crop had emerged as of July 14, and that would leave 4.2 million acres that have not emerged yet. Blooming, at 22%, trails the average by 27%. U.S. soybean inspections were decent, but shipments remain 24% lower than last year, and with total shipments of 1.422 bb, the pace needs to ramp up in the next seven weeks or risk being reduced, with the potential for some China sales to be rolled into new crop. China did ship seven cargoes last week. The U.S.-China trade talks will continue via phone this week, and if successful, U.S. trade representatives will again head to Beijing for further discussions. Word that China's 2nd quarter GDP had fallen to 6.2%, the slowest growth since 1992, could be a hint the trade war is taking a toll, as is African swine fever. NOPA crush for June was a much lower than expected 148.8 mb, versus the average estimate of 154.4 mb, and is the smallest monthly crush since September 2017. Funds sold an estimated 6,000 contracts Monday and are no doubt selling again Tuesday; funds come into Tuesday net short an estimated 50,000 contracts. Look for November beans to find support at $9.00-$9.04 and under that, $8.93. DTN's National Soybean Index closed at $8.28, reflecting an average basis of 70 cents under August.

Wheat:

Chicago and Kansas City wheat are modestly lower to begin Tuesday, with Minneapolis little changed. Chicago and Kansas City September have now fallen 27 cents from Monday's high. Winter wheat harvest is picking up steam and is now 57% done, with Kansas at 81% finished, Illinois 90% done and Indiana 74% completed. Yields continue to impress. Spring wheat conditions fell by 2% to 76% good to excellent, but still well above average, and key states of North Dakota and Minnesota at 80% and 85% good to excellent are bearish. Minnesota gained 2% to 85% good to excellent. IKAR, a Russian consultant, pegged that wheat crop at 77.5 million metric tons (mmt), down, but still well above USDA's 74.2 mmt. Ukraine's grain crop was also raised, with wheat at 24.7 mmt, well above last year. The German wheat crop, according to the German Association of Coops, is up 17.7% from last year at an estimated 23.85 mmt. Even with the recent decline of foreign wheat production in last week's USDA report, it is quite clear there is no shortage, and in fact, still a record world supply of wheat. Weather looks mostly clear for a continuation of rapid harvest progress. U.S. Gulf wheat continues to command a strong premium of $17 to $22/mt on a FOB basis to both EU and Black Sea wheat, so exports will continue to be a challenge; for now U.S. exports are 31% above a year ago. Taiwan is in for 90,000 mt of U.S. milling wheat for September-October. Watch for Chicago September futures and a break below $5.03 to lead to additional selling. DTN's National HRW Index closed at $4.28, 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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