DTN Before The Bell Grains

Morning CME Globex Update:

Following Tuesday's modest 8-point gain on the Dow Jones Industrial average, Dow futures are pointing 16 lower in the overnight. March crude oil is down 37 cents, the U.S. dollar index is up 0.0380 and April gold continues its bullish move at $1.90 higher, and at the highest level since May of 2018.

Other Markets:

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

Corn:

Corn is getting a modest bounce in the overnight following Tuesday's 5-cent lower finish. March corn had broken through the minor uptrend line drawn from mid-September lows, and remains below that old support now. Much of corn's fall was likely in sympathy with a plunging wheat market, a limit down hog market, and the spread of African swine fever (ASF) again. African swine fever was not only found in Vietnam and Romania, but rumors of contaminated food items with ASF, and a rumor that it may have been detected in Canadian animal feed sent the hog market and other feed markets reeling. Weather in South America is also bearish, with improving moisture in Brazil's safrinha corn area, with forecasts for that to continue well into March, and a favorable outlook for Argentina as well, where a record corn crop is likely. Corn export inspections at 37.1 mb were well below the weekly amount needed, but total shipments of 952 mb are well above the 657 mb last year. Funds were estimated to have sold nearly 20,000 contracts of corn on Tuesday, and some estimates have their net position, including options, now at 70,000 short again. Basis is another story, with sky-high freight costs having rallied the PNW basis by over 20 cents, as snowy and cold weather has hampered and will continue to hamper transportation. The trade is still awaiting some sort of confirmation of China buying U.S. corn, and that may come on Friday, when FAS gives us six weeks of export sales combined. President Trump fueled this fire on Tuesday, stating that China would be buying "a lot" of corn. Look for March corn support at $3.66-$3.67 on a further break, with old support at $3.74 to $3.77 now new resistance. DTN's National Corn Index closed at $3.43 on Tuesday, with an average basis of 27 cents under March.

Soybeans:

As in corn, March soybeans have now breached that uptrend line that began in mid-September and trades below it now. March soybeans have plunged 38 cents from the high made on February 1. Funds also sold soybeans on Tuesday, estimated to be nearly 10,000 contracts. A combination of much improved South American weather, and the dramatic spread of demand-killing African swine fever, sent soybeans reeling, and soybean meal to a new contract low. Soybean inspections were decent at 37.9 mb, and for the sixth straight week, the gap versus last year is narrowing, but we remain 36% lower. Total inspections are 870 mb versus 1.360 billion bushels (bb) last year. The rapid and unrelenting spread of swine fever is troublesome, and could send China soy imports much lower than many expect. The spread to other countries and products will be closely watched, especially in North America. Most in the trade are figuring Brazilian soy production may have stabilized in the 115-116 million metric ton (mmt) range, with Rabobank the latest to estimate 115 mmt. The range appears to be a low of 112.2 mmt (INTL FC Stone) to 117 mmt (USDA). U.S. soybeans are higher than both Argentine and Brazilian beans landed in China, and after having bought an estimated 25-35 cargoes from Brazil last week, there is talk that Sinograin and Cofco are shopping Argentine beans for May forward. China's Vice Premier Liu will be in Washington on February 21-22 for trade discussions. Friday will bring us a slew of data, including the combined export sales for six weeks, and word from the USDA Outlook meeting on acreage and S & Ds, along with the updated CFTC data on trade positions. Look for March beans to have support around $8.90 with resistance in the $9.03 to $9.05 area and solid resistance up at $9.10-$9.15. DTN's National Soybean Index closed at $8.15, and reflects an average basis of 86 cents under March.

Wheat:

Wheat continues to plunge, and now Kansas City March wheat has fallen 58 cents per bushel from the high made as recently as February 6. Funds also sold wheat and are thought to be net short an amount close to that of corn. The wheat market is as oversold as any market that I have seen in quite a while, but so far there is no buy signal being flashed. U.S. wheat is still very competitive in the world, but news that Bangladesh bought Russian wheat and Syria bought Black Sea wheat, while Ethiopia likely took all non-U.S. wheat on its 400,000 mt purchase, has pressured wheat. Export inspections at a paltry 13.1 mb, is again well under the 25.4 mb required each week to achieve the USDA estimate, and total shipments are 579 mb compared to 646 mb last year, leaving the possibility that we could see ending stocks move toward 1.1 bb without a pick-up in sales. Weather in the U.S. shows heavy rains in the Delta and southeast, with bitter cold in the Plains and Midwest. In the week ahead, it is thought that some 15-20" of snow could fall in parts of KS, NE, IA, MN and WI. Egypt is in for April wheat needs today, and it is thought that, with this recent break, U.S. soft red winter wheat (SRW) could garner some of that business. On a FOB basis, SRW should have the advantage to French wheat now. DTN's National HRW index closed at $4.41, and the average basis is at 19 cents under March.

Dana Mantinican be reached at dana.mantini@dtn.com

FollowDana on Twitter @mantini_r

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