DTN Before The Bell Grains

Corn, Soybeans Little Changed, Wheat Lower Ahead of Report

Dana Mantini
By  Dana Mantini , Senior Market Analyst
(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

The June DJIA futures are up 135 points. The June U.S. dollar index is down 0.1690 at 96.595, June gold is up $7.00 per ounce at $1,302.30 and May crude oil is up $1.15 per barrel at $60.45.

Other Markets:

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

Corn:

Ahead of what might be the USDA's most important report of the year, corn is once again little changed. Managed money funds, comfortable with their bearish stance, come into this report short an estimated 245,000 contracts of corn futures. Friday's March 1 stocks are expected to show corn stocks of 8.336 billion bushels (bb), or roughly 560 million bushels (mb) less than last March. Corn seeding is pegged at an average pre-report estimate of 91.3 million acres versus 89.1 million acres last year. There is a wide range of estimates on the stocks number and it is here that the USDA could reveal a surprise. Acreage intentions are a moving target and this is just a starting point. Late Thursday there were rumors of more China interest in U.S. corn and pork, and the 3-5 cent gain in the corn basis may have been a sign of demand. The limit-down hog futures market reflected disappointment in a small cancellation of a previous pork sale to China in Thursday's export sales report. Export sales, at 35.6 mb were above the weekly amount needed to achieve the USDA objective, but total commitments are now down 8% from last year. South American corn values are currently much cheaper than U.S. A cash-connected commission house stated that on Thursday South Korea bought 134,000 metric tons (mt) on one tender and 69,000 mt on another, optional origin, and unconfirmed by USDA so far. Thursday's Hog and Pigs report showed a record large inventory for the quarter and the total was the highest March number on record. Weather in the U.S. is wet and cold and rains of 1-2" are projected across MO, IL, IN, OH and KY, likely exacerbating flooding issues. There is a drier trend ahead for parts of South America's corn regions and that will have to be watched, however corn production ideas are moving higher. In Argentina, the Buenos Aires Exchange moved corn 1 million metric tons (mmt) higher to 46 mmt, and in Brazil, Agroconsult moved Brazilian safrinha corn production (second crop) to 70.6 mmt from 68.9 mmt. Friday is not only report day but also the month and quarter end, a time when fund activity is high. Volatility could really escalate. DTN's National Corn Index closed at $3.47 on Tuesday, with an average basis of 27 cents under May.

Soybeans:

Soybeans are firmer again, but remain well under the key $9.00 level on May futures. As the U.S. and China continue trade discussions in Beijing, Treasury Secretary Mnuchin put forth some encouraging comments about Thursday's meeting. Unlike corn, the March 1 soybean stocks number in Friday's USDA report is expected to show a record large U.S. stocks number, with the average estimate at 2.683 bb, some 580 mb above last year, with some estimates much higher. Adding insult to injury, Thursday's export sales from the previous week showed a paltry 6.7 mb sold, the lowest in eleven weeks. Total commitments remain 17% below a year ago, and shipments are down 29%. China's total soybean imports this year are 11.8 mmt, down 2.1 mmt versus a year ago. Meanwhile South American soy crops are looking good, with Argentine soy rated at 51% good to excellent versus just 2% last year, and Agroconsult (a Brazilian consultancy) raising the Brazilian soy crop to 118 mmt from 116.4 mmt in February following a tour of Brazil's top producing regions that began in January. As in corn and wheat, the managed money funds appear confident in remaining short soybeans, now estimated to be 95,000 contracts. They also come into Friday's report short an estimated 30,000 contracts of soybean meal. May soybean futures will have initial resistance at $9.00 and then at $9.10-$9.15, while support will be near $8.80. Expect a volatile market reaction after 11 a.m. on Friday. DTN's National Soybean Index closed at $8.02, and reflects an average basis of 88 cents under May. At 8 a.m. USDA reported 816,000 mt of soybeans sold to China for 2018-2019 delivery.

Wheat:

Wheat is lower again ahead of Friday's USDA report, and the trade is expecting a bearish March 1 stocks number, currently estimated to be 50 mb higher than a year ago. The trade will focus on spring wheat acreage changes to see if USDA pegs spring acreage lower than trade on anticipated flooding concerns. The range of estimates on hard red spring (HRS) planting is 12.6 mb to 13.9 mb. Sales of 120,000 mt (4.4 mb) to Egypt and 150,000 mt to Iraq of U.S. HRW (only 50,000 of that old crop) were announced, and export sales of 17.5 mb were decent and put total wheat commitments 4% above a year ago, but that is not saying much. With shipments still 4% lower, the pace will need to accelerate or risk a burdensome 1.1 bb U.S. carryout. Wheat competition will likely continue to be fierce in 2019/2020, as the International Grains Council (IGC) pegs world wheat production to be 24 mmt higher than a year ago. Basis levels in hard wheat markets continue to fall, with Minneapolis bids taking a hit on Thursday, reflecting an improvement in logistics and slack demand. Managed money funds in wheat come into the report short an estimated 100,000 contracts in Chicago and a record large short in Kansas City near 50,000 contracts. Of course, there will be much firepower to fuel a rally in the event of an unexpected bullish USDA report. DTN's National HRW index closed at $4.24, and the average basis is at 15 under May. At 8 a.m. USDA reported 150,000 mt HRW sold to Iraq for delivery in 2018-2019.

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

FollowDanaon Twitter@mantini_r

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Dana Mantini