DTN Early Word Grains

Mixed Trade Following Tuesday Selloff

6:00 a.m. CME Globex:

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

CME Globex Recap:

Global equities are mostly higher Wednesday morning as we await more developments in the trade talks with China and hope to stave off another feud with the EU. Grains are mixed to weaker following the washout Tuesday which saw sizable increases in open interest for corn and wheat. This could be a sign funds were adding to short positions, although without updated CFTC data, we are flying somewhat blind. Thursday's export sales data and Friday's USDA Outlook Forum data will be the next big fundamental inputs for our markets.

OUTSIDE MARKETS:

Previous closes on Tuesday showed the Dow Jones Industrial Average up 8.07 at 25,891.32 and the S&P 500 up 4.16 at 2,775.60 while the 10-Year Treasury yield ended at 2.647%. Early Wednesday, the March DJIA futures are down 44 points. Asian markets are higher with Japan's Nikkei 225 up 128.84 (0.6%) and China's Shanghai Composite up 5.57 points (0.2%). European markets are higher with London's FTSE 100 up 11.21 points (0.16%), Germany's DAX up 26.61 points (0.24%) and France's CAC 40 up 8.32 points (0.16%). The March Euro is down 0.001 at 1.140 and the March U.S. dollar index is up 0.086 at 96.435. The March 30-Year T-Bond is up 9/32nds, while April gold is up $2.50 at $1,347.30 and April crude oil is down $0.33 at $56.12. Soybeans on China's Dalian Exchange were down -0.26% while soybean meal was down -1.44%.

BULL BEAR
1) Soybean export inspections hit the level needed to reach the USDA's export forecast for the sixth consecutive week. 1) The MWH/MWK calendar spread finally saw the inverse break on Tuesday, trading a high of +6.25 cents to a low of -1.25 cent carry.
2) President Trump said trade talks with China are "going very well" along with comments about selling them a lot more corn than anyone thought possible. 2) March soybeans broke trendline support dating back to September with Tuesday's selloff. Next support is January lows.
3) Egypt's GASC is tendering for wheat with U.S. SRW thought to be competitive along with French origin for the April 5-15 shipment slot. 3) African Swine Fever was confirmed on three farms in Vietnam, becoming the third country in which the virus has spread by either live hogs or feed.

MORE COMMODITY-SPECIFIC COMMENTS

CORN Corn is higher Wednesday morning but well-inside yesterday's flush which saw prices trade down to the lowest level since November 28. Corn was drug lower by wheat and soybeans, although there aren't a lot of bullish inputs for corn to hang its hat on either. After making 8-month highs two weeks ago, the SX9/CZ9 new crop ratio broke to 2.37 Tuesday, a one-month low. As most universities and bankers will show, corn economics far outweigh both soybeans and wheat at the moment, so it shouldn't be too difficult of a decision for remaining swing acres. In addition, it looks likely we will see the highest February insurance guarantee price since 2015. Data released Tuesday included export inspections which remain poor at 37.1 million bushels (mb) vs. the 45.9 mb needed weekly to hit the USDA forecast. Inspections remain 44.9% ahead of year ago levels but that gap has shrunk from 51.0% two weeks ago. Only one week out of the last twelve have hit the level needed to achieve the USDA forecast. Combined with solid crop prospects out of South America and a cutthroat FOB market, U.S corn exports should not be taken for granted this summer. Ethanol prices suffered a decent selloff Tuesday, but still managed to gain ground on corn prices. The ethanol/corn spread is at the strongest level since mid-October.

SOYBEANS Soybeans are weaker Wednesday morning after opening 3-4 cents higher in the overnight session. The technical failure Tuesday below trendline support was all anyone wanted to talk about until more is known about the outcome of the trade talks. Whispers in the trade suggested a 20 million metric ton (mmt) agreement spread over the next several years of U.S. specific soybean purchases. The ironic thing is there would be no need for pre-arranged purchases if the market was left to its own devices and allowed to function properly. Instead, we are forced to negotiate purchases with the world's largest soybean importer while another large soybean importer threatens retaliatory measures if tariffs are implemented on European autos. Soybean inspections were decent at 37.9 mb vs. the 33.2 mb needed weekly to hit the USDA forecast. This is the sixth straight week of achieving that level, bolstering ideas the U.S. can indeed achieve the 1.875 billion bushel (bb) export forecast. Inspections of 869.5 mb are still down 36.1% from a year ago while USDA is calling for just a 13.7% decline from a year ago. Adding to bearish sentiment Tuesday was news African Swine Fever (ASF) had spread to Vietnam in live pigs, leading to the culling of the infected pigs and limitations on movement of live animals. In addition, rumors were swirling about Canada finding ASF in some hog feed although this appears to have been debunked. Short of China buying half the U.S. carryout, difficult to see a lot of bullish ag items coming out of the talks just yet.

WHEAT Wheat markets are mixed Wednesday morning, although most are still in shock from Tuesday's bloodletting. Wheat crashed through any remaining moving averages, trading to multi-month lows across multiple contracts. The selloff of the last 3-4 sessions feels like the market waking up to the fact the USDA export forecast has become almost unachievable. If exports are cut 25-75 mb, those bushels will go straight to ending stocks. Carryout would find itself in-line with the previous two marketing years which saw Chicago wheat prices in the lower four-dollar area for long stretches of time. A sign of this concern is export inspections which came in at 13.1 mb vs. the 25.4 mb needed weekly to hit the USDA forecast. There has been just one week all season where wheat export inspections hit the needed level. Total inspections of 578.6 mb are actually down 10.4% from a year ago while USDA is calling for a 10% increase. The inverses to new crop sported by Paris and Black Sea futures are also omnipresent. New crop Black Sea wheat futures settled Tuesday at $197.75-199.00/metric ton (mt), breaking the psychologically important $200/mt level. Egypt's GASC tendered overnight with U.S. SRW and French wheat expected to compete.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.43 -$0.04 -$0.27 Mar $0.006
Soybeans: $8.15 -$0.07 -$0.86 Mar $0.002
SRW Wheat: $4.65 -$0.14 -$0.24 Mar $0.009
HRW Wheat: $4.41 -$0.15 -$0.20 Mar $0.003
HRS Wheat: $5.20 -$0.14 -$0.36 Mar $0.031

Tregg Cronin can be reached at tmcronin31@gmail.com

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

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