DTN Before The Bell Grains

Grains, Soybeans Higher; Equities Recover from Monday's Early Plunge

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

Morning CME Globex Update:

Outside markets are providing a nice risk-on boost this morning, with the Dow futures pointing to a strong opening, currently 322 points higher following Monday's reversal from new recent lows. January crude oil is up 82 cents per barrel. The U.S. dollar index is down .1760 and gold is up $3.00.

Other Markets:

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

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Corn:

March corn continues to bide its time awaiting some sort of China announcement. USDA's WASDE report will be out at 11 a.m., but is not expected to be much of a market mover. A slight increase in U.S. corn carryout is possible and few world changes are expected, although there is talk of a bump in Ukraine production of up to 2 mmt. Ukraine corn offers are said to be some 18-19 cents per bushel cheaper than U.S. on an FOB basis. However, trade is watching for any escalation of the Russia-Ukraine conflict for any trade interruption. Exports remain the bright spot for U.S. corn with corn, ethanol and DDG sales above last year. Monday's large sale announced to Mexico of 1.6 mmt, with 1.1 mmt (43.3 million bushels) of the total for 18/19 is thought to be trying to get ahead of impending Chinese purchases of U.S. grain. Year-to-date U.S. corn shipments are now 595 million bushels (mb) compared to 339 mb last year at this time. Large speculative traders were said to have bought in 63,000 contracts of corn since the last COT report, still leaving funds net short corn on a combined futures and options position. It appears that both Cargill and ADM may have stopped many of the corn deliveries against expiring December futures. South American weather is mostly favorable, but too much rain in Argentina and a drying trend in Brazil must be watched. Resistance on March corn should be in the $3.85-$3.90 area, while support is down at the gap at $3.80. DTN's National Corn Index closed at $3.48 on Friday, with an average basis of 36 under March, stronger.

Soybeans:

January soybeans continue to trade back and forth, although firmer since the G-20 summit, but the trade may grow weary waiting for the China purchase announcement to come. The rumor continues to be that the Chinese government entity Sinograin will likely buy from 5 to 8 mmt of U.S. soybeans to replenish their reserve, but we have seen little to indicate that of late. Brazil soybean offers continue to weaken, and are now said to be 80 cents over the nearby futures month, down from $2.60 over several weeks ago. February offers are even lower, said to be close to 50 cents over the respective futures month. USDA reported a sale of 125,000 mt on Monday to unknown destinations for 2019/2020. U.S. soybean inspections for the year are now lagging last year by a huge 364 mb. Tuesday's WASDE report is likely to show an increase in U.S. soybean carryout. With a 950 mb ending stocks number, coupled with a 112 mmt world soy carryout, there is little for bulls to get excited about. ABIOVE pegs the Brazil soybean crop at 120.9 mmt versus last year's record large 119.8 mmt crop. Expect support on January beans to be near the $9.00 level, while resistance on a rally is likely at the $9.32 summer high. DTN's National Soybean Index closed at $8.22, and reflects an average basis of 87 cents under January, firmer.

Wheat:

All of the wheat markets are slightly higher to start Tuesday morning. Rising world wheat prices of late have made U.S. wheat more attractive, and we have seen a pick-up in sales lately, with the U.S. getting the 50,000 mt Iraq business, and the 224,000 mt sale of HRW announced on Friday. However, this is business that is badly needed, as year-to-date U.S. wheat shipments are still some 88 mb behind last year's pace. The basis continues to inch higher, especially on HRW, with 12 protein said to be another 4 cents higher on Monday. Tuesday's WASDE report is likely to show a slight increase in U.S. wheat ending stocks. There is a possibility we could see a reduction in the Australia crop Tuesday. ADM has been a strong stopper of HRW deliveries against expiring December futures. Argentine wheat harvest is 44% complete, but with heavy rains ahead, there are quality issues with that crop. Several wheat tenders are reported with Bangladesh undecided, but the cheapest offer is said to be Russian. Jordan, Syria, Colombia, Brazil and Indonesia are all thought to be seeking wheat. DTN's National HRW index closed at $4.78, and the average basis is at 32 cents under March, stronger.

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

Follow Dana on Twitter @mantini_R

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Dana Mantini