DTN Before The Bell Grains

Morning CME Globex Update:

Global equities are down reflecting poor economic news out of the EU and China, and the Dow futures are up 4 points following Wednesday's 133- point decline. April crude oil is up 53 cents per barrel, the U.S. dollar index is 0.341 higher and approaching the recent highs, while April gold is down $2.40 per ounce.

Other Markets:

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

Corn:

Corn continues its sideways to lower trade, but has held up well in spite of another new wheat contract low established overnight. South Korea has used this break in corn to secure more supplies and in at least three private tenders, has bought a total of 343,000 metric tons (mt) of corn, but all on an optional origin basis, according to cash-connected commission houses. With South American new crop values likely cheaper, they could satisfy the purchases for July and August arrival. Ethanol production for last week was 0.40% lower, while inventory was 2.3% higher and nearly matched record stocks at just shy of 24.3 million gallons. Ethanol production continues to miss the weekly mark needed, and it is likely that the USDA could lower corn used for ethanol by another 25 million bushels (mb) at some point. The good news was that U.S. ethanol exports were nearly 24% higher than last year. Weather in the U.S. Midwest and northern Plains continues to hamper transportation and stress livestock, with live cattle prices near the contract high and hog futures, after a six-day bounce, still mired in a bear trend. Funds have added to a growing net short in corn, estimated to be around 140,000 contracts including options. This is said to be the first time since 2007 that managed money funds have had a net short corn position in early March, typically not an ideal time to be short! Look for May corn to see resistance up around $3.79-$3.80, and support in the $3.68-$3.70 range. Export sales for the week ending February 28, were 38.2 mb for 18/19, and total sales of 1.595 mb are now down 1%, while total shipments are up 40% versus a year ago. DTN's National Corn Index closed at $3.42 on Wednesday, with an average basis of 30 cents under May.

Soybeans:

Soybeans are getting a modest bounce overnight and are currently hovering just above the key $9.00 area on spot May futures. There still has been no confirmation of the second 10 million metric ton (mmt) purchase of U.S. beans promised by China a few weeks ago, and the trade has become tired of the wait. With the Brazilian harvest expanding and approaching 50% done, and with U.S. Gulf beans said to be from $15 to $20 per mt higher delivered to China for April and beyond, U.S. export sales, already well behind year ago levels, are having trouble finding new demand. U.S. PNW values are far cheaper, but logistical woes with rail shipment are expected to continue with more snows falling in the Midwest and northern Plains. As the snowpack grows, there is more talk that the anticipated late spring could lead to more soybean acres than earlier expected, something our bearish S & D does not desire. Also bearish is the spread of African swine fever, with another new case in China bringing the total to 111 outbreaks in 28 provinces. Even more negative is the news that Vietnam infections have now been found in eight to nine areas. The impact of this demand-destructive hog disease appears to be growing with estimates of China's drop in feed demand previously 5-10 lower%, now possibly down as much as 30% in the first quarter, according to Linn Group. The world is on watch for any spread of this disease to the northern hemisphere. Weather is still yield-conducive in South America, but some longer range forecasts appear to be leaning a bit drier for some key areas of Brazil. In the meantime, the trade is expecting an increase of 10 to 12 mmt of added production in South America versus last year. When coupled with a 900-mb carryout here, that does not scream higher prices. May soybean resistance will be $9.12-$9.15 and then $9.20 above, while a break and close under $9.00 would be bearish. Export sales for the week ending February 28, were a tepid 11.4 mb, and total sales at 1.443 bb are now down 18% versus last year, with total shipments down 31%. Export data continues to be bearish for soybeans. DTN's National Soybean Index closed at $8.11, and reflects an average basis of 91 cents under May.

Wheat:

Just when it appeared that the wheat markets might have reached a short-term low with last Friday's reversal, wheat plunged yesterday on a continued pile on of fund selling, leading to a net fund short in Chicago of over 110,000 contracts inclusive of options, and in Kansas City, a record large net short of 45,000 contracts. Both markets have again set new contract lows overnight Wednesday. U.S wheat has missed much of the export business of late, and aside from Japan, there is little on the docket. Missing the Saudi Arabian business for 12.5 protein wheat was a bearish blow. There is talk that Iraq may have bought 200,000-300,000 mt of U.S. HRW wheat on Wednesday, but the futures sure do not reflect that! Domestically, demand has driven up basis values on hard wheat as mills have had a tough time sourcing wheat with transportation woes. Kansas City 11 and 12 protein basis values were said to be up from 8-16 cents per bushel on Wednesday, trying to pry some wheat out as futures sank to new levels. Even though U.S. wheat sales have now caught up to last year at this time, with shipments off 6% the trade fears another decrease in exports and increase in the current burdensome carryout on Friday's USDA report. Wheat continues to be very oversold, but in a trending market, that is being pressed down by non-commercials, that is not unusual. Export sales for the week of February 28 at 22.8 mb have raised the total sales to 3% above a year ago at 830 mb, with total shipments now down just 6% versus last year. DTN's National HRW index closed at $4.18, and the average basis is at 20 cents under May.

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

FollowDana on Twitter @mantini_r

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