DTN Before The Bell Grains

Morning CME Globex Update:

Dow futures are showing a 18-point gain overnight, May crude oil is down 80 cents per barrel, the U.S. dollar index is up 0.1940, and June gold is down $13.70 an ounce.

Other Markets:

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

Corn:

What a surprise -- corn is moving sideways again in very slow overnight trade, but still seven cents above the recent contract low. South Korea's KOCOPIA reportedly bought 60,000 metric tons (mt) of corn on Wednesday for June arrival, likely from the U.S. This has not been confirmed yet. South Korea has been on a buying spree since early March, with estimates that they may have bought as much as 800,000 mt of corn on an optional origin basis, but much of that is likely to be supplied from cheaper South American origins. Currently, South American corn figures to be from $20 to $25 per metric ton (mt) cheaper than U.S. corn on a FOB basis. Managed funds were estimated to have bought in 10,000 contracts of shorts on Wednesday, but that would still leave them net short close to 260,000 contracts inclusive of options. China is reportedly reviewing tariffs on U.S. DDGs at the request of the U.S. Grains Council, and trade feels that China may move toward lowering tariffs on both DDGs and ethanol. China's plan to require 10% ethanol by 2020 would require annual usage of 15 million metric tons (mmt), versus their current capacity to produce about one third of that. In the U.S., ethanol production was a bit higher last week, and stocks were drawn down by 3.3% to just under 24 million gallons. The widening gasoline premium to ethanol should encourage higher production, but many in the trade see further cuts on corn used for ethanol. Weather in the U.S. features blizzard conditions in parts of NE, SD, ND and MN, likely leading to planting delays and more flood potential, while the Delta and southern Midwest also looks wet. May corn will continue to support near $3.55-$3.57, while resistance will be $3.66-$3.70. DTN's National Corn Index closed at $3.38 on Wednesday, with an average basis of 24 cents under May. Export sales of corn for the week of April 4 were 21.6 million bushels (mb) for 18-19 with total commitments now 1.722 billion bushels (bb) and down 9% versus last year. Weekly shipments of 38.7 mb brings total shipments to 19% above a year ago.

Soybeans:

May soybeans are once again gravitating around the $9.00 level in slow trade as the market awaits some news from the China trade negotiations. The feeling is a bit more positive of a final deal getting closer, as Treasury Secretary Mnuchin revealed that the U.S. and China have reached an agreement on enforcement. That has led some to think that a settlement could be close at hand. South American soybeans are currently priced about $10 to $15 per mt below U.S. soybeans. Brazil's soybean shipments in April are expected to be just shy of 9 mmt. On a negative note, African swine fever won't go away, with more cases found in northern Chinese provinces, and a lone case of ASF appearing in South Africa. Fears of the spread of the virus has led to the National Pork Producers Council canceling their World Pork Expo for 2019, scheduled to be held in Des Moines. With typical visitors from some twenty countries, and no ASF yet to be found in North America, they are taking precautions. Managed funds are estimated to be still net short about 95,000 contracts of soybeans. Look for May soybeans to continue to find support around $8.95, with stiff resistance on a rally to $9.10-$9.15. Weather continues to be a challenge in the Midwest and northern Plains, and the potential seeding delays could lead to even more unwanted soy acres, with record large U.S. and global soy supplies looking for demand, not more supply. Hopes of a China deal continue to support soybeans with rumors floating around of an annual China commitment of 40 mmt of U.S. soybeans on conclusion of the deal. DTN's National Soybean Index closed at $8.18, and reflects an average basis of 84 cents under May. Last week's export sales were a meager 9.9 mb for 18-19, bringing total commitments of 1.613 bb to down 17% from a year ago, and shipments of 32.7 mb make the total 26% below a year ago.

Wheat:

Minneapolis wheat has once again moved higher after a few bullish chart signals in the past few days. Supporting spring wheat futures are the very oversold momentum indicators after a 52-cent plunge in the past few weeks, and ideas that the ongoing blizzard conditions are likely to further delay spring wheat seeding and exacerbate flooding concerns. Kansas City and Chicago futures are up just slightly and in a holding pattern, with the April USDA report confirming even higher stocks of wheat. There are a few problem spots in wheat to watch, and one is the EU, where dryness has been an ongoing concern again. Strategie Grains just lowered soft wheat production to 144.8 mmt from 146.1 mmt last month, but that would still be 14% above last year's drought-impacted production. While U.S. hard red winter (HRW) wheat is surely benefitting from the wet pattern, U.S. soft red (SRW) conditions could worsen with a very wet pattern in the Delta and southern Midwest unlikely to improve already poor SRW ratings. While the last few days of action in Minneapolis wheat can be considered bullish in light of the largest spring wheat stocks in years, there is plentiful overhead resistance just 10-15 cents above the current market. DTN's National HRW index closed at $4.13, and the average basis is at 13 cents under May. Last week's export sales of wheat were just 10 mb for 18-19, bringing the total commitments to 904 mb, up 7% versus a year ago, but shipments, at 21.6 mb, left the total 3% under those of a year ago.

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

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