DTN Early Word Grains

Grains Mixed as Interest Rates Buoy, Export Sales Data Eyed

6:00 a.m. CME Globex:

March corn is down 1/2 cents per bushel, March soybeans are up 2 1/2 cents, and March K.C. wheat is down 1 3/4 cents.

CME Globex Recap:

Global equities are mostly higher following an about-face by the U.S. Federal Reserve Wednesday with regard to interest rate policy. Comments from The Fed seemed to suggest a halt to the raising of interest rates and even a willingness to curb its balance sheet reduction program if necessary. The Federal Funds Futures market fell sharply as interest rate expectations have been cut. Mostly weaker futures overnight as traders prepare for the first export sales data in over a month. The data will be staggered over the next month, however, limiting its near-term usefulness.

OUTSIDE MARKETS:

Previous closes on Wednesday showed the Dow Jones Industrial Average up 434.90 at 25,014.86 and the S&P 500 up 41.05 at 2,640.00 while the 10-Year Treasury yield ended at 2.695%. Early Thursday, the March DJIA futures are down 4 points. Asian markets are higher with Japan's Nikkei 225 higher 216.95 (1.06%) and China's Shanghai Composite higher 9 points (0.35%). European markets are higher with London's FTSE 100 higher 23.8 points (0.34%), Germany's DAX down 9.57 points (-0.09%) and France's CAC 40 up 5.68 points (0.11%). The March Euro is down 0.002 at 1.150 and the March U.S. dollar index is up 0.029 at 95.060. The March 30-Year T-Bond is up 17/32nds, while February gold is up $12.10 at $1,322.00 and March crude oil is down $0.04 at $54.19. Soybeans on China's Dalian Exchange were up 0.12% while soybean meal was up 0.59%.

BULL BEAR
1) The Australian Bureau of Meteorology issued their three-month outlook for February-April, calling for above normal temperatures and below normal precipitation. 1)

Weekly ethanol production missed the level needed to hit the USDA's marketing year forecast for the eighth-straight week.

2) The U.S. Dollar Index traded within 224 pips of 3-1/2 month lows on Wednesday on dovish comments from the Federal Reserve. 2) Brazilian soybean harvest and second-crop corn planting are running well ahead of average while Argentine corn and soy planting are nearing completion.
3) Crude oil futures traded to three-month highs Wednesday as U.S. sanctions hit Venezuela's oil sector. 3) Ukraine's marketing-year-to-date corn exports are now at 12.2 million metric tons (mmt) vs. 7.6 mmt at this same time last year.

MORE COMMODITY-SPECIFIC COMMENTS

CORN Corn prices are off a tad Thursday morning, remaining inside Wednesday's surge which found support at the 50 and 100-day moving averages. The theme of the last few weeks remains unchanged with range-bound trade, low volatility and traders keeping capital dry until data sets are refreshed. Later Thursday, the USDA will begin issuing delayed export sales reports with the first data set covering sales made for the week ended 12/20/18. Weekly ethanol production remains a giant disappointment for demand bulls, missing the level needed to achieve the USDA's estimate the last eight weeks and ten of the last eleven. Over the last eleven weeks, production has averaged 2.5% below year ago levels while the USDA is calling for unchanged production on the year. Compounding the issue, ethanol stocks continue to soar, rising 479,000 barrels last week to 23.980 million barrels. Stocks at that level would be the fourth highest on record and easily the highest on record from a seasonal perspective. Ethanol stocks tend to peak seasonally in March which means stocks could be primed to get even larger. Brazilian first-crop corn harvest was estimated at 5% complete as of 1/25 vs. 4% last week, 6% last year and 4% average. Second crop corn planting was estimated at 16% complete vs. 12% last week, 3% last year and 5% average.

SOYBEANS Soybeans are a bit higher Thursday morning, pushing above yesterday's high and the 200-day moving average. The flagging action in March soybeans is undeniable, and it certainly appears we are headed for a sharp move in one direction or the other. There will be no shortage of catalysts in the near-future between trade talks, updated export sales, the February WASDE and expanding South American harvest. Also adding support to soybeans of late have been several private outlets looking for Argentine soy ending stocks as of 4/1/19 to come in sharply below the USDA's last guess in December. Multiple outlets suggest ending stocks could be as low as 4-6 mmt vs. USDA at 16.85 mmt. This would certainly fit with the fact Argentina has imported a fair amount of U.S. soybeans this season and ending stocks should be more commiserate with production at 10-year lows. We doubt very much USDA would make such a change on the February WASDE but it is something to monitor moving into the spring. That said, production bouncing back to the second or third highest on record should mitigate tight ending stocks. Several private weather forecasters touting a pattern change as we move into February with a wetter Brazil and drier Argentina.

WHEAT Wheat markets are weaker Thursday morning as most contracts remain in downtrends. Wednesday featured quite the session as early strength gave way to selling pressure only to see prices rebound into the close. Recent trends remain in place, although we have seen Minneapolis regain premium against Kansas City with the March spread trading at +70.25 cents this morning, the highest levels since mid-December. The cold snap across the Northern Plains has brought spring wheat movement to a halt while temperatures were not cold enough across the Plains to threaten HRW production. Traders continue to watch Russian wheat price itself out of tenders but European prices have taken their place as the cheapest wheat into most major Middle East/North African destinations. Adding to Wednesday's GASC discussion on U.S. quality, non-deliverable stocks of wheat in Chicago total 9.132 million bushels (mb) vs. 6.462 mb a year ago, a 41% increase. Non-deliverable grades comprise 13.8% of total wheat stocks this year vs. 7.7% last year which could be one reason commercials aren't confident in offering competitive wheat prices which meet GASC specs. Australia's Bureau of Meteorology issued their latest outlook this week, calling for drought conditions to continue into planting season. Australia plants its wheat crop from mid-April to the end of June.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.52 $0.04 -$0.30 Mar $0.002
Soybeans: $8.31 $0.02 -$0.90 Mar -$0.001
SRW Wheat: $4.93 $0.04 -$0.24 Mar $0.009
HRW Wheat: $4.78 $0.02 -$0.24 Mar $0.002
HRS Wheat: $5.33 $0.03 -$0.39 Mar -$0.006

Tregg Cronin can be reached at tmcronin31@gmail.com

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

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