DTN Closing Grain Comments

Wheat and Corn Bounce Despite Weak Sales, Soybeans Lower

Dana Mantini
By  Dana Mantini , Senior Market Analyst
(DTN illustration by Nick Scalise)

General Comments:

May corn closed up 3 3/4 cents per bushel and December corn was up 1 3/4 cents. May soybeans closed down 2 1/2 cents and November soybeans were down 3 cents. May K.C. wheat closed down 1/4 cent, May Chicago wheat was up 5 1/2 cents and May Minneapolis wheat was up 1 1/2 cents.

The March U.S. dollar index is trading up 0.193 at 96.705. The Dow Jones Industrial Average is up 0.42 points at 25,703.31. April gold is down $12.60 at $1,296.70, May silver is down $0.27 at $15.19 and May copper is down $0.0450 at $2.8905. April crude oil is up $0.31 at $58.57, April heating oil is down $0.0057, April RBOB is down $0.0074 and April natural gas is up $0.033.

Corn:

Since setting a new contract low on Tuesday, corn has now rallied nearly 10 cents above that, as non-commercials, heavily short, have covered some of those shorts. Wednesday during the trading session, there were unconfirmed rumors that China had bought as much as 3 million metric tons (118 mb) of U.S. corn off the Pacific Northwest (PNW). While there is no proof of that occurring, Ag Resource suggests that China may have picked up a few cargoes of U.S. grain sorghum -- that too is speculation. Both Gulf and PNW values have moved higher again, likely buoyed by major weather and logistics issues due to widespread blizzard and flooding issues. Corn may also be getting strength from news that in last week's pork export sales that China had bought 28,300 metric tons (mt) of U.S. pork. This would make total sense, as China's hog herd has been decimated by the still pervasive African swine fever. While the U.S. has missed much of the recent Asian corn business as South American values had been cheaper, news that South Korea did buy 60,000 mt of U.S. corn for May off the PNW on Wednesday is good news -- not confirmed by the Foreign Agriculture Service yet. Also supportive to corn is the large fund short, which is estimated to be 210,000 contracts to 215,000 contracts. Bullish is the fact that Pro Agro has projected a smaller Ukraine corn crop of 31.2 mmt this year versus 35.6 mmt last year, and news that the EU and U.S. have reached an agreement on the export of U.S. beef into the EU. Bearish is the fact that the Argentine corn crop continues to look good, with the Rosario Exchange the latest to raise production ideas to a record 47.4 mmt versus 46.5 mmt last month. U.S. corn export sales last week were a disappointing 14.6 million bushels at the lowest prices of the year, and total sales are down 6% versus last year. Sales as a percentage of USDA estimate are currently only 68% compared to the 76% five-year average. Look for May corn to see major resistance on a further rally to the $3.75 to $3.80 area. DTN's national corn Index closed at $3.38 on Wednesday and reflects an average basis of 29 under May. In outside markets, the higher U.S. dollar and lower equities markets provided some added pressure.

Soybeans:

Soybeans could not gain much traction to the upside despite last week's sizeable export sales of 70.2 million bushels, with China responsible for the lion's share of that. Total soy sales of 1.513 billion bushels are down 16% versus last year and shipments are down 31%. Sales to date reflect just 81% of the USDA estimate, and that compares to the five-year average of 92%. Palm oil, down for the seventh straight day, has pressured oilseeds markets, as did the Rosario Exchange 2 mmt increase in Argentina's soybean production to 54 mmt. That still trails USDA's 55 mmt number. Also weighing on the soybeans is news that a President Trump/Xi Jinping meeting has been postponed to April as details of a trade deal continue to be hammered out. While South American weather has mostly been beneficial to those soybean crops, Argentine areas considered too dry are just 10% to 15% of the total, and Brazil has no real issue right now. In the U.S., the midweek major blizzard that is now impacting western NE and the Dakotas could certainly delay spring planting efforts, with the general thought that an increase in soy acres, opposed to spring wheat,could result. The trade will get a better handle on that following NASS' March 29 stocks and seeding report. After the recent storm, U.S. areas look mostly dry for the next 10 days. Even with a U.S/China trade agreement, the soy futures market is facing serious headwinds, with world and U.S. record large soybean supplies, and a falling demand base by the world's largest buyer due to the uncontained African swine fever menace. May soybeans will continue to see some resistance at the old support of $9.00 and major resistance on a bounce to $9.10 to $9.15. DTN's National Soybean Index closed at $8.14 on Wednesday and is priced 87 cents below the May futures contract.

Wheat:

Chicago wheat futures have continued the recovery on Thursday from new contract lows set on Monday. Chicago May wheat had rallied 29 cents above that low early Thursday, finishing modestly higher. Despite last week's export sales, which reflected a dismal 9.7 million bushels in sales, total sales remain 3% above year ago, while shipments are down 4%, placing the recently reduced USDA export estimate in doubt. The North American Millers Association pegged U.S. soft red winter (SRW) wheat production at 269.9 mb -- down 15.6 mb below last year, and SRW ending stocks are projected to fall sharply from the past few years. Not all is glamorous for wheat bulls, as U.S. wheat exporters continue to miss business, with both Algeria and Tunisia likely buying EU wheat. A few bullish weather issues to watch are North Africa's hot and dry weather for the next few weeks as their wheat is in the reproductive phase and the Australian Bureau of Meteorology projection for another three months of hot and mostly dry weather following a wheat crop that was the lowest in 11 years. Also weighing on wheat are ideas that India's wheat crop could be a record large 99.7 mmt according to the U.S. Ag Attache, and Strategie Grain's 15% higher estimate for EU soft wheat than last year. German wheat production looks to be up 19% at 24.2 mmt. The non-commercial short in wheat, which had reached a record large short in Kansas City and over 100,000 contracts in Chicago was fuel for the recent short-covering bounce. Funds were credited with selling 6,000 contracts as of noon on Thursday. However, with a U.S. carryout that is approaching a burdensome 1.1 billion bushels, this is a market that needs demand help as we near the end of the marketing year. DTN's National HRW index closed at $4.24 on Wednesday, and that is an average basis of 18 under Kansas City May futures.

Dana Mantini can be reached at Dana.Mantini@dtn.com

Follow him on Twitter @mantini_r

(CZ)

Dana Mantini