DTN Early Word Grains
Grains Mixed to Higher on China Agreement, Exports Release
March corn is up 1 1/2 cents per bushel, March soybeans are up 1/4 cent, and May K.C. wheat is down 1/4 cent.
CME Globex Recap:Equities are stronger around the globe Friday morning with an especially strong reaction out of China to the news of progress in trade talks. Energy markets also continue to make their way higher with crude oil notching fresh 3-month highs yesterday. Another big day of data for grains with six-weeks' worth of export sales released to get the market caught back up to current. In addition, the USDA will release their first blush ideas on 2019/20 grain demand later Friday morning. Any further clarity on agreements between the U.S. and China will also drive price action heading into the weekend.
OUTSIDE MARKETS:Previous closes on Thursday showed the Dow Jones Industrial Average down 103.81 at 25,850.63 and the S&P 500 down 9.82 at 2,784.70 while the 10-Year Treasury yield ended at 2.688%. Early Friday, the March DJIA futures are up 99 points. Asian markets are mixed with Japan's Nikkei 225 down 38.72 (-0.18%) and China's Shanghai Composite up 52.42 points (1.9%). European markets are higher with London's FTSE 100 up 29.18 points (0.41%), Germany's DAX up 43.68 points (0.38%) and France's CAC 40 up 17.52 points (0.34%). The March Euro is down 0.000 at 1.140 and the March U.S. dollar index is up 0.042 at 96.505. The March 30-Year T-Bond is up 4/32nds, while April gold is down $3.10 at $1,324.70 and April crude oil is up $0.11 at $57.07. Soybeans on China's Dalian Exchange were down -0.29% while soybean meal was up 0.43%.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
| BULL | BEAR | ||
| 1) | Trade chatter Thursday suggested China could be close to signing agreements to purchase an "additional $30 billion" worth of U.S. ag goods. | 1) | Weekly ethanol production missed the level needed to achieve the USDA forecast for the eleventh straight week and 13 out of the last 14. |
| 2) | The SH/SK calendar spread rallied into -13.00 cents carry Thursday and overnight, the strongest trade since January 10. | 2) | FOB offers on Thursday night showed Argentine corn at a $14/metric ton (mt) discount to U.S. Gulf offers and maintaining a discount through July. |
| 3) | Bloomberg reported U.S. and Chinese officials are discussing the removal of tariffs on U.S. DDGs imports which have been in place since 2017. | 3) | The spot wheat/corn spread traded down to +110.00 cents Thursday, the lowest print of the marketing year, which speaks to overall demand for wheat. |
CORN Corn is trading higher Friday morning, enjoying a bit of follow-through from Thursday's positive session. The market chatter related to possible memorandums of understanding on agriculture rallied the entire grain complex, although details remain lacking. As one astute market participant noted, $30 billion worth of additional purchases from zero is still $30 billion. Until the details are released, markets are still buying hope, which has proven an ill-fated strategy in the recent past. In the land of actual data and fact, corn demand remains shaky. Weekly ethanol production totaled 996,000 barrels per day, down 33,000 barrels from last week and missing the level needed by a huge margin. Weekly ethanol production hasn't hit the needed level since November and should prompt another cut to marketing year ethanol demand on the March WASDE. It will be interesting to see what the USDA does with 2019/20 ethanol demand at Friday's Outlook Forum. Ethanol stocks rose sharply by 447,000 barrels to 23.913 million barrels, a record for the week and within spitting distance of all-time records. The poor profitability in the industry is widely known, but if the U.S. and China were able to come to an agreement on lifting tariffs on DDGs, this could go a long way toward improving margins. Traders will be watching the six-week export sales release Friday morning with ideas between 3.5-5.0 million metric tons (mmt) of total sales.
SOYBEANS Soybeans are also higher Friday morning, supported by the China trade chatter but treading cautiously until details are released. As many have noted, we've been in this situation before although the fact actual agreements are said to be hitting paper is an encouraging sign. March soybeans found support at their 100-day moving average Wednesday and Thursday before running smack into their 50 and 200-day Thursday. Lots of focus on new crop soybeans as the insurance pricing period comes to a close next week. With the SX9/CZ9 new crop ratio at 2.37, and the corn+wheat minus soybean spread at the weakest levels since June, we are skeptical soybean acres will be as low as the Outlook Forum is projecting them. At 85.0 million acres, soybean plantings would be the lowest since 2016/17, down 4.2 million acres from last year despite a balance sheet which could see back-to-back years of carryout over 800-900 million bushels. 91.0-92.0 million acres of corn seems like a foregone conclusion, but the weakness in wheat prices the last month and change has economic calculations being re-run in the Northern Plains. It's pretty remarkable new crop soybeans are only down 7% from the same time a year ago despite the supply levels and the trade friction with China, even if that is in the process of being resolved.
WHEAT Wheat markets are mixed Friday morning, consolidating inside yesterday's range and waiting for the export sales dump. Chinese purchases of U.S. wheat have been rumored since Christmas with almost nothing actually having been booked. It would surprise the trade if China did in fact make a significant purchase of U.S. wheat as that could possibly give the dismal export program the shot in the arm it needs. The six-week sales total on Friday's export sales report is expected to be around 2.5-3.0 mmt. If the total is closer to the lower end of that range, or even below it, revisiting the lows would be appropriate. Before the rally the past two days, U.S. FOB prices had gotten down to competitive levels against European offers. There remains a significant amount of open interest left in the WH9 and KWH9 contracts with first notice day next week. The 71,000 contracts left in Chicago and especially the 61,000 contracts in Kansas City could provide fireworks as delivery approaches. USDA Outlook Forum ideas on 2019/20 exports and carryout will be of interest Friday morning.
| DTN Cash | Change From | National | Contract | Change from | |
| Commodity | Index | Prev Day | Avg. Basis | Month | Prev Day |
| Corn: | $3.49 | $0.06 | -$0.26 | Mar | $0.011 |
| Soybeans: | $8.26 | $0.10 | -$0.85 | Mar | $0.013 |
| SRW Wheat: | $4.62 | $0.09 | -$0.24 | Mar | $0.000 |
| HRW Wheat: | $4.36 | $0.05 | -$0.19 | Mar | -$0.006 |
| HRS Wheat: | $5.23 | $0.10 | -$0.35 | Mar | $0.007 |
Tregg Cronin can be reached at tmcronin31@gmail.com
Tregg can be followed throughout the day on Twitter @5thWave_tcronin
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