DTN Before The Bell Grains

Morning CME Globex Update:

Following Tuesday's 145-point gain in the Dow Jones average and new highs, Dow futures are showing 11 points higher Wednesday. June crude oil is up 4 cents per barrel, the U.S. dollar index is up .0840, and June gold is up $1.20 per ounce.

Other Markets:

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

Corn:

After falling to new contract lows on Tuesday, corn is up modestly Wednesday. Much cheaper South American corn values have undercut U.S. export business, and this week planting progress may have made big strides in the central U.S. Weather appears to be favorable through the weekend, but next week looks to be much wetter, and corn and spring wheat planting efforts could be further hampered. Meanwhile, in the midst of the ongoing trade challenges with China, Argentina is moving to increase ag trade with China following what appears to be a corn crop that is some 18 million metric tons (mmt) to 19 mmt above last year. Just since March 26, spot corn futures have plunged over 30 cents per bushel, fueled by confident managed money funds, who are now thought to be holding a record net-short of close to 360,000 contracts, inclusive of options. The last record net fund short in corn was 227,000 contracts set in January of 2018. Without a China deal signed, and with Argentine corn offers said to be sixty cents per bushel cheaper than the U.S., the funds have had little reason to cover this atypical short ahead of the North American growing season. A China trade deal might change the outlook, as even though China has been a minor corn importer the past few years, their usage is projected to outstrip production by some 27 mmt in the coming year. China corn imports year to date are said to be only 980,000 mt, but that is up over 76% versus last year at this stage. U.S. and China trade representatives meet on April 30 in Beijing and then return to Washington on May 8 for what most hope will be a signing ceremony. Look for May corn to have resistance at old support of $3.55 to $3.56, with the next support level down near $3.40. DTN's National Corn Index closed at $3.31 on Tuesday, with an average basis of 20 cents under May.

Soybeans:

Following Tuesday's plunge, spot soybean futures have now fallen 47 cents per bushel just since April 4, as managed money funds also add to a large net-short in soybeans that is now thought to be 130,000 contracts, including options. Cheaper South American soy supplies have taken over world demand, with U.S. Gulf FOB soybeans said to be a $2 per metric ton premium to Brazil, but a $21/mt premium to Argentine soy offers. U.S. exports to date are now 433 million bushels (mb) below last year, while the USDA is only calling for exports to fall by 259 mb. In the absence of a China trade deal, and promises of new U.S. purchases, it is very possible that USDA will be forced to lower U.S. exports and raise carryout even further. The U.S. is already projected to have a record large ending stocks of 895 mb. Brazil's soybean harvest is now 92% done, according to Ag Rural, with Argentina's harvest now over 34% complete. Due to the expanding and uncontained African swine fever, China demand has fallen sharply as well, with year-to-date imports of soybeans said to be 16.75 mmt. That is down 14.4% versus last year -- a testament to the demand impact of ASF. JCI, an analytical firm from China, estimates that China bean imports will be 8.6 mmt to 8.7 mmt in April, 6.3 mmt to 6.5 mmt in May and 6 mmt in June. As U.S. and Chinese trade representatives meet to advance trade talks, after the recent U.S. move to let waivers expire on Iran crude oil imports, China is not too happy, as they imported nearly 30 mmt of Iranian crude oil last year. On a bullish note, U.S. soybean crush margins continue to be very strong even out into the new-crop slot, with board crush margins called the strongest in many months. As in corn and wheat, soybean futures are oversold technically, but we need a bullish catalyst before stubborn funds will begin to exit shorts. DTN's National Soybean Index closed at $7.81, and reflects an average basis of 81 cents under May.

Wheat:

Both Chicago and Kansas City wheat futures continue their downward slide, while Minneapolis takes a break after reaching yet another new contract low on Tuesday. Both KC and Minneapolis have set new contract lows the past few days, while Chicago spot futures, having plunged 40 cents per bushel just since early April, is seven cents away from its low. Improving wheat conditions, with winter wheat at 62% good to excellent, the best in nine years, and advantageous spring wheat planting weather and slack export demand, the path of least resistance has been down. As in corn and beans, managed money funds have seized the bearish opportunity in wheat markets as well, now thought to have a combined net-short approaching 140,000 contracts in all three markets. Funds as of last week, were short 54,000 contracts of Kansas City alone -- a new record net short. While U.S. wheat sales are above last year, shipments are lagging and some feel that U.S. ending stocks could ultimately rise to more than 1 billion bushels. With major competitor wheat production estimated to be nearly 30 mmt higher than last year, U.S. wheat will likely continue to face stiff competition in the new-crop slot. Stats Canada just revealed their spring wheat planting intentions and they are up 12%, at the expense of both canola and durum. DTN's National HRW index closed at $4.03, and the average basis is at 12 cents under May.

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

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