DTN Early Word Grains
Grains Mixed, Trade Attempts to Sort Through China Rumors
May corn is unchanged, May soybeans are down 1 1/2 cents, and May K.C. wheat is up 3 cents.
CME Globex Recap:Global equities are mixed this morning as the focus swings back toward Brexit from the trade war between the U.S. and China. Fortunately for financial markets, British Parliament voted to prevent the U.K. from splashing out of the European Union without a "Brexit deal." This should provide investors at least some measure of peace, although it could mean the process drags out even longer. Grain markets are mixed to higher as enough China rumors are present to keep bulls bottom-picking. That said, managed funds remain overwhelmingly short with most positions carrying sizable equity which they will not want to part with until forced to. Export sales on tap Thursday morning with corn and wheat needing solid totals to prevent bears from axing export estimates further.
OUTSIDE MARKETS:Previous closes on Wednesday showed the Dow Jones Industrial Average up 148.23 at 25,702.89 and the S&P 500 up 19.40 at 2,791.52 while the 10-Year Treasury yield ended at 2.611%. Early Thursday, the June DJIA futures are down 21 points. Asian markets are lower with Japan's Nikkei 225 down 3.22 (-0.02%) and China's Shanghai Composite down 36.27 points (-1.2%). European markets are higher with London's FTSE 100 up 31.98 points (0.45%), Germany's DAX up 9.21 points (0.08%) and France's CAC 40 up 31.67 points (0.6%). The March Euro is down 0.002 at 1.130 and the March U.S. dollar index is up 0.228 at 96.740. The June 30-Year T-Bond is down 7/32nds, while April gold is down $10.40 at $1,298.90 and April crude oil is down $0.05 at $58.21. Soybeans on China's Dalian Exchange were down -0.03% while soybean meal was up 1.15%.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
| BULL | BEAR | ||
| 1) | Rumors permeated the trade Wednesday China was buying 3 million metric tons (mmt) of U.S. corn off the PNW for both old and new crop slots. Like all rumors related to China to-date, confirmation has been lacking. | 1) | The USDA Ag Attaché to India confirmed the agency's recent crop wheat crop estimate of 99.7 mmt, which would be a new record for the country. |
| 2) | The Environmental Protection Agency (EPA) released its proposed rulemaking on Wednesday to enable year-round sales of E15. | 2) | Weekly ethanol production missed the level needed to achieve the USDA's revised forecast for the 14th consecutive week and 16 of the last 17. |
| 3) | The Mississippi River is expected to hit major flood stage next week at lock and dams in Rock Island, Illinois City, Muscatine and Keokuk. | 3) | Algeria bought 450,000 metric tons (mt) of milling wheat at $231.50-234.00/mt C&F for April/May shipment, which is expected to be of French origin. |
CORN Corn futures are a bit firmer Thursday morning as corn attempts to notch a 3-day winning streak. Trade chatter suggested China was in the process of buying 3 mmt of U.S. corn off the PNW with split shipment between 2018/19 and 2019/20. As has been the case this entire marketing year, there has been no confirmation and cash basis for shuttles off the PNW was largely unchanged. Several flies in the ointment with this bit of information as 3 mmt of corn sold in a single day would be the second largest single day export sale on record. The largest single day export sale was back in January of 1991 when the U.S.S.R. purchased 3.720 mmt of corn. Also, as clipperdata.com pointed out Wednesday, there have only been two marketing years since 1960 in which China bought more than 3 mmt of U.S. corn. Both of the years in question were drought-related. Finally, it isn't clear to us why China would bother purchasing U.S. corn before a trade deal requires them to. According to Chinese data and USDA balance sheets, China has more than enough corn without worrying about bringing in U.S. supplies. Wednesday saw weekly ethanol production which came in at 1.005 million barrels per day, which was down 19,000 from the week before. Ethanol stocks fell by 530,000 barrels to 23.731 million barrels, but those are still the second largest on record for this week of the year. Ethanol production just can't seem to find traction and should see further cuts in future WASDE reports.
SOYBEANS Soybeans are weakerThursday morning as price takes a breather from the previous two-day winning streak. May soybeans have a lot of work to do before trends on any scale could be considered up with the 50, 100 and 200-day moving averages all above the market by at least 15 cents. Trade chatter remains rampant, but details are sorely lacking and even President Trump is keeping open the idea of a "no-deal." In addition, African Swine Fever losses in China seem to be mounting by the day, which could have even larger long-term consequences for soybean demand. NOPA is expected to release their February crush report Friday with estimates looking for 158.73 million bushels (mb), down from January's 171.6 mb but above last year's 153.7 mb. Crush margins remain stout with all contracts through December above 96 cents per bushel. Total volume in soybeans has been in a steep decline the last couple of weeks with Wednesday's preliminary volume of 132,743 contracts the lowest since January 30. Until more details are released or an actual trade deal is signed, not much reason for bulls to deploy capital to push prices higher as South America continues to harvest one of their largest crops on record. Option volatility is slightly below week ago levels with May settling Wednesday at 12.59% vs. 13.00% a week ago.
WHEAT Wheat contracts are firmer Thursday morning as the erratic trade of the last few sessions continues. Trade Wednesday saw prices give back about a third of Tuesday's gains, although at the lows most contracts were 10-13 cents lower on the day. Wednesday's price action seemed to confirm Tuesday as nothing more than a short-covering burst in a market with an overly short speculative sector. Nonetheless, two steps forward and one back may be the kind of price action the wheat market needs to confirm a bottom and base higher. Volumes remain light while open interest continues to climb. It is no secret managed funds continue to pour capital into the short side of this market which will turn incendiary at some point. However, large short positions held by the managed community in and of themselves are not a reason to get bullish. This market needs a catalyst to force short-covering, which it does not have today. Several firms have made note of the poor vegetative health indices in North Africa this spring, implying below trend yields this season. North Africa commonly swings between minimal and large wheat imports, and this season is shaping up to see larger than normal imports.
| DTN Cash | Change From | National | Contract | Change from | |
| Commodity | Index | Prev Day | Avg. Basis | Month | Prev Day |
| Corn: | $3.38 | $0.01 | -$0.29 | May | $0.006 |
| Soybeans: | $8.14 | $0.04 | -$0.87 | May | $0.004 |
| SRW Wheat: | $4.22 | -$0.06 | -$0.26 | May | $0.000 |
| HRW Wheat: | $4.19 | -$0.05 | -$0.18 | May | $0.006 |
| HRS Wheat: | $5.17 | -$0.10 | -$0.34 | May | -$0.002 |
Tregg Cronin can be reached at tmcronin31@gmail.com
Tregg can be followed throughout the day on Twitter @5thWave_tcronin
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