DTN Before The Bell Grains

Morning CME Globex Update:

Outside markets are quiet overnight, with Dow futures down 38 points, April crude oil down 54 cents per barrel, U.S. dollar index up 0.0190 and going for its sixth consecutive higher close, and April gold up $1.80 per ounce.

Other Markets:

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

Corn:

Corn is again trading quietly around unchanged with little fresh news to drive markets early Wednesday. The CFTC report confirmed that funds had continued to exit their once large net long position on corn futures and were sellers again the week of February 26. Managed money fund estimates are short over 100,000 contracts. Following Friday's reversal from five-month lows, corn is attempting its fourth consecutive higher finish. Cash connected commission houses indicate that low protein wheat in TX is trading at a 12-14% discount to corn due to the high cost of freight. Some wheat was rumored to have traded into the west coast to replace corn due to logistics, according to Linn Group. The sharp rise in basis at the ports due to logistical problems has made the U.S. less competitive in export markets as well. Argentine and Ukraine corn offers appear to be significantly lower into Asian destinations. Gulf U.S. corn is nearly a 25-cent per bushel premium to Argentine corn. Argentina's corn basis has dropped 20 cents per bushel in the last several weeks. On a more positive note, ethanol prices have improved, as have margins, which are now break even or better in many locations. The EPA has drafted a proposal to the Office of Budget Management in an effort to allow E-15 ahead of the summer driving period. A decision is due by June 1. Weather in South America continues to weigh on corn as analysts are now raising Brazil corn production estimates due to recent rains, while Argentina looks to be on the path to a record corn crop. April and May weather will be important for those crops. On May corn, the $3.80 area will continue to be resistance, with even more selling expected at $3.84-$3.85. DTN's National Corn Index closed at $3.44 on Tuesday, with an average basis of 32 cents under May.

Soybeans:

Following Friday's reversal, soybeans have been trading sideways and just under key moving averages with little news to drive the markets as we await both news from the trade talks and Friday's WASDE report. Production in both Brazil and Argentina recently moved higher again as weather has been favorable, with polls showing an average Brazil soy crop of 115-116 million metric tons (mmt) and Argentine crop of 54-55 mmt. Funds, as expected, sold soybeans the week of February 26, and estimates to date have funds short about 47,000 contracts of soybeans. U.S. soybeans are not competitive into the April through June period as South American soybeans hold a sharp price advantage. In addition, bearish inputs include more talk of a very late spring in the upper Midwest and northern Plains, likely leading to much higher than expected soy acreage at the expense of spring wheat, and the ongoing spread of African swine fever. Vietnam has now recorded seven cases of the deadly pig disease, which in China is thought to have reduced soymeal demand by 5-10%. The trade has still not seen any sign of confirmation of the second 10 mmt of U.S. soybeans that China pledged to buy. On a bullish note, there are several analysts and news outlets that are reporting that the U.S.-China trade deal is very close at hand, or even done. However, a late March meeting with President's Donald Trump and Xi Jinping will confirm or challenge that. Any trade deal is expected to include wheat, corn, soybeans, ethanol, DDGs and sorghum. May soybeans will find support down around $9.00 to $9.05, and resistance at $9.22-$9.25. DTN's National Soybean Index closed at $8.23, and reflects an average basis of 91 cents under May.

Wheat:

Just when wheat looks like it has turned the corner, it moves back, as it has this Wednesday morning. U.S. wheat missed much of the recent export business and continues to face stiff competition from EU and Black Sea wheat, with both of those markets again weaker. The jury is still out on both the Bangladesh and Iraq tenders, where it is hoped that the U.S. can garner some business. Wheat shipments for the year remain nearly 50 million bushels (mb) below last year, and it looks like ending stocks are headed for 1 billion bushels (bb) again. In Friday's USDA report, it is possible that U.S. exports could be lowered. As in corn and soybeans, the CFTC's delayed position reports for the week of February 26 showed funds as big sellers, leading to a record Kansas City wheat short of close to 43,000 contracts now. The extreme cold snap that we have seen in the past month and this week has had little impact on the wheat market, with any potential winterkill damage not likely to change the bearish S & D in wheat. The wheat basis, unlike flat price, is surging higher in both hard wheat markets as mills try to secure supplies in the face of very poor and costly transportation issues. Cargill, who had delivered KC wheat on Friday, was rumored to have stopped those same wheat deliveries, explaining the rally in expiring March futures on Tuesday. Wheat continues to be oversold, but not enough to drive markets higher. KC May futures will have resistance up around $4.60-$4.65 on any rally. DTN's National HRW index closed at $4.30, and the average basis is at 21 cents under May.

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

FollowDana on Twitter @mantini_r

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