DTN Before The Bell Grains

Morning CME Globex Update:

May corn is up 1/4 of a cent, May soybeans are up 2 1/4 cents, Chicago May wheat is 3/4 of a cent higher, Kansas City May is down 3/4 of a cent and Minneapolis May is down 1 cent per bushel.

Other Markets:

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

Corn:

Corn is barely higher in overnight trade as it goes for its fourth consecutive higher close, as May sits roughly 18 cents above last week's new contract low. Although a miniscule amount in the big picture, the announcement last week that China had bought 11.8 million bushels (mb) of U.S. corn can be taken as a real positive in the ongoing trade battle. If not for a sign of good faith, and repeated promises to buy U.S. grains if a final deal is struck, why else would China buy U.S. corn, which is said to be 50 cents per bushel higher than Argentine corn? The trade holds out hope that this is just the beginning, with more U.S. corn, ethanol and even DDGs to come. Chinese analytical group, JCI, is certainly on board with such thinking, stating that China corn purchases from the U.S. could hit 20 million metric tons (mmt) (788 mb) once a deal is signed. Also underpinning the corn market is a reported record-large short by managed money funds of nearly 262,000 contracts last Tuesday, the ongoing and devastating Midwest floods covering crop land and contaminating corn and soybeans, and ideas that this will likely lead to decreased corn acres at the expense of soybeans. One argument against that is the rise in corn futures versus soybeans, which now has the ratio of new-crop at 2.34 to 1 -- a three-month low, and perhaps more of an incentive to maintain corn acres. Ethanol demand is expected to take a further hit when Energy Information Administration reports statistics this week, as a reported 13% of production capacity has been compromised due to flooding. Friday's Cattle on Feed report showed 102% on feed -- well above the 96% expected and perhaps bullish for corn. Look for May corn to struggle again at the 50-day moving average near $3.80, but a rally and close above should be bullish, with next resistance at $3.85. New-crop December is above $4 again and will encounter selling in the $4.05 to $4.08 range. DTN's National Corn Index closed at $3.51 on Friday, with an average basis of 27 cents under May.

Soybeans:

Soybean futures continue their multi-month back and forth action in a narrow range, slightly firmer to start. U.S. trade representatives will meet China's negotiating team in Beijing this week. Unlike corn, where funds added to net-shorts, managed money funds covered 26,000 contracts of their soybean short last week, and are now net-short a modest 64,000 contracts. China corn imports from the U.S. in February, though much larger than January at nearly 908,000 metric tons (mt), were under the 3.35 mmt bought in February of 2018. Not only has the trade dispute led to lower purchases but so has the spreading African swine fever. On Monday China found a highly contagious bird flu, according to Linn Group. Some analysts project that China may have lost an astounding 25% to 30% of the hog herd, while more substantiated claims that we saw last week were on the order of 16% to 17%. We may never know for sure. While South American weather has been mostly favorable for soybeans, though a few dry spots are being closely watched, the aforementioned U.S. flooding is likely to lead to an increase in soybean acres. More rains are projected into April and beyond, and the acreage jury is still out ahead of Friday's USDA stocks and seeding report. It's a report that many feel may not be very accurate, as acreage intentions are still a moving target, and flooded cropland has likely made estimates more unreliable. With world and U.S. soybean supply plentiful, only a U.S.-China trade deal can perhaps add some bullish life into soybeans, or we risk falling to much lower levels. Look for the $9.12 to $9.15 area to once again provide resistance to May beans, with $9.20 to $9.25 even more formidable above that. DTN's National Soybean Index closed at $8.16, and reflects an average basis of 88 cents under May.

Wheat:

Following the China corn purchase announcement last week, wheat had rallied sharply as well, as the trade sensed that China wheat buying could be next. However, the wheat market was unable to hold those early Friday gains, but still remains 26 cents above contract lows. Managed money funds were short 73,000 contracts of Chicago wheat as of Tuesday, but in Kansas City added to a net-short, which is now record large at over 51,000 contracts. Such a position will surely add some fuel to a bullish fire in the event of a China trade deal. The ongoing flooding in the Midwest and southeast, which NOAA projects to worsen in coming weeks, is surely compromising some hard red winter (HRW) and soft red winter (SRW) fields, but we won't know for a while. Demand for U.S. wheat has been a bearish input of late, and the trade fears an ultimate carryout near 1.1 billion bushels (bb) will result. Taiwan did buy 110,000 mt of U.S. mixed wheat on Friday, but other purchases and the tender line-up remain scarce. Minneapolis futures did finish 17 cents higher last week, buoyed by the expectation that expected Northern Plains flooding as the snowpack melts, will cut into spring wheat acres. A survey released by Farm Futures last week shows all wheat acres at 45.9 mb -- down 5% from last year. Plentiful U.S. wheat stocks, and aggressive selling from the Black Sea and Europe, and now Argentina, has pressured wheat futures this year, but it is the expanding fund net-short that should make short traders nervous. DTN's National HRW index closed at $4.30, and the average basis is at 15 cents under May.

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

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