DTN Before The Bell Grains

Corn, Soybeans & Wheat All Higher in Overnight Trade

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

Morning CME Globex Update:

The Dow futures are 93 points higher, February crude oil is down 47 cents per barrel, the U.S. dollar index is up 0.1440, and February gold is up $1.90 per ounce. Equities around the world are little changed to begin Wednesday. The big news is that the UK Brexit proposal failed, leading to Tuesday's pound weakness and U.S. dollar strength.

Other Markets:

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

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Following Tuesday's price plunge on all grains, corn has stabilized and is trading just below that broken trend line. Resistance will likely be at $3.77 on March, and $3.80 above that, with support at $3.68 on further weakness. Funds were thought to have sold anywhere from 15,000 to 20,000 contracts of corn yesterday, liquidating longs. They currently remain long an estimated 35,000 contracts including options. The corn basis at the Gulf was up 2-3 cents on Tuesday, and U.S. export offers continue to be very competitive, and currently below both Black Sea and Argentine offers. While news of trade representative Robert Lighthizer's statement that little progress was being made on structural issues (intellectual property, etc.) with China, multiple sources suggest that ongoing talks are very active, and that there continues to be great progress made on U.S. ag products. The next round of trade talks begins January 30. There is some thought that once USDA reports resume that we will see multiple China purchases reported not only on corn, but several of its by-products, including DDGs, ethanol and pork. In the meantime, the trade grew weary of trading only on rumors of that. Cattle margins continue to be good at $100 per head, while hog margins have improved but remain negative. Today, the EIA will report ethanol production with expectations are for a 2 1/2% increase. Weather in Brazil continues to be closely watched, and with safrinha corn planting beginning, that weather, which remains mostly hot and dry in some key areas of central and northeast Brazil, may soon impact corn. This morning, it appears that rains called for late this week may now be disappointing. DTN's National Corn Index closed at $3.39 on Tuesday, with an average basis of 35 cents under March.

Soybeans:

Soybeans fell hard Tuesday on poor economic news from China and concern over the progress of China-U.S. talks. With most in the trade feeling assured that China may have bought as much as 5 million metric tons (mmt) (180 million bushels) of U.S. soybeans, that does not change the overall bearish soybean landscape both here and in the world. Also pressuring soybeans is the continued spread of African swine fever, with nearly 100 cases so far. Although the reported pig culling number is minor compared to the entire herd, trade fears that the number is much higher. Rabobank suggests that China's pig herd in 2019 could be reduced by as much as 20%. That would be a huge hit to demand. Good news for the soy complex was the NOPA crush, reported to be an all-time record for December, and third largest ever at 171.8 million bushels (mb). Also bullish was that soy oil stocks, at 1.498 billion pounds, were far below the average estimate for 1.571 billion pounds. Weather is front and center Wednesday morning, and although forecasts were for a respite from the heat and dryness plaguing key areas of Brazil (such as Parana), those rain totals this morning appear to be less than forecast, and the hot and dry pattern resumes after the weekend. Brazil's soy crop continues to slip. Funds on Tuesday were thought to have sold an estimated 12,000 contracts of soybeans, adding to their net short position. Soybean barge bids at the Gulf were up 2-3 cents, possibly a sign that some business is being done. Look for trend support at $8.90-$8.91 on March soybeans, with resistance $9.05 to $9.10 on a bounce. DTN's National Soybean Index closed at $8.02, and reflects an average basis of 91 cents under March.

Wheat:

Wheat fell Tuesday, but ended down only 3 1/2 cents. Today, wheat is up 3 1/2 cents as U.S. wheat on a FOB basis remains the world's cheapest offer. Rising interior values and bad weather has slowed Black Sea export activity with a possible demand shift toward the U.S. Weather in the U.S. is expected to turn very cold, with single digits and even 5-10 degrees below readings expected in the coming days. The very below-normal pattern looks to last into mid-February. Snow cover exists in many areas, so that will be closely watched for any winterkill threats. As in corn, some analysts feel that once the USDA is reopened and catch up sales reports are released, we will see some large export sales on wheat. Wheat tenders this week are not as plentiful, although Yemen, Japan and Philippines are looking, while Thailand bought 70,000 mt of Canadian feed wheat, and Jordan bought 60,000 mt on their 120,000 mt tender, likely non-U.S. DTN's National HRW index closed at $4.70, 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)

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Dana Mantini