DTN Before The Bell Grains

A Green Morning to Start on Grain, Soybeans

Dana Mantini
By  Dana Mantini , Senior Market Analyst
(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

Dow futures are little changed in the overnight following Wednesday's 39-point gain, up 11 points. May crude oil futures are up 14 cents per barrel, the U.S. dollar index is up 0.1700, and April gold is down $8.10 an ounce.

Other Markets:

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

Corn:

The corn market is once again higher and now sits eight cents above the recent contract low, gaining back nearly half of the report day losses on much higher stocks and seeding intentions. While U.S. corn offers appear to be more competitive into Asian destinations with Black Sea exporters, Argentine corn offers for June-July appear to be at a 60-cent per bushel discount to the U.S. Word that both Argentine and Ukraine corn shipments for March are well above year ago levels, at 3.5 and 4.5 million metric tons (mmt) respectively illustrates the severe competition. Ethanol continues to reflect a production level that is far below the USDA projection, and future USDA reports are likely to cut corn used for ethanol. The combination of that, with possibly reduced exports and larger March 1 stocks, could send U.S. ending stocks back toward 2 billion bushels (bb). Ethanol stocks last week fell 456,000 barrels, but remained record large for this time of year at just under 24 million barrels. Poor margins, and flooding related logistics issues are given credit for reduced production and higher stocks. It is those challenging logistics and low prices that have led to a strengthening interior corn basis as plants and end users try to pry corn away from the producer. The good news is that ethanol margins have improved and the gasoline to ethanol premium is said to be the highest in six months, incentivizing production. Even though U.S. southern states appear to be ahead of average planting pace, the weather pattern should slow down seeding efforts on corn. Widespread and sometimes heavy rain this weekend and early next week in the central U.S. and heavy rains of 2"-4" the next ten days in the Delta and southern Midwest should hamper planters. NOAA's extended forecast also looks wet. Funds have chosen to remain short a large 240,000 contracts of corn, including options, despite what are more positive developments with China. President Trump meets China's Vice Premier Liu on Thursday, and a meeting with President Xi Jinping could be announced as early as Thursday. U.S. Corn export sales for the week ending March 28 were 21.2 mb for 18-19, bringing total of 1.701 bb to down 9% for the year (bearish), while shipments of 49.7 mb, bring the total to 24% above a year ago. DTN's National Corn Index closed at $3.36 on Wednesday, with an average basis of 25 cents under May.

Soybeans:

Soybeans are higher Thursday morning, just slightly above the old support at $9.00, and that could lead to a test of the $9.10 to $9.15 range. Various news outlets continue to suggest that the trade talks with China are in the final stages and over 90% complete. The rumor that the U.S. will give China until 2025 to satisfy promised purchases of ag products cannot be good news for soybean longs looking for a short-term reaction. The alleged China commitment to allow U.S. companies to own 100% of their China based operations is a step in the right direction. These are all rumors at this stage and until a final deal is inked, we will continue to speculate. This is a market that is tired of constant rhetoric without more action. African swine fever reared its ugly head again and showed up in two more new provinces in China and also appeared in Cambodia, close to the Vietnam border. Although China has ramped up safeguards against the deadly pig disease, it is surely not totally contained. The wet U.S. forecast will continue to hang over soybeans as any delay in either corn or spring wheat seeding is likely to lead to increased soybean acreage, something that a world awash in soybeans does not need. The trade will anxiously await any news from Washington on Thursday as U.S. trade representatives and President Trump both meet with China's trade team. U.S. soybean export sales for the week ending March 28 were a large 72.4 mb, bringing the total to 1.603 bb and down 15% versus last year, bearish. Shipments were 28.1 mb and now are down 28% on the year. DTN's National Soybean Index closed at $8.13, and reflects an average basis of 86 cents under May.

Wheat:

Wheat once again is firm with Chicago May wheat futures now 47 cents above the contract low set in mid-March. A rising soft red winter (SRW) wheat basis on poor crop ratings and excess rains in the Delta and southern Midwest SRW regions is underpinning wheat. U.S. wheat is now more competitive, with U.S. hard red winter (HRW) said to be competitive into north Africa and U.S. SRW cheapest on an FOB basis. However, the U.S. continues to lose business as Algeria's recent purchase of 120,000 mt was satisfied by French wheat, and a rumored purchase of another 180,000 mt may have been covered by French and Argentine wheat. In Minneapolis, which just set another new contract low on Wednesday, the spot basis has weakened as logistics have improved. India reported a possible third straight record large wheat crop, estimated at 100 mmt. Managed money funds remain net short a large wheat position in both Chicago and Kansas City, but are undoubtedly lightening up that position on recent strength. Weather is sure to improve HRW conditions even more, but the excess moisture in big SRW producing southern Midwest and Delta areas will likely worsen already poor SRW conditions. U.S. wheat export sales of 25.9 mb for the week of March 28 bring the total to 894 mb, and that is up 6% on the year, while shipments of just 15.3 mb bring the total to down 4% on the year. DTN's National HRW index closed at $4.23, and the average basis is at 14 cents under May.

Dana Mantini can be reached at dana.mantini@dtn.com

FollowDanaon Twitter@mantini_r

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Dana Mantini