DTN Before The Bell Grains

Morning CME Globex Update:

The Dow Jones average fell 96 points on Tuesday but Dow futures are pointing to a modest 75-point gain to start Wednesday. April crude oil is up 67 cents per barrel, the U.S. dollar index is down 0.1020, and April gold is up $8.50 per ounce.

Other Markets:

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

Corn:

Corn is slightly lower in the overnight, pressured by wheat weakness. Just as corn was pulled along for the bullish ride on Tuesday's sharp wheat rally, it is being pressured this morning. The CONAB (Brazil's supply and statistics agency) increase in its estimate of Brazil's final corn crop of 92.8 million metric tons (mmt) was bearish, as is news that Asian importers continue to source their corn feed needs from cheaper South American origins. South Korea has been very active buying corn, but many of the optional origin purchases are said to be coming from the southern hemisphere. On Tuesday, Taiwan's MFIG was rumored to have bought 65,000 metric tons (mt) of corn, and that was sold by Argentina for May-June shipment. Argentina is certainly cheaper than U.S. offers for May-June. CONAB's 92.8 mmt estimate of Brazilian corn is up 1.1 mmt from their last on beneficial February-March rains, but that is still well below USDA's 94.5 mmt estimate, and some private estimates that are even higher. Comments from Robert Lighthizer that major issues still need to be resolved before a China trade pact can be signed are also pressuring markets on Wednesday. EPA's allowance of E-15 is bullish, and the higher blend of ethanol may be signed in the next few days according to Ag Resource. Weather in the U.S. continues to be a challenge, and it appears that planting is likely to be further delayed with parts of NE, SD and ND on tap to get 12-18" of snow and high winds in the next two days. Funds are thought to have bought in nearly 9,000 contracts of their short on Tuesday, but managed money funds are estimated to be short over 200,000 contracts still. Look for May corn to continue to meet resistance at $3.70-$3.75, with support at the recent lows of $3.61-$3.62, and then at $3.58. DTN's National Corn Index closed at $3.36 on Tuesday, with an average basis of 30 cents under May.

Soybeans:

Soybeans are slightly lower, as recent comments from trade representative Lighthizer suggest that there is still much work to be done on the China trade pact. This is contrary to earlier thoughts that the U.S. and China are in the final stages for an early April conclusion to the trade war. In addition to the current U.S. and world record large supplies of soybeans, African swine fever just will not go away, with cases in both China and Vietnam on the rise, and a case now reported in Russia. This demand-dampening disease has sent China's pig population down 13% from last year at the same time as trade issues with China have reduced exports there. Palm oil on Tuesday fell to its sixth consecutive loss, adding to the bearish oilseeds profile. Tuesday's revised Brazil soybean production estimate by well-regarded CONAB to 113.5 mmt, down 1.9 mmt from last month, and well under the USDA's 116.5 mmt March estimate was bullish. Also bullish is Wednesday's NOPA estimate for a crush of 158.7 million bushels (mb), which if realized, would be a record for February crush, though 7 1/2% lower than January. Managed money funds in soybeans are thought to be 83,000 contracts net short, although they bought in some of that short on Tuesday's bounce. Soybean meal, which set a new contract low on Tuesday, is only slightly above the historical support level of $300. Weather in South America has provided few major threats lately, and even with production potential having slipped, supplies remain burdensome and U.S. soybeans will have major competition. Look for May soybeans to see resistance at $9.00 and then $9.10-$9.15, and support down at $8.85. DTN's National Soybean Index closed at $8.09, and reflects an average basis of 88 cents under May.

Wheat:

Following Tuesday's sharp rally from new contract lows, which had many proclaiming that the lows in wheat are in, wheat has given back about one third of those gains in the overnight. In a market that had become very oversold, and with an estimated fund short that had become record large in Kansas City, Tuesday's rally was precipitated by short-covering following a decline of nearly $1.00 per bushel just since the beginning of February. Funds bought in nearly 11,000 contracts of their shorts Tuesday, according to several commission houses who track funds. Although U.S. wheat has been undercut on many recent wheat tenders, as both the EU and Black Sea origins continue to be aggressive, there are several more tenders this week with Algeria, Tunisia, Bangladesh and Turkey all in for wheat. While the EU is likely to satisfy much of that demand, the U.S. has a shot as SRW (soft red winter) is advantageously priced on a FOB basis. Recent moisture in wheat areas has been plentiful, but more extreme weather promises to delay spring planting even more, with a major blizzard headed for western NE and into the Dakotas with 12-18" of snow and very high winds. Funds remain short sizeable positions in both Chicago and Kansas City wheat. Look for KC May wheat to have resistance at $4.42-$4.45 and then at $4.55-$4.60 above that, with a break through $4.33 possibly leading to another challenge at the lows. DTN's National HRW index closed at $4.24, and the average basis is at 19 cents under May.

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

FollowDana on Twitter @mantini_r

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