DTN Before The Bell Grains

Morning CME Globex Update:

Following Thursday's sharp fall in global and U.S. equities markets, the Dow futures are pointing higher -- currently up 280 points -- a fraction of Thursday's loss. The Dow Jones average had fallen 660 points on Thursday with the S&P off 62. February crude oil is $1.07 cents per barrel higher. The U.S. dollar index is up .1880 in two-sided trade, and February gold is down $5 per ounce. U.S. nonfarm payrolls increased a seasonally adjusted 312,000 in December, the Labor Department said Friday, the biggest jump since February. The unemployment rate rose to 3.9% from 3.7%.

Other Markets:

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

Corn:

Corn is trying to cap off a very positive week following the 4-cent higher finish on March Thursday. A combination of the recent fall in prices, which has made U.S. corn one of the cheapest feed grains in the world, and rumors of China interest in buying both U.S. corn and wheat, supported the late day surge. Seasonally, corn futures tend to move higher from early January to late winter as well. March corn continues to trade above the trend line and above key 50- and 100-day moving averages, with the stochastics having crossed to the upside. Without the usual USDA daily and weekly sales data, it is impossible for the trade to know what business is being done, but where there is smoke there may be some fire. On the other side of that coin, the cash markets on Thursday did little to hint at business being done. Bearish to corn is the continued poor ethanol margin structure, with the energy report out Friday likely to see a drop in production, and news that another ethanol plant was soon to close in Nebraska (Pacific), was not good news for corn usage. Margins are still said to be some 20 cent to 25 cents per bushel are bearish, though ethanol futures had gained in four of the last five sessions. On a combined futures and options position, commodity funds are thought to be net-long an estimated 55,000 contracts of corn and are thought to have bought 9,000 on Thursday. Support on March corn will continue to be the uptrend line at $3.74 to $3.75, while resistance on a further rally looks to be formidable at $3.82 to $3.83. Corn will continue to react to both South American weather and China rumors, and the mostly hotter and drier Brazil pattern in some areas will be bullish. DTN's National Corn Index closed at $3.47 on Thursday, with an average basis of 33 cents under March.

Soybeans:

Soybeans continue to rally, and now are some 37 cents above the low set just six days ago. The trade is convinced that China's Sinograin and Cofco have bought close to a combined 5 million metric tons (mmt) of U.S. soybeans so far, with rumors of at least 1.5 mmt to 2 mmt consummated in the last several days. A look at March soybean meal shows it to be threatening to break out above a long standing triangle chart pattern, with a solid close above $318 likely to lead to further gains. Weather in South America is front and center, and though the mostly hot and dry pattern in some key areas of Brazil is likely to moderate this weekend and bring showers, that heat and dryness looks to return again early next week. In Argentina, 89% of the soybeans are planted, and there could be issues and replants with the remaining acres there due to some heavy rains in the next seven to 10 days. Although it would appear that the futures rally suggests that China is active, the cash markets continue to be historically weak, with Thursday's CIF Gulf values up 1, but still just 21 over March futures. Brazil FOB values were said to be down 3 cents on Thursday to 47 cents over March. Production ideas for Brazilian soybeans continue to slip, with one cash-connected commission house dropping their estimate by some 4 mmt to 116 mmt versus USDA's last at 122 mmt. The recent losses in Brazilian production potential, likely eliminating the potential for another record crop, must be minimized when looking at an Argentine crop that looks 17 mmt to 18mmt above last year, and a U.S. Dec. 1 stocks number that could be some 700 million bushels (mb) above last year. Linn Group came out with their revised supply and demand forecast on soybeans, using higher crush and exports in the U.S., and it is 769 mb compared to USDA's 955 million -- still the largest ending stocks ever. Look for March soybean resistance first at $9.21 to $9.22, and then at $9.28. Funds are thought to have bought 5,000 contracts on Thursday, and remain net-short an estimated 58,000 contracts of futures and options. March soybeans DTN's National Soybean Index closed at $8.21, reflecting an average basis of 88 cents under March, much firmer.

Wheat:

Wheat, and especially the quality hard wheat markets, were the star of the show on Thursday, with both Kansas City and Minneapolis spot futures up over 11 cents. The fact that all three U.S. wheats, on the recent break, had worked themselves back into competitiveness in world wheat markets, and rumors on Thursday of Chinese interest in U.S. spring wheat, sent wheat soaring, as funds covered some of their shorts. Funds bought an estimated 5,000 in Chicago wheat, and remain short an estimated combined 48,000 contracts, including futures and options. With heavy rains continuing to impact Argentine wheat, where some harvesting still remains, the Argentine crop estimate is now at 18 mmt or lower vs 19 mmt a few weeks ago, and speculation that some 2 mmt of that could be feed grade quality. A rumor late Thursday that a cargo of Argentine wheat was rejected by Algeria played into this narrative, and sent buyers flocking to the U.S. hard wheat futures markets. There was also talk of lower-than-expected wheat acreage in both winter and spring wheat areas that helped support wheat. Both Chicago and KC March wheat futures are just below the 50-day moving averages. Momentum indicators on wheat appear to be turning up. DTN's National HRW index closed at $4.79, and the average basis is at 25 cents under March, firmer.

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

Follow Dana on Twitter @mantini_r

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