DTN Before The Bell Grains

Corn Higher, Wheat & Soy Mixed to Lower in Overnight Trade

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

Morning CME Globex Update:

Following Tuesday's 190-point decline in the Dow Jones average, Dow futures are up 22 points in the overnight, May crude oil is up 33 cents per barrel, the U.S. dollar index is up 0.0070, and June gold is down $1.20 an ounce.

Other Markets:

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

Corn:

After Tuesday's USDA report featuring an expected but sobering rise in U.S. corn ending stocks, corn is slightly higher to begin. The resulting 2.035 billion bushel (bb) ending stocks number was arrived at by slashing U.S. feed and residual, ethanol and export demand to account for the surprising jump in March corn stocks. Some feel that further cuts could be ahead of us. The stocks-to-use ratio on U.S. corn if this projection is realized is being called the highest since 2005. Adding insult to injury was WASDE's increase in both the Brazilian corn crop to 96 million metric tons (mmt), and the Argentine crop to 47 mmt, leading to a massive gain of 29 mmt (1.141 bb) of corn combined in those two countries compared to last year. World stocks were pegged at nearly 6 mmt (236 mb) higher, and U.S. corn exports were presumed to be negatively impacted by higher Ukraine and South American share of world corn exports. Tuesday's USDA report surely confirmed the managed money funds' record large net-short ahead of the report, and the results gave them little reason to exit those shorts. May corn made a new contract low ahead of the USDA report but is five cents above that low to start on Wednesday. The trade is little fazed by the ongoing surge of winter weather again, bringing blizzard conditions to Wyoming, parts of Nebraska, South Dakota and Minnesota. Heavy rains and high winds will occur in many areas along with falling temperatures. Planting progress will surely be halted and future flooding could be a concern. Look for May corn to see support around $3.55 with resistance $3.65-$3.66. DTN's National Corn Index closed at $3.36 on Tuesday, with an average basis of 24 cents under May.

Soybeans:

While Tuesday's April USDA report made few changes to an already bearish soy balance sheet for both the U.S. and the world, the meager 5 bb cut in U.S. ending stocks kept stocks at a burdensome level, and world stocks at a record large level. The 500,000 metric ton (mt) increase in Brazil soy production to 117 mmt was about 1 mmt above trade expectations and was likely attributed to great finishing weather in Rio Grande do Sul, with the prospect that final production could move even higher. The combined Brazilian and Argentine soy production is now pegged at close to 14 mmt (514.4 mb) higher than a year ago. Last year's crop was revised higher as well. China demand was left unchanged at 88 mmt compared to 94 mmt last year as African swine fever has impacted demand. China's own ag ministry has called China's soybean imports closer to 85 mmt. Soybeans have been underpinned by the hopes for a soon to be announced U.S.-China trade deal, but without that, there is the chance for more bad news in the form of added soy acres in the event that the cool and wet spring in the U.S. forces planting switches to more soybeans. South American soybeans remain priced well below U.S. values and Brazil's soy exports for April are projected to be a new record, at 12.7 mmt, according to R.J. O'Brien. The dreaded African swine fever continues its relentless assault on pigs as it was found for the first time in South Africa. Look for May soybeans to continue to be supported around $8.95, with strong resistance likely on any move toward the $9.10-$9.12 range. Tuesday's USDA report once again confirmed what most have known, that we have too many soybeans for both the U.S. and globally. A China solution is now desperately needed. A Bloomberg article suggested that there is a move to get a finalized deal and that a meeting between President's Trump and Xi Jinping might be announced soon. DTN's National Soybean Index closed at $8.14, and reflects an average basis of 85 cents under May. At 8 a.m. USDA reported 133,759 mt of soybeans sold to unknown destinations for delivery in 2018-2019.

Wheat:

Tuesday's April USDA report made the U.S. export picture even more depressing with a cut in both U.S. wheat exports of 20 mb and a cut in feed and residual by another 10 mb, sending U.S. ending stocks closer to a burdensome 1.1 bb. The impending increase in wheat supplies in 2019 from the EU, Black Sea and Australia is likely to make U.S. exporters fight even harder for a share of business. French wheat exports to countries outside of the EU are expected to be close to 20% above year ago levels. Tuesday's report also resulted in a further decline in spring wheat exports, sending ending stocks of hard red spring (HRS) to 305 million bushels - called the highest since 1987-1988. World ending stocks on wheat were a much greater than expected 275.6 mmt, resulting from not only the U.S. stocks increase, but also a multi-year revision of Iran wheat stocks and lower use by the EU who once again replaced corn use for wheat in feed rations. Funds remain net short a sizeable Chicago and Kansas City position and seem comfortable staying with that. Kansas City may wheat is sitting about seven cents above the recent contract low, while Chicago May is now under the 20-day moving average. DTN's National HRW index closed at $4.14, and the average basis is at 13 cents under May.

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

FollowDanaon Twitter@mantini_r

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Dana Mantini