DTN Before The Bell Grains

Morning CME Globex Update:

Following Monday's late recovery and 200-point higher close in the Dow Jones average, Dow futures are showing 29 points lower in overnight trade. April crude oil is up 45 cents per barrel. The U.S. dollar index is up .1240, and April gold is $8.20 per ounce higher.

Other Markets:

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

Corn:

Following new contract lows set on Monday, May corn is hovering just above those lows late in the overnight session. Commodity funds have continued to pile on to a larger net short position, now thought to be 242,000 contracts, when including options. News that the Trump administration's move to reduce subsidy payments for crop insurance, and tighten farm program payments in their latest budget proposal is another blow to grain markets that have been reeling of late. South Korea continues to be the most active corn buyer, with two purchases totaling 128,000 metric tons (mt) in the past few days and two new tenders upcoming for over 130,000 mt on the docket according to a cash-connected commission house. Much of the recent buying by South Korea is optional origin, and is likely to be sourced from cheaper South American supplies. Argentine corn landed in South Korea is said to be $16/mt cheaper. The widening carrying charges in corn is indicative of slack export business, with the May-July nearby spread out to 9 3/4 cents. Last week's export inspections of just 30.1 million bushels, was well shy of the 42.7 million required each week, but total shipments of 1.046 billion compare to just 801 million last year. Hog prices were up sharply on Tuesday, fueled by the highest Chinese pork prices in fourteen months as African swine fever has cut into pig herds there. South American weather holds no real threats, though rains will delay harvest in some areas, but it is the rains in the past few weeks that have improved Brazil's safrinha crop potential. Look for the $3.70 to $3.75 area to be resistance on May, with the next support down at $3.58. DTN's National Corn Index closed at $3.33 on Monday, with an average basis of 29 cents under May.

Soybeans:

Soybeans are little changed in the overnight and have hit the lowest level since November. Another 926,000 mt (34 million bushels) of soybean sales were announced to China on Monday, bringing the last two days total to near 1.6 million metric tons (mmt). Soybean inspections of 32.1 million bushels last week bring the total to 986 million compared to 1.460 billion last year, and now 32% lower. Weather in South America has been mostly favorable of late. Ag Rural is the latest to revise soy production there, with their estimate of 112.9 mmt the lowest we have seen, but that is up from 112.5 mmt previously, and compares to the USDA's 116.5 mmt. African swine fever is now expanding in Vietnam and has been found in seven states or provinces, and China has now banned the import of pigs from Vietnam. This deadly pig disease continues to cut into demand in the face of world record supplies of soybeans. No news from the ongoing U.S.-China trade talks, but China has insisted that before Presidents Trump and Xi Jinping meet, that all of the details are in place. New contract lows were scored in soybean meal on Monday, and that also pressured soybeans, as did the new contract low on Tuesday in Malaysian palm oil. The next support on May soybeans looks to be the $8.85 area, and on a rally, look for old support of $9.00 and then $9.10 to $9.25 to be resistance. DTN's National Soybean Index closed at $8.02, and reflects an average basis of 88 cents under May.

Wheat:

Wheat is getting what might be termed a "dead cat bounce" Tuesday, but Kansas City May has bow dropped nearly $1 per bushel just since the end of January. Funds have loaded the boat on the short side in wheat during that time, with the Chicago net short estimated to be 133,000 contracts, with Kansas City a record short of over 45,000 contracts. The plunge in prices have now made Chicago's SRW (soft red wheat) the cheapest world wheat on a FOB basis. With export inspections now trailing last year by some 6%, the trade fears that ending stocks could ultimately be near 1.1 billion bushels -- a burdensome carryout when coupled with a sharp rise expected in Black Sea and EU production in 2019. U.S. wheat has suffered at the hands of both European and Black Sea wheat offers lately, and both are said to be aggressively offering in the new-crop slot. Russian production is expected to rise to 76 mmt to 78 mmt from 71.7 mmt this year. U.S. weather will continue to be a challenge, with more heavy snows slated for parts of Colorado, Nebraska and South Dakota, with an already heavy snowpack, and heavy rains expected in the Delta and southeast on Wednesday through Friday exacerbating that already soggy situation. Good rains have and will fall in the Southern Plains -- beneficial to hard red winter (HRW) wheat. Texas conditions dropped 8% to only 28% good to excellent, Oklahoma conditions gained 3% to 56%, and Kansas also rose 2% to 51% good to excellent. There are some wheat tenders around -- Bangladesh, Jordan and Indonesia. The U.S. and Canada each sold 50,000 mt to Iraq, while Syria bought all Black Sea on their 200,000 mt tender. DTN's National HRW index closed at $4.02, and the average basis is at 18 cents under May.

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

FollowDana on Twitter @mantini_r

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