DTN Before The Bell Grains

Morning CME Globex Update:

World equities markets are higher on the heels of the U.S.-China trade progress late last week. China's Shanghai Index was up 2.1% on Monday. Following Friday's 181-point gain in the Dow Jones average, Dow futures are once again higher, up 177 points. April crude oil is down $1.38 per barrel, the U.S. dollar index is down 0.0390 and April gold is 50 cents lower.

Other Markets:

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

Corn:

The late Friday news that China had agreed to buy another 10 million metric tons (mm) (367 million bushels) of U.S. soybeans, and word from President Trump that he would delay the imposition of additional tariffs on Chinese goods, sent soybeans and corn higher to start Monday. Although no corn purchases were announced, Ag Secretary Perdue noted that there is "more good news to come". The trade assumes that means that we could see some combination of corn, ethanol and DDGs purchased by China soon. A Bloomberg article on Friday suggested that U.S. corn is on China's "shopping list". With the late week USDA data release last week, we are now current on export sales, and the past six weeks' average at 40 million bushels (mb) has put corn about 2% above last year's sales commitments. Although U.S. corn export sales and shipments continues to be U.S. ag products bright spot, competition will be fierce with Argentine and Ukraine basis levels said to have weakened late last week. Weather in South America continues to be mostly yield enhancing, with the next two weeks promising more needed moisture in much of Brazil's safrinha corn growing regions. Argentina has turned drier and the forecast shows below normal rain for primary growing areas. The only good news is that temperatures will remain below normal, minimizing stress to a crop that is projected to be record-large now. U.S. weather is troublesome, with major snowpack added to this weekend, and fears of a late spring and delayed planting on the minds of farmers. Ethanol prices hit the highest level in six months on trade optimism. Friday's Cattle on Feed report revealed the highest on feed since 2012. March corn will continue to see resistance in the $3.80-$3.83 area, with support in the low to mid-$3.70 area. DTN's National Corn Index closed at $3.49 on Friday, with an average basis of 26 cents under March. At 8 a.m. USDA reported 279,400 mt of corn sold to Mexico; 88,500 mt for 2018-2019 and 190,900 mt for 2019-2020 delivery.

Soybeans:

March soybeans have actually gapped higher Monday following the bullish trade talk news, with China's pledge to buy another 10 mmt (367 mb) of U.S. soybeans. That would bring the confirmed total to 17.5 mmt plus another 3 mmt to unknown, which is presumed to be China. The total of 735 mb, though still behind last year, is a step in the right direction, but sales commitments remain 17% behind a year ago. The shipment period for the 10 mmt remains to be revealed, with some assuming half old and half new crop. President Trump has agreed to delay the imposition of higher tariffs beyond the March 1 deadline as trade talks are deemed to be very productive, with progress being made in intellectual property, technology issues, agriculture and currency. The Brazilian soybean basis fell after that announcement Friday, so competition will be fierce as that harvest expands. Bad news is the fact that African swine fever was found in another province in Vietnam over the weekend. Weather in Brazil continues to be much more conducive to better yields, but likely only having an impact on 15-20% of the later planted soybeans. Argentina must be watched as the outlook is drier there for the next few weeks, and weekend rains were said to have missed Cordoba and Buenos Aires. Now that U.S. export sales are up to date, following Friday's six-week combined release, the 40-million bushel average for the last six weeks was a step in the right direction, but sales and shipments still continue to lag a year ago. December soybean crush was a bullish surprise again, with the 183.6 mb a 4.1% gain over last year. March soybeans have now vaulted back above the major moving averages including the 200-day, and resistance will again be in the $9.25-$9.30 area. Support looks to be $9.05-$9.08. DTN's National Soybean Index closed at $8.25, and reflects an average basis of 85 cents under March.

Wheat:

Wheat appears to be reluctant to participate in the trade talk euphoria Monday morning. Despite the constant rumors of China buying U.S. wheat for several weeks with no confirmation, the fact that the U.S. continues to miss recent tenders is bothersome. The late-week release of combined export sales showing the six-week average of 22 mb per week, allowed U.S. sales to match those of last year, but shipments continue to lag by 10%. World wheat prices have declined sharply in the past few weeks, and especially Russian and European wheat, with Russian values having fallen by another $6/mt last week. Egypt's GASC late last week took French, Russian, Ukraine and Romanian wheat with no U.S. even offered. Kansas City May wheat continues to be very oversold, and on a rally higher, there is little major resistance until we get to $4.85-$4.95. The trade will continue to hold hole that wheat is a part of the potential $50 billion of annual Chinese demand for ag products that has been talked about lately. DTN's National HRW index closed at $4.39, and the average basis is at 20 under March, firmer.

Dana Mantinican be reached at dana.mantini@dtn.com

FollowDana on Twitter @mantini_r

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