DTN Before The Bell Grains

Wheat Leads All Three Markets Higher

Dana Mantini
By  Dana Mantini , Senior Market Analyst
(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

Dow futures are down 44 points in the overnight following Tuesday's 34-point lower finish on the Dow Jones average. April crude oil is up $1.15 per barrel, the U.S. dollar index is down 0.0710, and April gold is $0.40 per ounce lower.

Other Markets:

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

Corn:

Following the 9-cent drop in futures to start the week, corn has stabilized a bit early Wednesday morning and is up two cents. South Korea's FLC is said to have bought 68,000 mt of optional corn Wednesday following Tuesday's 68,000 mt purchase, but the origin is likely to be South America. While U.S. corn exports continue be well ahead of last year at this time, the past five weeks of shipments have failed to reach the weekly amount needed to achieve the USDA projection. Funds were big sellers of corn again on Tuesday and this week are thought to have sold close to 25,000 contracts. The CFTC position report from the week of February 12 was released late on Tuesday and showed that funds had sold 30,000 contracts that week. At that time, funds were still net long corn futures alone. This week, the combined futures and options position is estimated to be over 70,000 contracts short. Weather in South America is favorable for corn crops and Brazil's safrinha corn crop will likely be fully planted within two weeks. Record cold is likely in much of the Midwest and northern Plains next week, and that should continue to stifle transportation and stress cattle. As traders await the results of the U.S.-China trade agreement, we continue to hold out hope that some combination of U.S. corn, ethanol, DDGs and maybe even pork might be included. If the much talked about $30 billion in new Chinese demand comes to fruition, it would be a boon for U.S. markets. Only time will tell. Look for May corn to encounter solid resistance on a bounce to $3.84-$3.85, and support will be five cents below at $3.72. DTN's National Corn Index closed at $3.41 on Tuesday, with an average basis of 25 cents under March.

Soybeans:

Soybeans begin Wednesday trading higher after Tuesday's fund-driven 8-cent lower finish. After Friday's apparently bullish announcement that China would buy another 367 million bushels (mb) of U.S. soybeans, the trade wants to see concrete evidence of that purchase. Tuesday's CFTC Commitment of Traders report for the week of February 12 showed funds to be sellers of 16,000 that week. They have continued to be net sellers of soybeans and the combined futures and options position is now thought to be over 30,000 contracts. Also on the week of February 12, it appears that commercial traders had gotten long, a positive development. African swine fever continues to be a bearish factor with another few cases reported on Wednesday in China. Brazil's soy exports this year are estimated to be close to 70 million metric tons (mmt) compared to 84 mmt, a testament to the impact of demand-dampening swine fever. Bearish also is the weather in Brazil where rains are expected to be near to above normal over the next 10 days, helping late-planted soybeans and newly planted safrinha corn. Argentina, except for the south, is mostly favorable. Even with the fall in Brazil's soy crop from the record levels of last year, the combined South American soy crop could well be 10-12 million tons more than last year. The trade will continue to monitor the trade talks, where it is hoped that Presidents Trump and Xi can come to an agreement in March. Cash traders report that China continues to seek offers not only on U.S. soybeans, but on corn as well. May soybeans continue to trade just above the trend line that began in September. On a bounced, look for $9.25-$9.30 to be resistance. DTN's National Soybean Index closed at $8.20, and reflects an average basis of 84 cents under March.

Wheat:

Wheat markets are finally getting a bounce from very oversold conditions on Wednesday morning. Kansas City May wheat, just since February 6, had fallen 77 cents per bushel from the high on that day. Commodity funds have piled on, selling an estimated 22,000 contracts this week so far. The combined fund futures and options position now is thought to be over 60,000 contracts in Chicago wheat, and they are net short Kansas City as well. Weather in the central U.S. is very cold and about to get record cold next week, with temperatures beyond March 2 expected to fall to sub-zero in KS, NE and OK. Any unprotected wheat may be subject to damage. Wheat conditions, despite being better than last year in many states, declined from November readings. National wheat ratings are expected to come out around April 1. Wheat has plunged as the U.S. has missed much of the recent wheat tender business, as the EU and Black Sea continue to be aggressive sellers. Interfax reports that the Russian ag minister has recommended a "tacit" quota for grain exports as supplies dwindle, but the Russian ag minister denies that and says that there will be no export restrictions. Russia has exported 33.4 mmt of grain this year so far, and is thought to have 4-5 mmt more to sell. Wheat has also been under pressure on expectations for EU and Black Sea wheat production to rise by as much as 22 mmt (808 mb) next year. KC May wheat will encounter resistance up around $4.62-$4.67. DTN's National HRW index closed at $4.17, and the average basis is at 19 cents under March.

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

FollowDana on Twitter @mantini_r

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Dana Mantini