DTN Before The Bell Grains

Morning CME Globex Update:

Global equities are higher on positive economic news from China, with Dow Jones Industrial Average futures pointing up 155 points following a 69-point lower finish Thursday. April crude oil is down 13 cents per barrel, the U.S. dollar index is down 0.0550, and April gold is down $9.70 an ounce.

Other Markets:

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

Corn:

Corn continues to trade in a tight range, inching closer to the lowest futures prices we have seen since September. Corn is little changed in the overnight. Bullish news in the form of good exports last week at 48.8 million bushels (mb) was not enough to stem the tide of relentless fund selling and long liquidation into the March delivery period. March corn faced more deliveries on Friday morning, with another 786 contracts registered for delivery. No commercials stepped up to take ownership of the 1975 contracts delivered so far. The failure to see any concrete evidence of the constantly rumored Chinese corn purchases has resulted in a tired market. Corn export sales now total 1.557 billion bushels (bb) compared to 1.546 bb last year. The path forward may be more difficult as the Black Sea and South American exporters have a price advantage. China pork prices are higher as African swine fever, now having been found in 28 provinces, has tightened pork supplies and government support for producers has risen. China, which consumes 50% of the world pork, is attempting to increase production from large producers and shares of those producers have risen sharply in past months. Could the tightening pork supplies be a good omen for U.S. pork sales to China once the trade deal is consummated? Funds, who have been relentless sellers of corn, are now thought to have a net short position, including options, of over 120,000 contracts. This contrasts to a few months ago, when funds held a net long futures only position of 200,000 contracts. Weather in the U.S. (cold and wet) is expected to continue, hampering movement and stressing livestock, and a late spring is expected to delay planting efforts. The February crop insurance price was finalized Thursday at $4.00 for corn. DTN's National Corn Index closed at $3.38 on Thursday, with an average basis of 33 cents under May.

Soybeans:

Following three consecutive days of lower prices fueled by speculative selling, soybeans are bouncing in the overnight. Despite massive export sales of 80.7 mb last week, including 66 mb of China sales, the lack of confirmation of the second tranche of 10 million metric tons (mmt)(367 mb) China has committed to buy that has the trade cautious. While Ag Secretary Perdue has assured the market that it will be old crop soybeans, we have seen little proof so far. Export sales at 1.431 bb so far are still down 14% from last year, with total China sales standing at 9.2 mmt. U.S. soybean shipments remain a hefty 32% below year ago levels. Soybean deliveries finally found a commercial stopper with Louis Dreyfus taking delivery on 223 contracts of March, supporting the market. The final February crop insurance price was $9.54, better than fall prices but lower than last year's $10.16 price. The continued wet, snowy and cold weather pattern in the upper Midwest and northern Plains leans to heavier soybean plantings as spring is further delayed. Weather in South America has been ideal lately in Brazil, and the four-week dry spell in southern Argentina is about to come to an end with very good rains of up to 3" in some areas expected next week. Census soybean crush will be released Friday morning and estimates are pointing to 180.6 mb compared to December crush at 183.6 mb and last year's 174.7 mb. May soybeans should find decent selling pressure on a rally to $9.20-$9.25. DTN's National Soybean Index closed at $8.16, and reflects an average basis of 94 cents under May.

Wheat:

Wheat is lower again and now has fallen some 70 cents in Chicago and 76 cents in Kansas City just since early February, sending Chicago wheat to another new contract low. Adding to wheat pressure was the EU's Matif wheat contract sinking to seven-month lows Thursday. Last week's export sales of 17.5 mb were as expected, but wheat sales have now eclipsed those of last year, at a total commitment of 806 mb. Export shipments, however, are still 8% behind last year's pace. The U.S. has missed export business in the past few weeks, but exporters are hoping that might change with today's 595,000 mt (21.8 mb) Saudi Arabia tender for 12.5 protein milling wheat. The U.S. is thought to have a shot at some of that business. Deliveries against Chicago expiring March futures now stand at 610 contracts, with no relevant stopper of those deliveries. Weather will remain a threat to unprotected wheat over the weekend and early next week as temperatures are expected to fall to sub-zero in parts of KS, NE and OK. Spring wheat has been the only market not subjected to big speculative selling, as logistical issues caused by weather and a projected late spring has supported that market relative to Chicago and KC. The February crop insurance price on HRS (hard red spring wheat) finished at $5.77, well below last year's $6.31. With the massive snowpack expected to get even larger in coming weeks, trade ideas are that soybeans could steal acreage away from HRS. I will keep saying it, but wheat has now fallen to an extreme regarding its oversold technical condition. We need some good demand news from China or elsewhere to stem the bearish tide. DTN's National HRW index closed at $4.24, and the average basis is at 28 cents under May.

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

FollowDana on Twitter @mantini_r

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