DTN Before The Bell Grains

Morning CME Globex Update:

Outside markets are firmer. Dow futures are up 159 points, January crude oil is up 21 cents following yesterday's 7% decline, the U.S. dollar index is down .1500 and February gold is down $1.70. The Fed Open Market Committee will have an interest rate decision today.

Other Markets:

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

Corn:

In lackluster pre-holiday trade, corn continues to chop around in a narrow range. Trade continues to await some indication that China might buy corn, pork or ethanol from the U.S. There is no sign of that yet, but basis has been firming at port locations. PNW track bids for corn were said to be up 3 cents to 108 cents over the March futures, and cost for rail cars said to be up $100 per car on Tuesday. Corn bids for barges to the Gulf were up 5 to 8 cents per bushel. The U.S has more competition this morning as Ukraine basis values dropped Tuesday by 5 cents per bushel, making Ukraine cheaper than U.S. corn for Jan-Feb. Rumors continue to float around about China potentially buying up to 3 million metric tons (mmt) of U.S. corn. With world corn trade already said to be record large, that would surely be a bullish input for corn prices. Corn prices are no doubt reacting to the many ethanol stories Tuesday about the slide in producer stock prices and more news about ethanol plant slowdowns and closures, as margins remain severely in the red. EIA will be out with ethanol production today, which is expected to be down 1% from the previous week. Thursday will feature both the Cattle on Feed and Hogs and Pigs report, both expected to show hefty animal numbers and a positive demand structure. Weather concerns persist in South America, but rains are expected late month in dry areas of Brazil, while Argentina turns favorably drier. Commodity funds, on a combined futures and options position, are estimated to be long 52,000 contracts of corn, and on a futures-only basis large speculators hold a nearly 170,000 contracts long, making this a market susceptible to a sell off without some good news. While everyone awaits that good news in the form of China purchases, U.S. corn shipments continue to outpace last year and the USDA projections by a wide margin so far. DTN's National Corn Index closed at $3.50 on Tuesday, with an average basis of 35 cents under March.

Soybeans:

January soybeans were down a half-cent before USDA announced 44.1 million bushels (1,199,000 mt) of U.S. soybeans were sold to China for 2018-19. The amount was in line with expectations and helps explain some of the basis firming that had been seen.With the U.S. soybean balance sheet reflecting a nearly 1 billion bushel (bb) ending stocks number, any purchases would be welcome news with WASDE likely to raise U.S. exports and lower carryout on the January report. Treasury Secretary Mnuchin indicated that China and U.S. trade representatives are scheduled to meet in January to further the trade agreement. Although to date, most analysts see Brazil on pace for another record large soybean crop, recent weather has caused concern, with two key areas -- Parana and Mato Grosso du Sol -- very dry and warm. Parana has reportedly gone 20 days without much rain, and stress is building there. There is relief on the way in another week, but if that does not materialize, look for this 2nd largest soybean producing state to lose production. On a positive note for soybeans, palm oil hit a 5-month high on Tuesday. Domestic soybean meal basis has ticked up as slowing ethanol has rallied DDG prices. Funds remain net short an estimated 59,000 contracts of soybeans on a combined futures and options position. January soybeans DTN's National Soybean Index closed at $8.23, and reflects an average basis of 86 cents under January. At 8 a.m. USDA reported 1,199,000 mt of soybeans sold to China for delivery in 2018-2019.

Wheat:

All three wheat markets are under pressure today as U.S. FOB values are said to have priced us out of some export markets, and the sharp fall in the Russian ruble has made Russian wheat more attractive to end users. Jordan again is said to have passed on their 120,000 mt wheat tender, but there are several other tenders around -- Syria, Japan, Indonesia, Colombia, Brazil and Ethiopia. The drier forecast on tap for Argentina is likely injecting some of today's weakness into the wheat market as the market had rallied partly on quality concerns from there. Trade will be watching today's Federal Reserve decision on interest rates, with a 70% probability that rates will be raised another 1/4 point. Commodity funds on a combined futures and options position have a moderate net short of 41,000 contracts in Chicago wheat, and much less in Kansas City. DTN's National HRW index closed at $4.88, and the average basis is at 29 cents under March.

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

Follow Dana on Twitter @mantini_R

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