Morning Grain Comments Thursday February 21, 2019

 

Corn: Corn is 4-6 cents higher at the morning break.  CK9 tested R3 intraday resistance at

$3.86 ½ but could not convincingly take it out. Bloomberg reported this morning that China

and the US are discussing a memorandum of understanding that would have China buy $30

billion per year more of US ag products than pre-trade war levels (2017 was $24 bln, so $54

bln/year).  The article specifically mentions corn, DDGS, soybeans and wheat.  The market

rallied on the news.  At 7:15 this morning the USDA Ag Outlook Forum issued a series of ag

projections including 2019 acreage of 92 mln corn (+2.9), 85 mln soy (-4.2) and 47 mln

wheat (-0.8).  See table.  Open interest in corn fell 6K on Wednesday with the March contract

down 40K; volume was heavy driven by spreading out of the March contract. Friday will bring

the expiration of March options; the biggest open interest is in the $3.80 strike. Korean buyers

purchased two cargoes of corn overnight for July arrival.  The prices line up with current

Argentine values but the US still looks too high priced to compete. Jordan has issued a tender

to buy 120K tons of feed barley. Tunisia is also tendering for 75K tons of feed barley which

closes on Friday.  The EIA will release their weekly energy (including ethanol production &

stocks) data at 10 am. Going home last night, estimated cash ethanol margins at 8-10 cents

in the red.  This is improved from 11-13 cents in the red a week ago but this morning’s corn

rally likely ate into those.  

 

Soybeans: Soybeans are up 7-10 cents at the morning break with R3 intra-day resistance

($9.30) turning the SK9 contract back.  Meal is up $1+ while oil is up 55-60 points.  Open

interest in soybeans dropped 14K on Wednesday with the March contract losing 18K.  The

story was the same in the products with total open interest down 3K in meal and 7K in oil but

the March contracts down 13K and 20K respectively.  The biggest open interest in March

soybean options ins in the $9.20 strike.  AgroConsult lowered their AgroConsult Updates

Brazilian Estimates Brazilian soybean production and export estimates to 116.4 mmt and 70.2

mmt from 116.5 and 73 mmt previously.  Their production number remains on the higher end

of recent analysts’ estimates. Palm oil was up about 1% overnight.  Bunge reported quarterly

profit in its  agribusiness unit of $203 mln, down from $238 mln in Q4 and less than analysts

had expected; they blamed the miss on falling soybean prices in Brazil.      

  

Wheat: Wheat is bouncing after four straight lower closes encompassing a 40+ cent selloff. 

HRW is up 8-11 cents. Wheat is  trying to break above R1 intra-day resistance of $4.68 KWK9.

Open interest in HRW increased by 6K on Wednesday in heavy volume which would seem to

add validity to the break.  New shorts were assumed to be the managed money growing their

net position while the new longs were mostly likely price-sensitive physical buyers.  Taiwan

issued a tender for 110K tons of food-grade wheat out of the US.  Thailand bought 100K tons

of feed wheat that is likely to come out of the Black Sea after their harvest; the price was

quite low reported.  South Korea’s NOFI bought a cargo of feed wheat for July arrival.  The

biggest open interest in March options in the HRW is in the $4.90.

 

The stock market is trading slightly lower after trading higher overnight on the perception of

positive progress in US-China trade talks and on the possibility that the Mar 1 tariff increase

date will be extended.  Crude oil is slightly lower ahead of the EPA’s weekly energy report

which is expected to show crude stocks increasing 3.1 mln brls vs. last week and gasoline

stocks falling slightly.  Private group API reported just a 1.3 mln brl crude build and a 1.5 mln

brl drop in gasoline stocks.  If confirmed by the EIA, those numbers would likely be

supportive.