DTN Before The Bell Grains

Grains, Outside Markets Firm

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

Morning CME Globex Update:

Equities are higher again with Dow futures up 223 points. February crude oil is up 80 cents and has rallied some $7 per barrel from recent lows. The U.S. dollar index is up 0.2720 after having fallen the past few days. February gold is down $8.40 per ounce.

Other Markets:

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

P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]

Corn:

Corn continues to move higher after rumors of China interest in buying U.S. corn surfaced. Reports are that progress is being made at the talks in Beijing with China expected to have a news conference in the next few days. Rumors of a total purchase of U.S. corn of between 5 and 8 million metric tons (mmt) compares to just 3 mmt the previous week. However, with the government still closed, it is all speculation. China is said to have made several concessions to the U.S. since talks began, and Monday's announcement that China had approved five genetically modified products for import was another step in the right direction. Included among those products were soybean, corn and canola varieties. There are reportedly three vessels of U.S. crude oil headed to China as well. On a not so bullish note, corn inspections for last week at just 19.7 million bushels (mb) were well below the weekly amount required to meet the USDA projection, although total shipments remain some 61% above a year ago. Ethanol and hog margins continue to reflect losses, while cattle margins remain solid. Index fund rebalance begins today at the close and is expected to feature both corn and wheat selling. Commodity funds remain net long roughly 50,000 corn contracts when including options. There are a host of importers seeking corn, including Japan, Malaysia, Thailand, Mexico and Colombia. Look for March corn resistance first at $3.85, then up around $3.90. DTN's National Corn Index closed at $3.50 on Monday, with an average basis of 32 cents under March, and continues to firm.

Soybeans:

Soybeans are slightly lower after having rallied some 45 cents above the trend line in the past week. Rumors that China may have bought an additional 1 to 1.1 mmt of U.S. soybeans Monday was a bullish indicator, but no confirmation will be forthcoming as the government shutdown continues. Some in the trade feel that China may have bought up to 6 million tons of U.S. soybeans since trade talks began. Soybeans have also been supported by the bullish hot and dry pattern in key areas of Brazil, most notably Parana. Final Brazil soybean production estimates are mostly gravitating to a range of 116-119 mmt, with a few private sources hinting at even less. CONAB will be out on Thursday with their updated estimate, which is likely to be lower than their 120.1 mmt last month. Soybean meal led the complex higher on Monday as it appears to have broken out of a sideways trend, but the overnight is slightly lower. Soybean meal is said to be one of the cheapest protein sources, with DDGs and corn gluten higher priced. Soybean inspections at just 24.7 million bushels are well below the amount needed per week to reach the USDA projection, and the total remains 42% below last year at this time. Commodity funds are said to be net short about 55,000 contracts of soybeans including options. Look for the $9.41-$9.42 double top area to be the next resistance on March soybeans, with a rally and close above that bullish. DTN's National Soybean Index closed at $8.34, and reflects an average basis of 90 cents under March.

Wheat:

Wheat is up 2-3 cents this morning. U.S. wheat continues to be very competitive to world buyers and rumors continue to swirl of China buying U.S. wheat, with the total of 6 mmt the most talked about. An even split of spring and winter wheat has been rumored in the past two trading days. U.S. hard and soft red winter wheats are said to be the world's cheapest on a FOB basis, so perhaps we will see a pick-up in demand. That demand is sorely needed as last week's inspections at just 9.6 million were bearish and total shipments remain some 13% under a year ago. Providing some support to wheat has been the falling U.S. dollar, and private estimates that winter wheat seeding is well below previous projections. Commodity funds remain short an estimated net 40,000 contracts, but without any CFTC reports, it is tough to verify. Index funds are expected to sell 6,500 contracts of Chicago wheat futures on the close each of the next 5 days on their yearly rebalance. There are a host of wheat tenders on the docket in the next few days with Algeria, Morocco, Jordan and Ethiopia among the buyers. DTN's National HRW index closed at $4.78, 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

(KR)

P[L2] D[728x90] M[320x50] OOP[F] ADUNIT[] T[]
P[R1] D[300x250] M[300x250] OOP[F] ADUNIT[] T[]
P[R2] D[300x250] M[320x50] OOP[F] ADUNIT[] T[]
DIM[1x3] LBL[] SEL[] IDX[] TMPL[standalone] T[]
P[R3] D[300x250] M[0x0] OOP[F] ADUNIT[] T[]

Dana Mantini