DTN Early Word Grains 03/22 06:03
Grains Higher on Trade, Flooding
May corn is up 2 1/2 cents per bushel, May soybeans are unchanged, and May
K.C. wheat is up 2 3/4 cents.
By Tregg Cronin
DTN Contributing Analyst
6:00 a.m. CME Globex: May corn is up 2 1/2 cents per bushel, May soybeans are
unchanged, and May K.C. wheat is up 2 3/4 cents.
CME Globex Recap: Equity markets are mostly weaker Friday morning, especially
in Europe after soft economic data in the way of purchasing managers indices in
Germany and France disappointed. In the U.S., investors are busy recalculating
what another year to year-and-a-half of easy money means for equity valuations
after the Federal Reserve indicated it would not be raising interest rates the
rest of 2019 and only once in 2020. Grains are mostly firmer as we get set to
close another week of trading. Next week will be dominated by average trade
guesses in the run-up to the March 29 USDA reports, but we contend the March 1
stocks data will be of most importance while the acreage guesses will have
limited value due to the recent flooding. From a demand standpoint, the
flooding across the Midwest is a bearish feature as water roils logistics and
extinguishes demand which can't be made up.
OUTSIDE MARKETS: Previous closes on Thursday showed the Dow Jones Industrial
Average up 216.84 at 25,962.51 and the S&P 500 up 30.65 at 2,824.23 while the
10-Year Treasury yield ended at 2.537%. Early Friday, the June DJIA futures are
down 108 points. Asian markets are higher with Japan's Nikkei 225 up 18.42
(0.09%) and China's Shanghai Composite up 2.69 points (0.09%). European markets
are lower with London's FTSE 100 down 68.14 points (-0.93%), Germany's DAX down
37.68 points (-0.33%) and France's CAC 40 down 46.61 points (-0.87%). The June
Euro is down 0.004 at 1.140 and the June U.S. dollar index is up 0.133 at
96.120. The June 30-Year T-Bond is up 22/32nds, while April gold is up $5.00 at
$1,312.30 and May crude oil is down $0.54 at $59.44. Soybeans on China's Dalian
Exchange were up 0.06% while soybean meal was up 0.43%.
1) Corn and wheat export sales hit the 1) Soybean export sales missed the
needed levels to achieve the USDA level needed to achieve the USDA
forecasts last week. forecast with total commitments
lagging last year by 17%.
2) Crude oil futures traded over $60 per 2) Minneapolis spot floor trades saw
barrel this week for the first time most wheat protein classes ease
since mid-November, supporting the from early week values as
entire energy market including 13.5-15.0% protein is flat at
3) Above normal precipitation and below 3) Cash traders continue to point out
normal temperatures are forecast for the awful logistics plaguing the
the Northern Plains in the 6-10 and ethanol industry which should slow
8-14 day which will slow dry down. corn grind rates in the near-term.
MORE COMMODITY-SPECIFIC COMMENTS
CORN Corn futures are firmer Friday morning as December corn pushes back
above $4.00 for the first time since February 25. Due to stronger corn basis
where end users desperately need bushels, some areas are paying the highest old
crop cash corn prices since summer despite relatively flat futures levels. The
DTN National cash corn index closed Thursday at $3.48, the highest settlement
since February 22. While these values still aren't bringing about a lot of
selling, due in large part to the inability to move grain, there should be a
fair amount of hedge pressure above $4.05 December '19 corn futures. Corn
export sales last week were decent at 33.7 million bushels (mb) vs. the 26.7 mb
needed weekly to hit the USDA forecast. Commitments at 1.643 billion bushels
(bb) are down 7% from a year ago as the 2018/19 crop year should not see the
same sort of export pull June-August as we did last year. Lots of chatter about
China moving forward on the purchase of up to 7 million metric tons (mmt) of
U.S. corn as part of filling their obligation to the World Trade Organization.
As always, we will wait for the USDA to make confirmations before we decide
this is finally the missing piece we've been waiting for. Momentum indicators
are strong and rising, indicating no looming bearish set back.
SOYBEANS Soybeans are a bit higher Friday morning, adding to Thursday's
gains with an eye toward trade negotiations next week. As one financial media
outlet reports a trade deal is close at hand, another reports Trump has no
intention of removing tariffs and to strap in for a long, drawn-out affair.
Volatility remains in a downtrend as there is nothing to get too excited about
until the end of the month reports are behind us. Soybean export sales last
week were a bit weaker as commitments only measured 14.7 mb vs. the needed
weekly level of 16.0 mb. Total commitments are now down 17% from last year
while the USDA is only forecasting a 13% decline from a year ago. As concerning
is the fact that exporters have only shipped 55.4% of the USDA's export
forecast which is the lowest on record for this week on the calendar. Lots and
lots of work to do on the export front to prevent USDA from making further cuts
on subsequent WASDE reports.
WHEAT Wheat contracts are higher, adding to Thursday's gains as the
gigantic managed fund short seems to support on days without distraction.
Technically, wheat export sales did hit the needed level to achieve the USDA's
export forecast at 11.0 mb vs. 7.7 mb. The trouble has been shipments, however,
as only 66.1% of the USDA's forecast has been shipped with 11 weeks left in the
marketing year. That is an all-time record low for any year going back to 1991.
The poor logistics continue to keep things inconsistent across the Northern
Plains with additional ethanol plants being shut off and rail remaining 3-4
weeks behind want dates. We continue to sell large quantities of HRW each week,
but the ability to actually get the wheat into exportable position will remain
a challenge well into April. It has seemed lately that each bushel of demand
HRW is adding, HRS is taking away as poor export sales and shipments continue
to plague the spring wheat market. As we opined earlier in the week, the HRS
balance sheet needs to see a massive acreage cut in 2019/20 to prevent ending
stocks from reach the highest level in 30-years. The switch to above normal
precipitation and below normal temperatures for the Northern Plains is about
the worst shift in the forecast spring wheat producers hoped to see.
DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.48 $0.05 -$0.28 May $0.000
Soybeans: $8.23 $0.04 -$0.88 May -$0.009
SRW Wheat: $4.40 $0.01 -$0.27 May -$0.004
HRW Wheat: $4.32 $0.04 -$0.15 May $0.008
HRS Wheat: $5.38 $0.00 -$0.33 May $0.007
Tregg Cronin can be reached at email@example.com
Tregg can be followed throughout the day on Twitter @5thWave_tcronin
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