DTN Early Word Grains

Firmer Row Crops, Weaker Wheat for Turnaround Tuesday

6:00 a.m. CME Globex:

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

CME Globex Recap:

Stronger global equity markets this morning as optimism grows toward a deal to keep the U.S. government open past this Friday's deadline. The deal salvaged between Republicans and Democrats would force Mr. Trump to accept less money for his border barrier than what he has been proposing. Grain markets are mixed this morning as corn and soybeans claw back from a poor showing Monday. If current new crop prices hold through the rest of February, producers will have some difficult choices to make about spring rotations given the relatively tight spread between commodities and profitability.

OUTSIDE MARKETS:

Previous closes on Monday showed the Dow Jones Industrial Average down 53.22 at 25,053.11 and the S&P 500 up 1.92 at 2,707.88 while the 10-Year Treasury yield ended at 2.661%. Early Tuesday, the March DJIA futures are up 167 points. Asian markets are higher with Japan's Nikkei 225 up 531.04 (2.61%) and China's Shanghai Composite up 18 points (0.68%). European markets are higher with London's FTSE 100 up 28.89 points (0.41%), Germany's DAX up 131.05 points (1.19%) and France's CAC 40 up 51.34 points (1.02%). The March Euro is up 0.001 at 1.130 and the March U.S. dollar index is down 0.002 at 96.855. The March 30-Year T-Bond is down 12/32nds, while April gold is up $4.90 at $1,316.80 and March crude oil is up $0.54 at $52.95. Soybeans on China's Dalian Exchange were up 0.49% while soybean meal was up 0.73%.

BULL BEAR
1) USDA confirmed wheat export sales to Egypt and Nigeria on Monday as well as a soymeal sale to Ecuador. 1) Corn and wheat export inspections missed the levels needed to hit USDA export forecasts. Wheat inspections are down 10.2% from a year ago.
2) Soybean export inspections hit the needed level to achieve USDA's export forecast for the fifth week in a row. 2) USDA is forecasting the first year-over-year drop in Chinese soybean imports and crush demand in 15 years.
3) The MWH/MWK calendar spread inverted Monday, trading to new contract highs as a lack of physical wheat movement supports bull spreads. 3) On Monday, the U.S. Dollar Index traded to the highest level since December 18.

MORE COMMODITY-SPECIFIC COMMENTS

CORN Corn futures are higher Tuesday morning, desperately trying to post a higher close for the first time in five sessions. With March corn trading around $3.74, the contract is showing a textbook example of "giving up the carry." December corn futures expired at $3.76 3/4 on December 14. That day, March corn futures settled at $3.84 3/4 while the CH/CK spread closed at 7.50-cent carry. Without hedging, and therefore locking in that carry, futures have extracted the benefit to storing grain. While grain stocks on December 1 came in lower than trade expectations, traders seem much more concerned with the competitiveness of U.S. exports relative to Argentina, Brazil and Ukraine. Argentine FOB offers are trading a discount to U.S. Gulf offers while Brazilian export offerings are struggling to find bids. Ukrainian offers are $5-$7/metric ton premium to U.S., but the pace of exports continues at breakneck speed. Export inspections in the week ended 2/7 totaled 29.3 million bushels (mb), less than the 45.6 mb needed weekly to hit the USDA forecast. Corn inspections have missed the level needed for four straight weeks but are still 47.5% above year-ago levels. Technically, March corn futures are slipping out of the bottom end of its contracting triangle pattern which could prompt follow-through selling in coming sessions.

SOYBEANS Soybeans are also firmer after a vicious round of selling on Monday. Traders had the weekend to digest the latest USDA reports as well as determine which direction the trade winds are blowing this week. While South American production prospects for soybeans were lowered by USDA, more concerning to us were the further cuts to Chinese imports and crush demand. The Trump Administration has made its feelings known on where soybeans fall on the pecking order of trade war priorities, and it is not near the top. A major breakthrough when Secretary Mnuchin and Trade Representative Lighthizer join talks in Beijing on Thursday would surprise us. Soybean export inspections do continue to roll in, notching 39.1 mb last week vs. the 33.4 mb needed weekly to hit the export forecast. Total inspections of 831.4 mb are down 37.2% from a year ago while USDA is calling for just a 13.7% decline. Brazilian ag consultant, AgRural, cut their estimate of soybean production for the country to 112.5 million metric tons (mmt) vs. 116.9 mmt last month and would compare with the USDA Friday at 117.0 mmt. They also saw soybean harvest at 26% complete vs. 10% last year and 12% average. Smaller Brazilian production likely has more meaning to the 2019/20 U.S. and global balance sheet than the 2018/19 balance sheet.

WHEAT Wheat contracts are slightly lower Tuesday morning after prices staged an impressive late-day recovery on Monday. Considering wheat was dealt a mainly bearish blow with USDA data Friday outside of winter wheat acres, that price can't seem to trade lower is an encouraging sign for wheat. Flash sales to Egypt and Nigeria are supportive but futures would do well not to rally away from business. U.S. wheat is the cheapest in the world, thanks in part to weakening ocean freight. The lowest winter wheat acres in 110 years will be a supportive influence heading into spring, but the balance sheet is not outright bullish without yield adversity. Wheat inspections totaled 20.7 mb, below the 24.7 mb needed weekly to hit the USDA forecast. Total inspections are down 10.2% from a year ago while USDA continues to call for 10.9% increase. The recent sales are buying the USDA time on their estimate, but seasonality is working against them. There were only 15 cars on the Minneapolis spot floor as cold temperatures and heavy snow keeps railroads behind schedule. Minneapolis spring wheat futures inverting is a great reminder of how volatile spring wheat cash trade can get.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.44 -$0.02 -$0.28 Mar -$0.003
Soybeans: $8.17 -$0.09 -$0.88 Mar $0.001
SRW Wheat: $4.93 $0.00 -$0.25 Mar -$0.011
HRW Wheat: $4.71 -$0.01 -$0.23 Mar -$0.008
HRS Wheat: $5.35 $0.04 -$0.38 Mar -$0.014


Tregg Cronin can be reached at tmcronin31@gmail.com

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

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