DTN Before The Bell Grains

Morning CME Globex Update:

The June DJIA futures are up 14 points. The June U.S. dollar index is up 0.1600, April gold is down $10.30 per ounce and May crude oil is down 86 cents per barrel.

Other Markets:

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

Corn:

Corn is once again little changed in lackluster trade and going for its third straight lower close. Wednesday's ethanol report from last week revealed a drop of 2.9%, something not totally unexpected in light of flooding and logistics challenges, but a future drop in yearly ethanol looks to be in the cards. Ethanol stocks rose again to another record large level. U.S. corn landed in China without tariffs was said to be roughly a $16 per metric ton (mt) premium to Brazil and $17/ton premium to Argentine corn. The sharp fall in both the Brazilian real currency and the Argentine peso at a new low fostered increased farmer selling from there, pressuring both corn and beans on Wednesday. The corn basis in the U.S. fell 4 cents on Wednesday to 57 cents over the May futures. The Argentine corn harvest is now 9% complete with reports of very strong yields so far. The prospect for South American corn production to be up 26 to 27 million metric tons (mmt) (1.023 to 1.062 billion bushels (bb)) appears real. Friday's USDA stocks and seeding report is typically a big market mover, and this should be no exception. Since 2007, corn futures have moved an average of 4% on the day following the report, according to Ag Resource, and has moved higher in 8 of the 12 weeks following. Weather in the U.S. will continue to present a planting challenge as storms are projected to hit KS, MO and IL with some pretty good totals the next two days and will likely exacerbate flooding issues. Longer range also appears to be wetter into April and May. Progress appears to be moving ahead on the U.S.-China trade talks with respect to intellectual property and forced technology transfer issues as they meet in Beijing. China's ethanol plants are running strong and with Jilin plants said to be at 90% capacity, China's plans for sharply increased ethanol usage could bode well for U.S. exports of corn or ethanol. The funds continue to add to a large net short in corn - a bullish factor in the event of a bullish crop report. Look for May corn to find some support at the 20-day average at $3.70-$3.71 with selling likely at $3.75. Corn export sales at 35.6 million bushels (mb) for 18/19 last week bring the total commitments to 1.679 bb and down 8%, while shipments are up 25%. DTN's National Corn Index closed at $3.46 on Wednesday, with an average basis of 28 cents under May.

Soybeans:

After a sharp move lower the past two days, soybeans are getting a much needed bounce in the overnight. There is a more positive vibe coming from the Beijing trade meetings, but how many times have we heard that song? The fall in both the Brazilian and Argentine currencies on Wednesday fostered a pick-up in farmer selling from South America, and that, coupled with little demand for U.S. soybeans, pummeled futures values Wednesday. The U.S. Gulf barge values for Wednesday were down 17 cents to just 18 cents over May futures, while at the PNW, there are reportedly no soybeans bids until June. As in corn, the March stocks and seeding report typically results in a large futures change, with soybeans on average moving 3% one way or the other in the week following this crucial report. Friday's soybean stocks report is expected to reveal a record large stocks number, likely in the range of 2.7 to 2.8 bb. The outlook for soybean seeding if the wet forecasts come to fruition would suggest higher than expected soybean acres at a time when we don't need that. U.S. soybean ending stocks without a China trade deal could be headed for 1 bb as both sales and shipments remain well behind year ago levels and USDA projections. The trade is still waiting for China to complete the second 10 mmt tranche of U.S. soy buying promised weeks ago. May soybeans will have trouble at the old support of $9.00 now and even more selling on a rally to $9.10-$9.15. Support will be in the $8.85 area. Last week's soybean sales for 18/19 were a dismal 6.7 mb, bringing total to 1.531 bb and down 17%, with shipments now lagging by 29%. DTN's National Soybean Index closed at $8.00, and reflects an average basis of 87 cents under May.

Wheat:

Wheat is under severe pressure in both Chicago and Kansas City Thursday morning as we look ahead to Friday's stocks report that is likely to confirm U.S. wheat demand, as DTN Lead Analyst Todd Hultman exclaims, is "among the worst in recent history". While this week's sale of U.S. SRW to Egypt, though small, was encouraging as U.S. wheat was the cheapest by far on a FOB basis, the 4% lower shipping pace versus last year suggests the real possibility of a burdensome 1.1 bb U.S. carryout. Expected storm activity is likely to further enhance U.S. crop prospects, with most key hard red winter (HRW) states condition ratings moving higher, and subsoil moisture levels already being plentiful to surplus. U.S. wheat has surely faced stiff competition from the EU and Black Sea areas as well as Argentina, and that is unlikely to change in the future. Glencore Agri's CEOI states that Russian export capacity is likely to increase by 10 mmt by 2025, with 6-7 mmt of that capacity likely to be used for wheat exports. Perhaps one of the few positives that we can look forward to on Friday's USDA report is a surprise in hard red spring (HRS) planting. With more rains and melting snow possibly exacerbating flooding, spring wheat acres could decline at the expense of soybeans. A few bullish factors to watch on wheat are developing EU and Black Sea dryness, and the better than average chance that Australia's climate remains too dry. U.S. wheat sales last week for 18/19 were 17.5 mb, with total commitments of 868 mb now up 4%, but shipments remain 4% lower than last year. DTN's National HRW index closed at $4.30, and the average basis is at 14 under May. At 8:00 a.m. USDA reported 120,000 mt of SRW sold to Egypt for 2018-2019 delivery. 150,000 mt of HRW were sold to Iraq, 50,000 for 2018-2019 and 100,000 mt for 2019-2020 delivery.

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

FollowDanaon Twitter@mantini_r

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