DTN Before The Bell Grains

Morning CME Globex Update:

Dow futures are again showing a higher start, up 99 points, after Friday's 110-point higher close. The U.S. dollar index is up 0.1410, April crude oil is up 69 cents per barrel, while April gold is down $9.80 per ounce.

Other Markets:

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

Corn:

After a strong Friday finish which saw May corn end higher, 7 cents above the new recent low, the market is continuing that bounce. Last month's finish on corn futures was still down 14 cents as the markets fell victim to heavy noncommercial (fund) selling, and traders grew weary of the lack of concrete Chinese buying news. While the U.S. corn basis has been very strong at both ports, it seems more about difficult transportation rather than substantive export demand. South Korea has been very active in the corn market, buying optional origin which is likely to be sourced from cheaper South America. PNW nearby bids for corn were reported to be as high as 170 cents over spot futures and looking for an offerfirst half of March, with the bid 35 cents below that for last half March. The CFTC commitment of traders for the week of February 19 showed funds selling nearly 71,000 corn contracts that week. Monday's net fund short, when you combine futures and options, is thought to be well over 100,000 contracts of corn. Brazil's first corn harvest is now 35-45% complete, and favorable weather is aiding the second (safrinha) crop. INTL FC Stone on Friday raised that crop by 1 million metric tons (mmt) to 65.8 mmt. Argentina's corn crop is now rated 90% good to excellent. Some much needed rains are headed for Argentina this week, after several weeks of abnormal dryness. Deliveries of corn against the expiring March futures have been heavy, with no significant takers, and the May-July spread has been widening, typically not indicative of business being done. However, Friday's strong rally from 5-month lows, and a higher close today, would be a bullish signal on corn according to Japanese candlestick charting theory. Look for May corn to have resistance first at $3.79-$3.80, and major selling up around $3.85. DTN's National Corn Index closed at $3.41 on Friday, with an average basis of 33 cents under May. At 8 a.m. USDA reported 100,500 mt of corn sold to Colombia for delivery in 2018-2019.

Soybeans:

Soybeans late day recovery on Friday was a bullish finish, but May soybeans still finished down close to 20 cents per bushel for the month of February. Funds and cash traders alike grew tired of the "all talk and no action" trading mode, as USDA has yet to confirm that second 10 million metric ton (mmt) purchase of U.S. soybeans by China. The CFTC reported that funds of the week of February 19 sold a hefty 36,000 contracts of soybeans. They have continued to be net sellers of soybeans in late February and early March. Soybeans are higher in the Sunday overnight market as a late request by President Trump on Friday to remove Chinese tariffs, and a news story by the Wall Street Journal indicating that the U.S. and China were wrapping up a final trade deal, have buoyed soy futures again on Monday morning. The U.S. trade representative has officially stated that higher tariffs on China would be delayed on Monday, as progress is being made. As in corn, it is the harsh winter weather and logistics problems that have driven bean basis higher at the ports. Bullish to soybeans was the record large census crush reported on Friday of 182.7 million bushels (mb), and also record large biodiesel production. While domestic demand remains stout, U.S. soybeans are still some 14% behind on export sales, and 32% on export shipments of soybean versus last year. Weather in Brazil has been crop friendly, while parts of southern Argentina have been too dry, but relief is on the way this week. INTL FC Stone raised Brazilian soy production to 113 mmt, but they are still on the low end of estimates. While the U.S. soy basis has been very strong, the Brazilian basis has fallen as the harvest expands. Brazil shipments for February were reported to be 6.09 mmt, far above those of January. African swine fever has not ceased to expand, and the fear in the trade is if that killer disease were to make its way to the northern hemisphere. Look for May beans to have resistance first at $9.22-$9.25 and then at $9.30. DTN's National Soybean Index closed at $8.19, and reflects an average basis of 92 cents under May.

Wheat:

Both Chicago and Kansas City wheat markets had dramatic turnarounds late in Friday's trading session, and as in corn, a bullish Japanese candlestick chart pattern will be confirmed with a higher close on Monday. Both wheat markets are stronger again in the overnight markets, but have traded both sides. Kansas City finished over 12 cents above yet another new contract low established early Friday. Demand news has not been good, with the U.S. losing out to the competition. Saudi Arabia is said to have purchased 625,000 mt of wheat on Monday, but that is suspected to be sourced from northern Europe and the Baltics. U.S. wheat does have a shot at both the Iraq and Bangladesh tenders on Monday. As in corn and soybeans, the February 19 CFTC report showed funds as sellers of 31,000 Chicago and 8,000 KC wheat that week, and as of the first of March are thought to have sizeable net short positions as we begin the month of March. Bearish was news that IKAR consultancy had raised the Russian wheat production by 1 mmt on Friday to 78.5 mmt. Bullish is the bitter cold surge ongoing, which has resulted in single digits and sub-zero temps all the way to the Texas panhandle, stoking fears of some winterkill. However, the U.S. at this stage is facing yet another 1-billion bushel carryout in the face of expanding competitor production in 2019. To date, there has been no confirmation of any China wheat demand for U.S. wheat, and that led to the fund-inspired sell off for February, which found Chicago May wheat down 62 cents per bushel for the month. Today's close will be all important and a higher close may confirm that at least short-term lows have been set. DTN's National HRW index closed at $4.21, and the average basis is at 24 cents under May, firmer.

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

FollowDana on Twitter @mantini_r

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