DTN Before The Bell Grain Comments

Soybeans, Meal Under Pressure Early Friday

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

At 8 a.m. CST, USDA announced 7.5 million bushels (205,000 mt) of U.S. soybeans were sold to unknown destinations and another 6.7 million bushels (183,000 mt) were sold to China, both for 2017-18. 10.2 million bushels of U.S. corn were sold to unknown destinations for 2017-18. One day after USDA released its lower estimate of world ending soybean stocks, May soybeans and meal are trading lower, pressured by an early show of commercial selling in both.

Other Markets:

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

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Corn:

At 8 a.m. CST, USDA announced 10.2 million bushels of U.S. corn were sold to unknown destinations for 2017-18. May corn was down 1 3/4 cents earlier, pausing after Thursday's new six-month high and lower ending U.S. corn stocks estimate of 2.13 billion bushels from USDA. USDA's lower estimate was the result of a 50 million bushel increase in the estimate of ethanol demand and a 175 million bushel increase in the export estimate. Given U.S. corn shipments are currently down 28% from a year ago and USDA is forecasting a 3% drop, exports are going to have to have a big run in the second half of 2017-18 and apparently, USDA is counting on Argentina's drought to help. As we look at old-crop futures spreads however, the level of carry reflects a neutral commercial outlook so it is difficult to see any market clues yet that support USDA's bullish optimism. One factor in corn's favor came from the Buenos Aires Grain Exchanges on Thursday, lowering Argentina's corn crop estimate from 37.0 to 34.0 mmt (1.3 bb). Fundamentally, there is plenty of U.S. corn in storage with producers waiting for a higher price and possibly, a look at USDA's planting estimate on Mar. 29. Technically, the trend remains up in May corn. DTN's National Corn Index closed at $3.57 Thursday, priced 37 cents below the May contract and within a cent of its July high. There was one delivery intention for March corn early Friday and open interest stood at 4,064 contracts -- a fairly high amount with expiration coming Wednesday. In outside markets, the March U.S. dollar index is up 0.16, a mild response after the U.S. Labor Department said nonfarm payrolls increased 313,000 in February, much more than expected. The U.S. unemployment rate stayed at 4.1%, reported RTTNews.com.

Soybeans:

At 8 a.m. CST, USDA announced 7.5 million bushels (205,000 mt) of U.S. soybeans were sold to unknown destinations and another 6.7 million bushels (183,000 mt) were sold to China, both for 2017-18. May soybeans were down 13 1/2 cents earlier Friday, an early response of commercial selling after USDA increased its estimate of U.S. ending soybean stocks from 530 to 555 million bushels on Thursday. In the same report, the world ending soybean stocks estimate was lowered almost 4 mmt as a result of a 7-mmt drop in Argentina's crop estimate. At the same time, the Buenos Aires Grain Exchange lowered Argentina's soybean crop estimate from 44.0 to 42.0 mmt (1.5 bb) as the drought shows no sign of letting up yet. Here in the U.S., we can point to a modestly higher crush estimate and 9% increase in soybean meal exports as bullish results of Argentina's drought. However, U.S. soybean exports remain down 13% from a year ago while China continues to favor Brazil's soybeans. Fundamentally, the world soybean situation is neutral with USDA expecting a slight production deficit in 2018-19. Technically, the weekly stochastic appears to be turning lower on spot soybeans and meal -- bearish signs that the winter's uptrends are losing upward momentum. DTN's National Soybean Index closed at $9.85 Thursday, down from its highest price in over a year and priced 79 cents below the May contract. Early Friday, there were no delivery intentions for March contracts of soybeans, 39 for meal, and 18 for bean oil.

Wheat:

May Chicago wheat was down 5 1/2 cents and May K.C. wheat was down 5 3/4 cents early Friday, gradually falling back from last Friday's new highs, even though this week's forecasts for the southwestern U.S. Plains don't look any better as far as rain chances are concerned. As I have mentioned before, it is difficult to be too bullish in winter wheat when we know so much of it is available around the world and the U.S. is struggling to export any. What keeps bullish hopes alive is that noncommercial traders are still holding plenty of short positions -- a dangerous thing to do when there is no rain anticipated in the heart of HRW winter wheat country. A look at new-crop futures spreads in winter wheat shows no signs of buying urgency among commercials, but so far, the trends remain up in May contracts of Chicago and K.C. wheat. DTN's National SRW index closed at $4.64 Thursday, down from its highest price in seven months and priced 35 cents below the May contract. Early Friday, there were 37 delivery intentions for March K.C. wheat and 6 for March Minneapolis wheat.

Todd Hultman can be reachedat todd.hultman@dtn.com

FollowTodd on Twitter @ToddHultman1

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Todd Hultman