DTN Early Word Grains

Grains Mixed to Weaker, Equity Selloff Continues

6:00 a.m. CME Globex:

March corn was down 1/2 cent, January soybeans were down 5 3/4 cents, and March KC wheat was down 1/4 cent.

CME Globex Recap:

Financial markets around the globe are continuing their Tuesday selloff due in part to the arrest in Canada of a top executive at Huawei, one of China's national technology champions. The arrest has investors nervous as it could impact trade-war talks. Equity selling has spilled into energies with crude down over 4.5%. Grains are insulated so far Thursday morning with only light losses as optimism still reigns about Chinese ag purchases. USDA Export Sales and Shipments report delayed until Friday morning.

OUTSIDE MARKETS:

Equity markets were closed Wednesday in recognition of the national day of mourning for former President George H.W. Bush. Early Thursday, DJIA futures are down 472.00. Asian markets were lower with Japan's Nikkei 225 down 417.71 points (-1.91%) and China's Shanghai Composite was down 44.62 points (-1.68%). European markets are lower with London's FTSE 100 down 179.79 points (-2.60%), Germany's DAX down 264.97 points (-2.37%), and France's CAC 40 down 121.28 points (-2.45%). The euro was up 0.00160 at 1.13355 and the U.S. dollar index was up 0.1150 at 97.1110. September 30-year T-Bonds were up 18/32nds while December gold was down $0.30 at $1242.30 and December crude oil was down $1.78 at $51.11. Soybeans on China's Dalian Exchange closed up 0.21% and soymeal closed up 1.31%.

BULL BEAR
1) Shanghai-based consulting firm JC Intelligence increased their estimate of 18/19 Chinese soybean imports to 100 million metric tons (mmt) vs. USDA at 90 mmt. 1) Reports Egypt is having funding issues and not granting letters of credit for recent wheat purchases is weighing on market sentiment.
2) Corn and soybean prices continue to respect the gaps left on charts following the sharply higher open Sunday night. 2) Estimates of the Ukrainian corn crop continue to grow with some thinking the crop could be 35-36 mmt vs. USDA at 33.5 mmt and 24 mmt last year.
3) It looks likely Iraq will purchase 50,000 metric tons (mt) of U.S. HRW from ADM in their most recent tender with U.S. prices $7-$24/mt cheaper than AUS/CAN. 3) Pre-trade estimates for today's StatsCan production report see the Canadian wheat crop getting larger vs. the last estimate.

MORE COMMODITY-SPECIFIC COMMENTS

CORN Corn prices are mixed Thursday morning, adding to the slight weakness Wednesday which was a session no one was happy to be participating in. Volumes were exceptionally low and interest muted as the rest of the financial markets took a break to honor former President Bush. No government data was issued yesterday and weekly ethanol production will be delayed to this morning. Ethanol prices have moved 3-4 cents off their recent lows but production margins remain weak. The ethanol/corn spread remains in negative territory, a sign ethanol prices are not currently covering the cost of corn. Most believe we will see a reduction in ethanol production on next week's WASDE. Cash corn markets are mostly firm this week with movement muted. Calendar spreads are just over 50% of full financial carry to just under throughout the curve, which remains a neutral to supportive input. CHS registered a fresh 67 corn receipts last night with the firm putting a total of 69 on the street for the first meaningful deliveries of the cycle. Both the 50 and 100-day moving averages sit in the gap from the Sunday night open which should offer support on setback attempts. March corn needs to break $3.90, otherwise we will fill the downside gap.

SOYBEANS Soybeans are lower this morning, attempting the first weaker close in four sessions. As with corn, the gap from Sunday will remain a magnet for price action, although the October and November highs should act as solid support on setback attempts. Cash traders were excited about JC Intelligence raising their Chinese soybean import forecast to 100 mmt which is a full 10 mmt higher than USDA. This figure obviously has a trade agreement factored in, although we aren't comfortable with much more than the 4-5 mmt needed to refill state-owned reserves at this time. President Xi of China will return to his countryThursday with traders and analysts alike anxious to see if any announcements are made to back up President Trump's claims on twitter Wednesday. Offsetting this enthusiasm was the report Brazilian consulting firm Celeres raised their 2018/19 soybean crop estimate to 130 mmt vs. USDA at 120.5 mmt. This would certainly support 80 mmt worth of exports and leave China to source only 5-10mmt to meet Chinese and U.S. import forecast. Producers are optimistic an announcement about the second half of the market facilitation payment could come this week as USDA Secretary Perdue intimated Monday in Chicago.

WHEAT Wheat prices are softer as the Egyptian letter-of-credit issue has traders concerned about the globe's largest importer. GASC tried to calm fears saying three letters of credit were issued Wednesday afternoon with another five coming soon. This has cast a pall over today's GASC tender in which traders are either expected not to offer or tack on a substantial counter-party risk premium. U.S. SRW exports do not want to have business slip away because of the buyer's lack of liquidity. StatsCan will be out later this morning with their December crop report with traders expecting all-wheat production to move up to 31.4 mmt vs. 31.019 mmt last month and 29.984 mmt in 2017/18. There continues to be no spring wheat deliveries after CHS stood in and stopped all available receipts. There were 140 fresh SRW registrations in Toledo last night with ADM delivering same. These are the first deliveries against the WZ. Comments from an elevator conference this week suggested Kansas winter wheat acres as a whole could be down 10% vs. earlier ideas of a 10% increase year/year. Provided yields are average or better, and if demand doesn't increase sharply, there should still be plenty of HRW next year.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.48 $0.00 -$0.37 Mar $0.006
Soybeans: $8.26 $0.02 -$0.88 Jan $0.005
SRW Wheat: $4.86 -$0.04 -$0.32 Mar $0.008
HRW Wheat: $4.62 -$0.07 -$0.36 Mar $0.007
HRS Wheat: $5.41 -$0.05 -$0.35 Mar -$0.006

Tregg Cronin can be reached at tmcronin31@gmail.com

Tregg can be followed throughout the day on Twitter @5thWave_tcronin

(KR)