DTN Before The Bell Grains

Morning CME Globex Update:

Friday's Dow Jones average finished 139 points higher. The Dow futures are pointing 40 points lower in overnight trade. April crude oil is up 12 cents per barrel, the U.S. dollar index is down .0390 and April gold is up $2.70 an ounce.

Other Markets:

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

Corn:

Corn goes for its fifth straight higher close, but is currently unchanged, and 12 cents above the contract low set last week. The big news continues to be the ongoing and expanding flooding across the Midwest, where Nebraska has been particularly hard hit, with catastrophic damage to homes, highways, people and livestock. Also big news is the CFTC Commitment of Traders report out on Friday, which revealed that managed funds were short a record large 258,582 contracts of corn as of last Tuesday. Funds have since bought in some of those shorts but are thought to have started Monday at a net 225,000 contracts short. This is surely unusual ahead of the North American growing season, with the outlook for a late spring due to huge snowpack and major flooding issues ongoing. On the export front, as U.S. exporters have recently been undercut by cheaper major competitor offers, that is expected to continue, with U.S. corn for April-May into Asian destinations roughly $10 to $12 per metric tons (mt) more expensive than Argentine corn, and offers for July a premium of $13/mt to Brazilian corn. Bullish for corn was the appearance of China as a buyer of 24,000 mt of U.S. pork in last week's sales, with rumors making the rounds that they could import 200,000 mt total. Hog prices in China have hit the highest level in six months. The U.S. ag attache is even more optimistic, saying that Chinese pork imports could even top 2 million metric tons (mmt) due to African swine fever. The hog futures market has responded, and has now rallied $15, or 30% above the recent lows. Potentially bullish for corn prices is also a rumor that China may have bought up to 190,000 mt of U.S. grain sorghum -- unconfirmed. U.S. weather appears to be beneficially drier in the next week, but flooding issues will continue, and the six to ten day forecast turns wet again. Major flooding is expected to hit the Red River valley in the Dakotas soon. U.S. ethanol prices have reached the highest level in eight months, and even though margins have reached profitable levels in some locations, plants in both Nebraska and South Dakota have been idled by flooding. Look for May corn to have resistance at $3.77 to $3.80, and significant selling at $3.85 on a rally. DTN's National Corn Index closed at $3.45 on Thursday, with an average basis of 28 under May.

Soybeans:

After Friday's 11-cent rally, soybeans are backing and filling a bit to start. While overall reports from the U.S.-China trade talks have been mostly positive with China's parliament said to have passed laws on intellectual property protection and other key issues, a weekend story from a Chinese newspaper suggested that a deal may not be struck until June. Bullish for soybeans was the record large 154.5 million bushel NOPA crush, although it fell short of pre-report estimates. The Rosario Grain Exchange pegs Argentine soy production at 54 mmt now -- up 2 mmt from last month, but still below the USDA's 55 mmt. Potentially constructive is the fact that funds are thought to be short over 100,000 contracts of soybeans, while hedgers, as of last Tuesday's CFTC data, are now holding the largest net-long in two years. Soybean meal had a weekly reversal higher last week. Soybeans were up 13 cents for the week, and soybean meal was $7 per ton higher. China's pig herd in February is down 5.4% from January, while the sow herd is called 5% lower -- a direct result of the uncontained African swine fever. China has yet to complete the promised purchase of about 8 million tons of the promised second tranche of 10 mmt several weeks ago. Weather in South America continues to be mostly favorable for crops there, although limited rains in the next few weeks in parts of Argentina must be watched as Cordoba and Buenos Aires may be too dry. Soybean market drivers will continue to be weather, news from the China trade talks, and planting decisions yet to be decided. Look for the $9.10 to $9.15 area on May to be resistance, with $9.20 to $9.25 above that. DTN's National Soybean Index closed at $8.22, and reflects an average basis of 87 cents under May.

Wheat:

The wheat markets are slightly lower following a nice rally from the lows, which finds Chicago May thirty cents above the contract lows set a week ago. Friday's CFTC report indicated that as of last Tuesday, managed funds were holding a combined net short of 162,000 contracts in all three wheat markets. The Kansas City net short was called a record large 49,000 contracts. A few weather issues have supported the wheat market, with heat and dryness in North African wheat areas, and the extended dry pattern for Australia following the past year's drought threatening production there. Also, warmer and drier outlook for both the EU and Black Sea wheat areas will be closely watched by the trade. Although the U.S. has missed much of the recent significant wheat export business to the EU and Black Sea, the market had become too oversold with the funds too short, leading to last week's rally from contract lows. A positive development for U.S. wheat is the fact that Brazil is considering a tariff-free import quota of 750,000 mt of U.S. wheat in return for some concessions. A meeting between Presidents Trump and Bolsonaro is scheduled for this week to discuss. It is unlikely that this will occur unless Brazil removes the U.S. ethanol tariffs. The wheat versus corn spread has reached the lowest level in 11 months and there is more talk of U.S. wheat making its way into feed rations. Kansas City May wheat would have to rally to the $4.55 to $4.60 area to find much resistance, while on the downside, the $4.25-$4.30 area should be the support. DTN's National HRW index closed at $4.26, and the average basis is at 17 under May.

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

FollowDanaon Twitter@mantini_r

(KR)

Copyright 2019 DTN/The Progressive Farmer. All rights reserved.