DTN Before The Bell Grains

Morning CME Globex Update:

Equities futures markets are up just slightly, but well off the overnight highs, with Dow futures up just 30 points following Friday's 746-point gain on the Dow Jones Industrials, and 84 points on the S & P Index. A much better than expected jobs report fueled the rally. Crude oil is $1.06 higher this Monday morning, while the U.S. dollar index is down .390, and February gold is up $8.60 per ounce.

Other Markets:

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

Corn:

March corn is up a half cent following two-sided and quiet overnight trade. March was up 7 1/2 cents per bushel last week, as rumors of China interest in U.S. corn and new-found competitiveness made U.S. corn attractive to world buyers for January-February. Also Supportive was the more bullish weather in Brazil, where a hot and dry pattern, interrupted by some relief this weekend, is again expected to prevail in some key Brazilian growing areas this week. Ethanol news was not bullish, as production was off 3% from the previous week, and stocks gained 1/2% as ethanol margins continued to reflect a net loss of 25-30 cents per bushel. Cattle feed margins, on the other hand, are called near $100 per head in some areas, while hog margins reflect a loss of $20-$25 per head. In China, the spread of African swine fever continues unabated, and pig farmers there are experiencing a huge loss in profits versus last year, said to be 40 to 80% in some cases, according to one Chicago broker. The bullish result could be that China will seek more pork imports. China and the U.S. began their follow up trade discussions today in Beijing. Funds are thought to be net long about 62,000 contracts of corn, options included. Look for solid resistance on March corn at $3.85-$3.87, and on new crop December, at $4.08-$4.10. DTN's National Corn Index closed at $3.51 on Friday, with an average basis of 32 cents under March.

Soybeans:

Soybeans continued their ascent overnight and are up 5 1/4 cents Monday morning, now some 47 cents above the trend line support reached 7 days ago. There appears to be a more positive vibe coming from Beijing where Chinese trade representatives are meeting this morning, and a surprise appearance from Vice Premier Liu is looked upon as important. He is the top economic adviser to China's President Xi Jinping. With the China economy slowing, and with U.S. stock markets under pressure lately, it is thought that both sides are anxious to get the trade issue settled. In addition, there is expected to be a January 9 meeting between U.S. trade officials and those of the EU and Japan. Most in the trade feel confident that China's U.S. soybean purchases are now close to that 5 mmt figure thrown around for weeks, but in the absence of USDA flash and export sales data, confirmation is still lacking. The U.S. will need to see some confirmation soon as the Brazil early soy harvest is said to be 2-3 weeks early. Weather is the other variable impacting soy markets. Some rains in key and dry areas of Brazil over the weekend were said to be better than expected. However, that pattern once again reverts to the hot and dry one that helped to buoy the soybean futures market last week. Index fund rebalance, beginning on Tuesday, is likely to show soybean buying. Private Brazil production estimates continue to slide from a month ago, and one cash-connected commission houses 116.25 mmt estimate is the lowest without a range. Brazilian farmer group Aprosoja is even more bullish, stating that the crop could end up between 110 and 115 mmt, a far cry from the 125-130 mmt numbers of a month ago. The U.S. government continues to be shut down, and we will not see the all-important January USDA report this week. DTN's National Soybean Index closed at $8.31, and reflects an average basis of 90 cents under March.

Wheat:

The wheat market is taking a breather after having rallied for the past three trading sessions. The late-week strength was being attributed to not only the new-found competitiveness of U.S. wheats to major destinations, but also a rumor late last week that China was looking to buy up to 6 mmt of U.S. wheat, with the split 3 mmt of HRW and HRS each. There is no confirmation of this. Index funds, who begin their annual "rebalance" on Tuesday are thought to be selling 32,000 contracts of wheat over 5 days. There is some thought that if the budget impasse continues and the government remains closed, that will have a bearish impact on the U.S. dollar and a bullish impact on wheat. U.S. HRW is said to be much more competitive in world markets now. A Memphis-based analytics firm cut their winter wheat acreage by 750,000 acres and 1 million from last year versus their last estimate late last week. A host of wheat tenders are around over the next few weeks - Bangladesh for 50,000 mt, Jordan for 120,000 mt, Taiwan for 111,000 mt, Morocco for 336,000 mt, and Ethiopia for 400,000 mt. Funds are holding a modest net short in Chicago wheat, estimated to be 38,000 contracts, with options. With no CFTC report, it is a guessing game. DTN's National HRW index closed at $4.80, 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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