DTN Before The Bell Grains

Morning CME Globex Update:

Global equity markets are overall lower following China's poor economic growth report Monday. The Dow futures are up 22 points after falling 206 points in Monday's trade. The U.S. dollar index is up 0.1450, April crude oil is up 22 cents and April gold is down $0.50 an ounce.

Other Markets:

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

Corn:

While attempting its third consecutive higher close Tuesday, corn is very quiet in two-sided overnight trade. The higher close Monday confirmed Friday's reversal from five-month lows, but the market still needs some positive demand news. Last week's export inspections of 34.1 million bushels (mb) was short of the weekly average needed, but shipments remain 36% above year ago levels at 1.016 billion bushels (bb) to date. A daily sale of 101,000 mt was announced sold to Colombia Monday, but there is still no sign of sales to China, and South America's corn basis continues to weaken as harvest advances, reducing U.S. competitiveness. The U.S. basis at the ports continues to be very strong due to logistical issues, with snow, ice and hampered barge and rail movement reducing the ability to ship. The PNW spot corn basis for first half March is reported to be as high as 170 over May futures, well over last half March and beyond bids. Ethanol margins, though improved from a month ago, remain close to or just under breakeven in many Midwest locations. Weather in South America is overall bearish, with recent Brazil rains improving the safrinha corn crop, and rains expected across all of Argentina's growing areas this week. Ahead of the Friday WASDE report from USDA, trade expects an average Brazilian corn crop of over 94 million metric tons (mmt), and an Argentine crop of over 45 mmt. That would result in roughly 25 mmt more than last year's combined production. News from the U.S.-China trade talks continues to be bullish, with the Wall Street Journal reporting the impending trade deal "will very likely remove all tariffs", as the trade representatives are working on a reported 150-page document. President's Trump and Xi Jinping will likely meet March 27 with the trade hoping a deal can be signed. Look for May corn to have resistance at $3.80 and even more at $3.84-$3.85. Commodity funds remain short a sizeable amount of corn, adding fuel to any bullish news, so far lacking. It is possible to retest Friday's lows, but the short-term lows could be in. DTN's National Corn Index closed at $3.43 on Monday, with an average basis of 32 cents under May.

Soybeans:

Soybeans also confirmed the price reversal that began late Friday, but as in corn, it is a market that needs more concrete demand news to hold up. That news continues to be elusive, with still no confirmation of the promised second 10 mmt purchase by China. Export inspections last week of just 31 mb was down from the previous week's 48 mb, and total soybean shipments are down 472 mb from last year at this time, 33% lower. Total inspections are the lowest since 2011/2012, and put the February USDA estimate of 1.875 bb in jeopardy. Funds have also added to net bean shorts and with options are estimated to be near 90,000 contracts net short. The favorable Brazilian rains of the past few weeks and the outlook for Argentina to get some good rains this week is bearish, as are indications that a late spring could lead to more soybean acres. With world and U.S. record large supplies, that is something the market does not need. With South American soybeans at a discount to U.S. as that harvest expands, this is a market that demands a U.S.-China trade pact and removal of tariffs soon. Optimism remains high for a deal, and Ag Resource suggests that the trade representatives are "in the final stages" of a historic deal. Look for May soybeans to encounter selling near key moving averages at $9.22-$9.25 and even more at $9.30-$9.35, while support will continue to be near $9.00. DTN's National Soybean Index closed at $8.25, and reflects an average basis of 91 cents under May.

Wheat:

Wheat, especially Kansas City, failed to confirm Friday's reversal in prices by finishing slightly lower on Monday. Although wheat is very oversold, demand news has not been good. Last week's export inspections of just 16.1 mb leaves U.S. shipments down 49 mb so far, over 7% lower than last year. News that U.S. wheat was likely not involved in Saudi Arabia's Monday purchase of 625,000 mt, with German and Baltic wheat offers much lower, was surely a disappointment to high protein hard wheat exporters. We have a shot of Iraq business, with the U.S. offer landed said to be cheapest, and possibly Bangladesh's tender. However, with the calendar advancing, it would appear that the U.S. could be headed to another 1 bb or higher ending stocks number. The market would love to see the China trade deal finalized soon, as U.S. wheat could be a beneficiary. Bad news is that Russia's wheat crop is called 4% higher this coming year, with some analysts saying that an 80 mmt crop is possible with good weather. The European Commission says that the EU wheat crop could be 140.8 mmt in 2019-2020 compared to the past year's 128.7 mmt wheat crop. Australia's Bureau of Statistics - ABARE - pegs the Aussie wheat crop at 23.9 mmt, 40% above this year's drought-reduced crop. Commodity funds have been adding to net shorts in wheat, with the February 19 CFTC report showing funds short 31,000 KC futures, and estimates today of Chicago's fund net short (including options) now up over 100,000 contracts. This is a bullish factor underpinning wheat on any bullish China announcement. Wheat ratings on both OK and TX were reported on Monday, with TX good to excellent down 2% to 36%, and OK up 15% to 53% good to excellent. Weather in the Plains and upper Midwest continues to be bitterly cold and wheat damage is possible. DTN's National HRW index closed at $4.22, and the average basis is at 21 cents under May.

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

FollowDana on Twitter @mantini_r

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