DTN Early Word Grains

Grains Weaker as Trade Awaits Export Demand Confirmation

6:00 a.m. CME Globex:

March corn down 1/4 cent, March soybeans down 1 1/2 cents, and March KC Wheat down 1 1/4 cent.

CME Globex Recap:

Mostly quiet global equity markets Thursday morning, but the U.S. Dollar Index is trading near 2019 highs and just below its 50-day moving average. The greenback found support at its 100-day moving average Wednesday and overnight. Grains have seen both sides overnight with wheat markets taking a breather for the first time since last week. Trade talks continue to be the main price driver even as South American production estimates are far from settled.

OUTSIDE MARKETS:

Previous closes on Wednesday showed the Dow Jones Industrial Average up 171.14 at 24,575.62 and the S&P 500 up 5.80 at 2,638.70 while the 10-yr Treasury yield ended at 2.746%. Early Thursday, DJIA futures are up 18.00 points. Asian markets are mixed with Japan's Nikkei 225 down 19.09 points (-0.09%) and China's Shanghai Composite up 10.69 points (0.41%). European markets are mostly higher with London's FTSE 100 down 9.76 points (-0.14%), Germany's DAX up 74.47 points (0.67%), and France's CAC 40 up 39.83 points (0.82%). The euro was down 0.00425 at 1.13660 and the U.S. dollar index was up 0.3220 at 96.4300. March 30-year T-Bonds were up 13/32nds while April gold was down $5.80 at $1284.40 and March crude oil was down $0.10 at $52.51. Soybeans on China's Dalian Exchange closed up 0.44% while soymeal closed up 0.46%.

BULL BEAR
1) The Russian ruble traded to its strongest level on Wednesday against the U.S. dollar since December 12. 1) There are 4.636 mmt of soybeans in the Brazilian shipping lineup with 2.7 mmt slated for China. This compares with the 359,281 mt inspected by the U.S. for China last week.
2) China imported 420,000 metric tons (mt) of corn in December, putting calendar year imports at 3.52 million metric tons (mmt) vs 2.82 mmt in 2017. 2) The 6-month RBOB/Ethanol spread strip closed Wednesday at 22.9 cents/gallon with spot month at 11.1 cents/gallon. This creates very little incentive for higher ethanol blends by either refiners or consumers.
3) Production estimates for Brazil continue to move lower with a general trade consensus between 115-117 mmt of total soybean production. 3) The wheat rally this week has taken U.S. FOB offers out of contention into several major importers.

MORE COMMODITY-SPECIFIC COMMENTS

CORN Corn prices are slightly weaker Thursday morning as the magnet to $3.80 basis March futures seems alive and well. The range-bound trade of the last two months has gotten stale, especially with no updates from the USDA. Even though the USDA will be opening all Farm Service Agencies for a brief period to administer programs which already have funding, no official data sets are expected to be issued which have been absent since December. The longer the government remains closed, the more likely it is capital will continue moving to the sidelines and taking volatility with it. Weekly ethanol production will be delayed until Thursday morning because ofMonday's holiday. Informa Economics was out during the session Wednesday with their latest estimates of 2019 acreage. Based on their survey, they see corn acreage at 91.504 million vs. 89.140 million in 2018 and would be the highest since 2016. Using a trendline yield of 176.5 bushels per acre, and demand largely unchanged from 2018, carryout tightens modestly to 1.675 billion bushels. If realized, it would be the smallest carryout since 2013/14 and generally support new crop corn prices above $4.00 basis December futures. Calendar spreads continue to offer no reason to believe flat price is ready to move away from current levels.

SOYBEANS Soybeans are lower this morning, creating consolidating and flagging action over the last four sessions. Generally, soybeans continue to trend higher inside their rising trend channel, and momentum indicators aren't offering any reason to be concerned with the strength of the current move. The 200-day moving average sits at $9.23 3/4, and March soybeans haven't traded above their 200-day moving average since June 7. Soybean spreads have a similar complexion to corn, offering little strength to flat price bulls. Somewhat under the radar, soybean oil rallied to the highest level since October 18 on Wednesday. The bean oil rally has propelled oil share to the highest level since early October. Rarely does a long-term, sustainable rally in the soy complex begin with soybean oil, which should give bulls pause about buying everything soy complex related. Open interest has actually been flat, which is a good sign as the recent buying could be sustainable without a flush of speculative money entering. Informa also issued their soybean acreage estimate, pegging it at 86.204 million acres vs. 89.145 million in 2018. These acres would be a three-year low nationally. In our balance sheet, and using a 52 bushels per acre (bpa) national average yield, carryout is essentially unchanged even with 380 million bushels worth of additional demand. If soybean acres only drop 2.9 million this spring, the soybean balance sheet could be in for a rough outing in 2019.

WHEAT Wheat markets are softer Thursday morning after making new highs for the move overnight. March Chicago wheat prior to Thursday had closed higher in five straight sessions and is now trading at the highest levels since December 19. March wheat also managed to close above its 100-day moving average for the first time since August 31. Price action continues to be underpinned by rumors China is getting close to buying 7 mmt of U.S. wheat but specifics are sorely lacking on this front. Still, as soybean inspection data showed this week, where there is smoke there is usually fire. Also adding support this week are a number of major international tenders including Algeria, Bangladesh, Turkey, Jordan, Ethiopia and Japan. The U.S. should be competitive in three of the six. Informa had all-wheat acreage at 47.163 million acres vs. 47.800 million acres last year with spring wheat at 13.780 million vs 13.200 million a year ago. The increase to spring wheat acres would be more than needed and create an incredibly burdensome situation across the Northern Plains. We do not believe the shift into more HRS acres will be as much as feared given the way soybean economics have taken a turn for the better the last 30-45 days.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.47 $0.00 -$0.32 Mar -$0.001
Soybeans: $8.24 $0.06 -$0.91 Mar $0.003
SRW Wheat: $5.01 $0.05 -$0.25 Mar $0.003
HRW Wheat: $4.91 $0.06 -$0.24 Mar $0.005
HRS Wheat: $5.37 $0.03 -$0.38 Mar -$0.006

Tregg Cronin can be reached at tmcronin31@gmail.com

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

(KR)