DTN Before The Bell Grains

Morning CME Globex Update:

Dow Jones futures are down 68 points, June crude oil is up 18 cents per barrel, the U.S. dollar index is again higher, at up .1930, and June gold is down 10 cents per ounce.

Other Markets:

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

Corn:

Corn is once again lower, with July and new-crop December setting yet another new contract low in the overnight. Although planting remains well behind the average pace, this week has likely seen a big catch-up in seeding. Thursday features some rains in Nebraska and southern Minnesota and in the southern Corn Belt, but dry most other areas. That is about to change this weekend, with the seven-day weather forecast looking wet for the central and southwestern Corn Belt. The recent surge in open interest indicates that managed money funds continue to add to an already record-large net-short, with not only corn the largest short ever, but combined ag crop products the largest bearish bet ever by funds. The net corn short, inclusive of options, is estimated to be close to 383,000 contracts. U.S. corn exporters are facing very stiff competition from South American corn, with Argentine offers from $9 to $15 per metric tons (mt) cheaper than U.S. Gulf corn offers. Also weighing on U.S, markets is the U.S. dollar index reaching its highest level since May of 2017. At the same time, the Brazilian real currency was down nearly 2% on Wednesday, and the Argentine peso has reached an all-time low versus the U.S. dollar, making South America even more competitive to world importers. The good news is that ethanol production was up 3% last week to 308 million gallons, and improved ethanol margins will likely lead to higher production and blending this summer. Look for July corn to find resistance on a bounce to $3.60, with support likely initially around $3.50. Export sales for the week ended April 18, were 30.7 million bushels (mb) for 2018-19, taking the total commitments of 1.790 billion bushels (bb) to 9% below last year. Shipments of 49.2 mb, were above the 46.8 mb per week needed, and are up 14% versus last year. DTN's National Corn Index closed at $3.27 on Monday, with an average basis of 20 cents under May, close to the narrowest level in many years.

Soybeans:

Soybeans are slightly higher and have matched Wednesday's low on July, and are at the lowest level since September of 2018. With U.S. trade representatives scheduled to meet in Beijing next week and return for discussions in the U.S. on May 8, the trade assumes that any final deal may not be announced until late May. As in corn, the huge South American supplies and lower currency values have made their offers much more attractive to world importers, and Brazil's bean harvest is over 92% done, with Argentina's harvest now approaching 40%. China did import more soybeans from the U.S. in March, according to the General Administration of Customs. China took 1.5 million metric tons (mmt) of U.S. soybeans in March versus 907,000 mt in February. They also took 2.79 mmt from Brazil, and 205,000 mt from Canada. Total China soy imports for March were 4.92 mmt. Meanwhile, with the U.S. embroiled in trade talks with China, Argentina has representatives now visiting China, looking to ramp up Argentine soybean meal exports to that country. As South American production in 2019 looks to be 11 mmt to 12 mmt higher in soybeans, and a huge 30 mmt to 31 mmt higher in corn than last year, more fears of the bearish demand implications of African swine fever appear to be making the rounds, with some analysts suggesting that China soy demand could be curbed for the next two to three years. As in corn, the managed money funds have been relentless in their selling, with current estimates of their net soybean short with futures and options combined up around 139,000 contracts. The soybean market is extremely oversold now, but needs a bullish catalyst to force funds to exit shorts. Export sales for 2018-19 for the week ended April 18 were 21.9 mb, with total commitments at 1.649 (bb) down 17% versus a year ago, while shipments at just 14.6 mb were well below the 34.6 mb needed per week, and now down 26% versus a year ago. DTN's National Soybean Index closed at $7.75, and reflects an average basis of 80 cents under May.

Wheat:

Wheat values are taking a breather from the bearish onslaught that we have witnessed lately, with both Kansas City and Minneapolis futures having scored new contract lows, hovering just above those, and Chicago spot futures within 4 cents of the contract low. Managed funds now have an estimated 72,000 contracts net short in Chicago wheat and the Kansas City short is estimated to be a record 58,000 contracts short. As if we needed more bearish news, Stats Canada's all wheat planting intentions were close to 1 million acres above the pre-report estimate, with all wheat up close to 4% and spring wheat up 12% from last year. The EU estimates their all wheat crop to be up 8% to 169.4 mmt, but that also includes durum. Russian wheat production, early on, is pegged at 5 mmt to 10 mmt above last year's crop. With recent rains falling on the hard red winter (HRW) crop, and more than adequate soil moisture reserves, winter wheat conditions, already the best in seven years, look to improve even more. Wheat has also been under pressure due to the new highs in the U.S. dollar -- now at the highest level in two years, making our wheat more expensive for world importers. As in soybeans, wheat futures are oversold, and although fund selling has propelled wheat to new lows, it is that huge fund short, which will provide plenty of firepower to the upside once the market turns. Export sales for the week ended April 18, were 15.6 mb, making total commitments of 931 mb now 9% higher than a year ago. Shipments of 29.1 mb were lower than the 33.7 mb needed each week, putting total shipments now 1% under a year ago. DTN's National HRW index closed at $3.93, and the average basis is at 12 cents under May.

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

FollowDanaon Twitter@mantini_r

(KR)

Copyright 2019 DTN/The Progressive Farmer. All rights reserved.