DTN Before The Bell Grains

Corn and Soybeans Higher, Wheat Mixed Overnight

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

Morning CME Globex Update:

The Dow Jones average rose 269 points on Friday and Dow futures are down 20 points in the overnight. May crude oil is down 57 cents per barrel, the U.S. dollar index is down 0.1430 and June gold is down $8.50 per ounce.

Other Markets:

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

Corn:

In light overnight trade, May corn is up a couple of cents, but remains well below the major moving averages. Weather is mildly supportive, with an active weather outlook for much of the central Corn Belt, likely leading to slower field work and planting efforts. Rains in the northern Plains over snow-covered fields is increasing the concern for additional flooding, and heavy rains will impact the Delta and southeast again. Despite that, Monday's crop progress report is expected to show corn planting right at the five-year average of 5%. The big news on Friday was the CFTC report which showed non-commercials added another 24,000 contracts to their net-short, which now stands at a whopping 294,000 contracts. Although we have not had much in the way of bullish news in this market, this will surely have the potential to incite a furious rally if we were to get a conclusion to the China trade issue. However, both U.S. exports and ethanol numbers continue to lag the amount needed to reach USDA projections and corn exports will need to pick up substantially in weeks to come. China news is a bit more positive, but only with rhetoric, as Treasury Secretary Mnuchin states that we are nearing the "end game" on discussions. China is expected to review the anti-dumping tariffs on DDGs this week. According to the Chinese Ministry of Agricultural and Rural Affairs, China's pig herd is down 18.8% in March versus a year ago, and the sow herd is off 21% versus last March as African swine fever continues to decimate the population, with 120 cases found to date. That continues to suggest that China might import more U.S. pork. Look for the $3.60 area to support May corn, with $3.66-$3.70 providing resistance. DTN's National Corn Index closed at $3.38 on Friday, with an average basis of 23 cents under May.

Soybeans:

Soybeans are bouncing a bit in the overnight, but remain stuck on that $9.00 number on May, where it has traded around for ten straight days. While Steve Mnuchin's comments on the China trade deal are optimistic, and there will be several more telephone discussions this week, U.S. soybean demand continues to suffer as a result of the trade issue and African swine fever. A record large shipping pace will be needed in the next several months to achieve USDA's soybean export projection, and South America is priced well below U.S. soybeans. China soybean imports for the first quarter are called 16.75 million metric tons (mmt) compared to 19.57 mmt last year. Rains falling on heavy snowpack in the Northern Plains is leading to concern of more flooding and spring planting delays, which is likely to add more unwanted soy acres to the mix. Non-commercials did cover part of their net-short soybean position last week, but still remain net-short 84,000 contracts, along with 32,000 soybean oil contracts. The NOPA report is expected Monday, and the average trade estimate is 168 million bushels (mb) compared to 171.8 mb last year. May soybeans should continue to find support in the $8.95 area, with strong resistance on a rally to $9.10-$9.12. DTN's National Soybean Index closed at $8.11, and reflects an average basis of 85 cents under May. At 8 a.m. USDA reported 140,000mt of soybeans sold to unknown destinations for delivery in 2018-2019.

Wheat:

Wheat is mixed to start with winter wheat futures markets lower and Minneapolis higher on continued technical recovery from last week's bullish reversal. However, very strong resistance on Minneapolis May is just 10-15 cents higher, at $5.45 to $5.50. Non-commercial sold 7,300 Minneapolis futures contracts last week and are now thought to have the largest net-short in that market in quite some time. Funds remain short both Chicago and Kansas City. Weather is aiding hard red winter (HRW) wheat conditions, while the very wet forecast and saturated fields in soft red winter (SRW) growing regions in the Midwest and Delta, are adding to what is being called the worst SRW conditions in years. Despite being the lowest FOB offer on Friday for Egypt's GASC wheat tender for May-June, U.S. wheat lost out by close to $8 per metric ton (mt) on a freight disadvantage. Romania (180,000 mt) and Ukraine (60,000 mt) satisfied that tender. Spring wheat planting will continue to be a concern, with expected rains falling on heavy snowpack in some areas of the Northern Plains likely to lead to a shift from spring wheat to soybeans. More flooding issues are expected. DTN's National HRW index closed at $4.22, and the average basis is at 13 under May.

Dana Mantini can be reached at dana.mantini@dtn.com

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Dana Mantini