DTN Before The Bell Grains

Morning CME Globex Update:

Outside markets are mixed to lower. Global equities are selling off, the Dow futures are currently down 203 points, January crude oil is 5 cents lower, the U.S. dollar index is up 0.624, close to the recent highs. February gold is down $8.90.

Other Markets:

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

Corn:

Corn is bouncing a bit Friday morning after overnight weakness as continued good export sales, and some worrisome weather issues, along with optimism that China could buy corn or by-products soon, keep this market above the primary support area. Export sales for last week were close to 1 million metric tons (mmt), and total commitments are now 16% above the year ago level. The U.S., Black Sea and South American corn offers are very close, and competition will remain stiff. Just a hint of weather issues are creeping into South America, with a drying pattern in central and parts of southern Brazil, while excess rains in Argentina not only threaten wheat quality and quantity, but may hamper Argentine corn planting, which is just 47% complete. That rain is expected to subside in 10 days, but prior to that, totals of 3-6", and even 8-10" in some areas will be closely watched. Ethanol margins, though improved a bit, still reflect a net loss of 40-50 cents per bushel (15 cents per gallon) in many areas. Resistance on March corn will be in the $3.90 area, with the gap around $3.80 the primary support. Funds are very close to even, being slightly long futures, but still short on a combined futures and options position. DTN's National Corn Index closed at $3.48 on Thursday, with an average basis of 36 cents under March. At 8 a.m. USDA reported 125,000 mt of corn sold to Japan for 2018-2019 delivery.

Soybeans:

Soybeans reflected disappointment Thursday despite the announcement of the first China purchase of U.S. soybeans since last July. The 1.130 mmt (41.5 million bushel) purchase was far too little, with pre-purchase estimates as high as 5-8 mmt. However, this was reportedly the 9th largest one-day sale of soybeans ever, and there is surely more to come. With the clearly bearish S & D overhanging both the U.S. and world soybean market, a large China purchase is demanded, or we risk a larger sell off. The good news is that cash basis at both the Gulf and PNW have been ratcheted higher in the past few days. The Gulf was said to be 4 cents higher on Thursday, with the PNW actively showing bids of 60-65 cents over futures for January-February-March, as Brazil remains stable and even weaker in the spring. Funds, who had turned sellers again on Thursday with an estimated 8,000 contracts sold, remain an estimated combined futures and options net short of close to 63,000 contracts. The China soy purchase was attributed to Sinograin, but any private grain purchase would require that the 25% tariff be removed. The jury is still out on that. U.S. soybean shipments thus far remain a large 362 million bushels (mb) behind last year's pace. Last week's sales of 792,000 mt (29.1 mb was just above the weekly total needed to reach USDA's projection, but we need many more weeks like that. Total soybean commitments are 34% under a year ago. Although South American weather to date has been beneficial, some extended dryness in parts of Brazil and excess rains in Argentina threaten those crops. Trade today will be anxiously watching for more sales announcements to China. January soybeans DTN's National Soybean Index closed at $8.20, and reflects an average basis of 87 cents under January. At 8 a.m. USDA reported 300,000mt of soybeans sold to China and 130,000mt sold to unknown destinations, both for 2018-2019 delivery.

Wheat:

Once again, wheat bucked the bearish soybean reaction on Thursday and closed higher. Although setting back a bit this morning, a host of developments appear to be buoying the wheat futures market of late, despite the mostly negative USDA findings Tuesday. European wheat markets surged yesterday and ideas that Russian wheat values have moved some $6-8 per metric ton higher versus last week gives an indication of tightening supplies. There is reportedly a meeting between the Russian ag minister and Russian wheat exporters next Friday, and some speculate that a slowing or restriction of exports could be discussed. This would run counter to WASDE's increase of Russian wheat exports by 1.5 mmt to 36.5 mmt. Russia has sold 21 mmt so far, which would leave them with 15 million tons to sell. Also, excess rains in both Argentina and Australia in the midst of harvest there, threaten both quantity and quality from those competitors. U.S. exports have been solid of late, but have some catching up to do, especially HRW, with all wheat sales still significantly behind those of a year ago. Total U.S. wheat sales are 601 mb compared to 664 mb at this time last year. Funds turned buyers of wheat yesterday, buying an estimated 8,000 contracts, but still remain net short an estimated 44,000 contracts combined futures and options in Chicago wheat. Once again, there are a host of wheat tenders around with Japan, Jordan, Bangladesh, Syria and Colombia all seeking wheat. DTN's National HRW index closed at $4.90, and the average basis is at 30 cent under March, much improved.

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

Follow Dana on Twitter @mantini_R

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