DTN Before The Bell Grains

Morning CME Globex Update:

Dow Jones futures are down 8 points in the overnight after the Dow Jones index average fell 27 points Tuesday. April crude oil is down 60 cents per barrel, the U.S. dollar index is up 0.0430 and April gold is up $1.20 per ounce.

Other Markets:

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

Corn:

Corn is once again subdued in quiet overnight trade. Trade talk about the ongoing U.S.-China discussions has been sending mixed messages. Ag Secretary Perdue's latest comments would be hugely bullish if the prediction came to fruition. Secretary Perdue said that China purchases of U.S. ag products over the next two to five years would be three times what they are now. Obviously, traders would rather see the action instead of just talk. U.S. primary trade representatives will head to Beijing next week for further talks and reportedly have an early April conclusion to the trade deal as their goal. Tuesday's comments by a prominent Chinese newspaper suggested that this year-long discussion could extend to June. U.S. corn export business lately has left much to be desired as cheaper competitor corn has filled importer needs. Even though U.S. corn exported thus far has exceeded last year, that pace is slowing. The inability to move grain with the ongoing flooding and transportation woes in the Midwest and northern Plains is bearish. A positive input for corn is he tightening balance sheet, with March 1 stocks expected to drop by nearly 600 million bushels (mb) from last year to the lowest level since 2015. Also underpinning the corn futures market is the growing expectation that the ongoing floods and excess rain in the southeast and Delta could lead to lower than expected corn seeding. The managed money funds, who were deemed to have a record large net short of over 258,000 contracts last Tuesday, are estimated to be still short a hefty 240,000 contracts. That will surely be a flame to ignite in the event of bullish trade news. Look for May corn to have trouble again at $3.75 and even more at $3.80. DTN's National Corn Index closed at $3.43 on Tuesday, with an average basis of 28 cents under May.

Soybeans:

Soybeans are once again a bit weaker and hovering around the $9.00 level on May. As the China trade deal talks go back and forth, soybean traders are disappointed that China has still not bought the balance of the 8 million metric tons (mmt) of soybeans that they had promised weeks ago. With all of the flooding going on in the Midwest and northern Plains, and excess rains in the Delta and southeast, this market that is burdened with record U.S. and world soy supplies can ill afford to have soy seeding exceed early projections for a 3-4 million acre drop. However, the late spring may indeed prove to be even more bearish for the soy complex. Weather in South America is enhancing crop potential there. Abiove (Brazil Association of Vegetable Oil Industry) revised Brazilian production down 1 mmt to 116.9 mmt, still above the USDA's 116.5 mmt. Abiove also raised last year's soybean crop to 123.1 mmt, and ending stocks from 778,000 mt to 2.79 mmt, with 2019 ending stocks projected to be 2.95 mmt. They stand alone in this assessment, as Safras and Mercado see 2018 ending stocks at just 200,000 mt. Look for May soybeans to have resistance at $9.10-$9.15, with support down near $8.90-$8.95. DTN's National Soybean Index closed at $8.17, and reflects an average basis of 87 cents under May.

Wheat:

Wheat is the bright spot in the overnight, with all three markets higher. The ongoing logistical woes, as major winter storms and flooding make transportation difficult, have forced millers to scramble for nearby needs, raising the basis in both Kansas City and Minneapolis. Export demand remains weak, with the EU, Black Sea and even Argentina satisfying world demand. U.S. wheat is surely competitive on a FOB basis, but surging transportation costs and logistics have priced our wheat out of world markets. Good news for wheat was Tuesday's meeting between President Bolsonaro from Brazil and President Trump, where they vowed to improve trade relations with the focus on beef, pork and wheat. Brazil reportedly made a deal to buy 750,000 mt (27.5 million bushels) of U.S. wheat this year, or roughly 10% of their import needs. That should help the hard red winter (HRW) balance sheet. U.S. exports of wheat are still down more than 6% versus last year, with the USDA projecting a rise of 7%, so we are likely headed for a burdensome 1.1 billion-bushel carryout with just eleven weeks remaining in the crop year. Likely flooding of the Red River in the next few weeks is expected to hamper spring wheat seeding, with analysts lowering spring wheat acres at the expense of soybeans. While the export line-up for wheat is light this week, Taiwan is tendering for 110,000 mt (2.4 million bushels) of U.S. wheat. DTN's National HRW index closed at $4.19, and the average basis is at 17 cents under May.

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

FollowDanaon Twitter@mantini_r

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