DTN Before The Bell Grains

Morning CME Globex Update:

Following the Dow Jones Average gain of 60 points on Monday, the Dow futures are pointing to a loss of 122 points early Tuesday morning. April crude oil is unchanged, the U.S. dollar index is down 0.1030, and April gold is down $0.50 an ounce.

Other Markets:

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

Corn:

After a mostly weaker overnight trading session, corn is right around unchanged to start Tuesday. Corn was higher Monday following Friday's announcement that China had agreed to buy another 10 million metric tons (mmt) of U.S. soybeans. However, as wheat began to fall, corn fell with it, as commodity funds sold an estimated 20,000 contracts, adding to a combined net short (options included). The corn basis has firmed greatly in the past few weeks, but that seems more an indication of rising freight values, and difficulty in transporting, rather than any China business. It appears that logistics will continue to be hampered with the cold and wet U.S. forecast expected to continue. There has been no hint of China purchases of U.S. corn or by-products, though there has been plenty of talk of that. President Trumps comments that a final trade deal with China is "very, very close", and the delay of added tariffs beyond March 1 was actually taken by the trade as more of a negative, possibly removing some of U.S. trade representative Robert Lighthizer's leverage. There continues to be talk that it would make sense for China to buy U.S. corn and ethanol, and with the Australian drought compromising their sorghum crop, perhaps even U.S. sorghum could be in the mix. South Korea overnight bought 68,000 metric tons (mt) of optional corn from CHS (Cenex) on a tender for 138,000 mt. U.S. corn inspections continue to run at a pace 38% above year ago levels, although last week's 29.6 million bushels (mb) was the fifth consecutive week that inspections fell under the weekly average needed. As corn fell in sympathy with the plunging wheat markets, talk began of wheat working into feed rations in the U.S. southwest. As May corn now takes over as the lead month, look for May corn to see good resistance just above at $3.84-$3.85. DTN's National Corn Index closed at $3.45 on Monday, with an average basis of 25 cents under March.

Soybeans:

A very disappointing soybean market finish was the result Monday following Friday's late news that China had agreed to buy another 10 mmt (367 mb) of U.S. soybeans, and the extension of the tariff delay. Soybeans finished just over 1 cent per bushel higher and nearly 10 cents under the Sunday night high. Despite China's pledge, which would bring the total China purchases to 735 mb, the lack of any confirmation and a plunging wheat market seemed to pressure soybeans late. That weakness continues this morning as the extension of trade talks is a possible sign that the U.S. sees more urgency than China. Export inspections on soybeans last week at 48 mb were impressive, but total shipments remain 34% below a year ago at this time. Funds are thought to have been net sellers on Monday of soybeans, meal and oil, adding to shorts in beans and bean oil. Brazil is now 45% done with their soybean harvest, with top producer Mato Grosso at 80% complete. The U.S. Ag Attache was the latest to project Brazil soy production and at 115.5 mmt, is close to the average of analysts, and 1.5 mmt below the USDA. China bought 4.93 mmt of Brazilian beans in January compared to just 2.07 mmt last year. Weather in Brazil continues to be good for late planted soybeans, and Argentina appears to have improved rain chances. Another weight on the soy market is talk that soybean acreage may be higher than the industry desires, with November beans gaining on spring wheat, and with talk of a very wet spring likely adding to soy planting potential. May soybeans should have resistance up around the $9.25-$9.30 area. DTN's National Soybean Index closed at $8.27, and reflects an average basis of 85 cents under March. At 8 a.m. USDA reported 120,000 mt of soybeans sold to Mexico; 48,000 mt for 2018-2019 delivery and 72,000 mt for 2019-2020 delivery.

Wheat:

Wheat was the story Monday as all three markets collapsed under the weight of fund and technical selling. Commodity funds were thought to have sold 15,000 contracts of Chicago wheat futures, with both KC and Chicago old and new crop setting new contract lows. The recent fall in world wheat values, and the prospect for a huge increase in production this coming year, combined to crater the wheat markets. The U.S. has lost much of the wheat business in the past few weeks to the EU and Black Sea. Russia has exported 28.3 mmt of wheat and Ukraine 10.3 mmt so far this year. Ukraine increased their export estimate of total grain to 49 mmt from 47.2 mmt Monday, so the competition remains stiff. The fall in wheat sent the July KC wheat versus corn spread to just 72 cents premium wheat, and that has started talk about possible feeding of wheat, a sharp contrast to being the cheapest wheat offer in the world just a few weeks ago! U.S. wheat shipments for the year so far still remain 53 mb behind last year, and the prospect for a burdensome 1 billion bushel U.S. ending stocks number is looking more likely. KC May wheat will not encounter much resistance until we rally some 18-20 cents above Monday's close, but right now, there are few buyers around. Wheat continues to be extremely oversold. DTN's National HRW index closed at $4.24, and the average basis is at 18 cents under March, firmer.

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

FollowDana on Twitter @mantini_r

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