DTN Before The Bell Grains

Morning CME Globex Update:

Global equities are under pressure Friday morning on ideas of slowing growth after bearish China trade news. The Dow futures are pointing to another loss of 205 points following Thursday's 200-point drop. April crude oil is down $1.53 per barrel, the U.S. dollar index is down 0.353 after rallying to a new recent high Thursday, and April gold is up $11.80 an ounce.

Other Markets:

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

Corn:

Following Thursday's fund-driven plunge to the lowest level since September of 2018, corn is attempting a bounce. Funds added to a growing and atypical net short position ahead of the North American growing season, pressured by the sharply lower wheat markets and stiff competition for export sales. Funds are thought to hold a net-short combined futures and options position of 156,000 contracts. Ag Resource estimates that funds in the past week have sold 52,000 contracts of corn. South Korea has been very active in export markets, picking up a rumored 400,000 metric tons (mt) or more of corn for summer just in the past few days, but all is optional origin, and most is expected to be sourced from South America. Corn export sales at 38.2 million bushels (mb) last week, along with 11 mb of new crop, was above expectations and total sales of 1.595 billion bushels (bb) remains slightly behind the 1.619 bb a year ago. China's purchase of 65,000 mt of sorghum was a bullish surprise. Bearish chart action, no weather issues for South American corn, and a superb moisture base for the coming crop have all combined to pressure corn. Weather in South America has turned a bit, with a drier outlook for Brazil in the next ten days. Argentina weather continues to be favorable. In the U.S., the bitter cold and big snow totals in the north, and the excess wetness and flooding in the Delta and southeast, has led to fears of a late planting season, favoring increased soybean acres. Basis continues to be very firm at the ports due to logistical constraints, and first half March PNW is said to have traded as high as 170 cents over spot May futures. The inability to move corn to export channels has likely led to the huge deliveries on expiring March, which has pressured futures as well. In Friday's WASDE report, the trade fears another cut in corn usage for ethanol. Few other changes are anticipated in Friday's USDA report with the focus likely on South American production. Look for May corn to have support at the old low of $3.63 and resistance up around $3.72-$3.75. DTN's National Corn Index closed at $3.34, with an average basis of 31 cents under May.

Soybeans:

Soybeans were able to hold up Thursday despite the fund onslaught in all three markets. The likely reason is a widely held belief that China was finally back buying U.S. soybeans again. Following trade talk that China was back buying U.S. soybeans again, USDA reported that China has bought 664,000 mt (24.4 mb) of U.S. soybeans for 18/19 Friday morning. It is thought that due to logistical constraints, the earliest the U.S. could ship any quantity would be May-June since U.S. is not competitive nearby. Soybean export sales were a disappointing marketing year low 11.4 mb, well under the 18 mb average needed. Total sales of 1.442 bb is well under the 1.763 bb at this time last year. China picked up two cargoes and total sales are now 9.4 mmt. U.S. soybean sales represent 77% of USDA projection, versus a normal 90% for the past five years. In Friday's USDA report, few changes are expected, but it is possible that USDA lowers their export projection. All eyes will be on South American production as well. The recent fall in both Brazil's Real currency and Argentina's Peso have also made their soybeans cheaper on world markets. China reported February imports of all goods to be down nearly 21%, while imports of soybeans at 4.46 mmt fell far below that of January, and no doubt the trade war and African swine fever were catalysts. Funds have now approached a net short in soybeans approaching 100,000 contracts inclusive of options. Look for May soybeans to once again have support at $9.00, with a fall under that bearish, and resistance first at $9.10-$9.15. DTN's National Soybean Index closed at $8.10, and reflects an average basis of 92 cents under May.

Wheat:

Wheat fell hard again Thursday, fueled by massive fund selling again, and now Kansas City May has plunged 90 cents per bushel just since February 6. The combined net-short between Chicago and Kansas City wheat, where funds hold a record net-short, is thought to be nearing 160,000 contracts. Wheat export sales were decent at 22.8 mb last week, and total sales are 830 mb, ahead of last year's 809 mb. However, U.S. wheat has missed much of the recent business as Europe and the Black Sea continues to be priced lower. The sharp rise in the U.S. dollar index, combined with the fall in the euro has been a bearish input for U.S. wheat prices. The U.S. dollar index hit the highest level in three months Thursday. Minneapolis wheat futures continue to be relatively firmer than the other two wheat markets, as big flooding expected in the northern Plains promises to lessen spring wheat seeding at the expense of soybeans. In Friday's USDA report, trade is bracing for a possible reduction in U.S. wheat exports and rise in carryout as shipments of U.S. wheat still trail last year by 6%. The impending 1 bb ending stocks combined with a predicted surge in other major exporters production this coming year has weighed heavily on wheat. On a bounce, look for KC May wheat to see resistance at $4.42 to $4.45. DTN's National HRW index closed at $4.06, 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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