DTN Before The Bell Grains

Morning CME Globex Update:

The June DJIA futures are up 4 points. The June U.S. dollar index is up 0.0750 at 96.300, April gold is down $0.90 per ounce at $1,314.10 and May crude oil is down $0.06 per barrel at $59.88. The Dow Jones average finished up 141 points on Tuesday.

Other Markets:

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

Corn:

Corn continues its two-day break despite managed money funds holding a near record large net-short in perhaps one of the most volatile times of the year. There has been no hint so far of further Chinese corn purchases since the 300,000 metric tons (mt) announced last week, and U.S. corn appears to be facing stiff competition. The corn basis at the Gulf however continues to move higher, likely due to stifled logistics as the result of severe flooding. In the Delta and the southeast, farmers have made planting progress, with MS at 18% done and LA at 50% complete, while TX farmers have planted 38% of the corn, exceeding the 5-year average. The EIA will release ethanol production today, and trade fears a further slowdown with the ongoing floods hampering ethanol plants ability to source and ship. The good news is that ethanol margins have improved, and are now thought to be around 20 cents per gallon in the western Midwest. A Bloomberg story released on Tuesday suggested without named sources that China could buy up to 300,000 mt of U.S. pork in the coming year, as ASF has decimated the Chinese herd. China also lifted the ban on French poultry imports, shut down since December 2015, as poultry demand in China is expected to surge 9% higher in 2019, according to the U.S. Ag Attache. Funds were sellers of an estimated 11,000 contracts of corn on Tuesday and managed money's net-short is estimated at 240,000 contracts. Argentina's corn production estimates continue to move higher, and it is looking more likely that South America's combined corn production could be up 26-27 million metric tons (mmt) versus last year. Rains are expected in the Central U.S. in the next two weeks and will possibly exacerbate flooding issues. The forecast for a warmer last half April forecast will help planting efforts in many areas. Look for May corn to support at $3.70 with resistance still $3.75. DTN's National Corn Index closed at $3.50 on Tuesday, with an average basis of 27 cents under May.

Soybeans:

Soybeans are once again under pressure and now have breached that benchmark support area of $9.00 again on May. U.S.-China trade representatives meet again on Thursday in Beijing, and apparently are working on the enforcement issue. Rabobank appears to have a positive spin on the final trade deal, stating that the new target with China is for $55 to $60 billion of U.S. ag exports "to be achieved within three years". In addition to a sagging U.S. basis at the export ports, there has been no new soy business announced and both palm oil and canola have sunk to contract lows, with canola's move being fueled by China's suspension of Canadian imports. As in corn, funds returned as sellers in the entire soy complex on Tuesday selling an estimated 5,000 soybeans, 4,000 meal and 3,000 bean oil futures. The best estimate has funds short 88,000 bean contracts. The one bright spot is the soybean meal basis, having moved $7 per ton higher in the past ten days, likely driven by China pork import talks and strength in DDG values related to logistics. Friday's USDA survey on acres is expected to show higher soy acres than earlier expected due to the late planting scenario, but surveys in early March prior to big floods will be taken with a grain of salt. The March intentions for soybeans have come in lower than the average trade estimate in seven of the last nine years. The trade's average guess, according to DJ, is 86.191 million acres versus 89.196, but the range of estimates is wide, suggesting a volatile reaction is possible. China continues to suffer with African swine fever, but claim to have isolated the strain, the first step in attaining a cure, but Vietnam now has ASF in 21 provinces. Look for May beans to see support at $8.85, with resistance now in the $9.00 to $9.05 range. DTN's National Soybean Index closed at $8.13, and reflects an average basis of 88 cents under May.

Wheat:

Wheat finally got a dose of good news on Tuesday, but it came in a small package. The sale of 120,000 mt (4,4 million bushels) of soft red winter (SRW) was a welcome announcement, but hardly a game changer for a market that appears destined for a 1.1 billion bushel carryout. The SRW offers were the cheapest by far on a FOB basis, but just $2-$5/mt cheaper on a landed basis. Meanwhile, loosening logistics and mills backing off are reasons given for a plunge in both Kansas City and Minneapolis hard wheat premiums, with HRW basis having fallen 50 to 60 cents in the last few days. State wheat conditions improved week on week, with TX up 6% in good to excellent to 38%, KS up to 52%, OK making a big jump to 74%, and NE at a decent 61% good to excellent, with subsoil levels huge. While Chicago May wheat has maintained much of the move above contract lows set a few weeks ago, it is barely above the 20-day moving average this Wednesday morning. In addition to the Egypt tender, Ethiopia has come forth with a sizeable 600,000 mt tender, and hopefully the U.S. can garner some of that much needed business. DTN's National HRW index closed at $4.28, and the average basis is at 15 cents under May.

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

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