DTN Before The Bell Grains

Morning CME Globex Update:

The Dow futures are down 44 points following Wednesday's 171-point gain. March crude oil is down 45 cents per barrel, the U.S. dollar index is up 0.4050, and February gold is down $5.80 per ounce.

Other Markets:

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

Corn:

Corn is once again trading both sides of unchanged in very quiet trade, just above trend line support. There is little in the news this morning other than some private acreage projections raising corn acres by a few million, and more talk of China potentially buying U.S. corn if the trade issue is settled. China faces a deficit of 26.5 million metric tons (mmt) this coming year, and if tariffs are removed, it would make sense to import U.S. corn which remains one of the world's cheapest feed grains on a FOB basis. China has reportedly increased its corn imports so far this year by some 700,000 metric tons (mt). U.S. corn export activity remains stout, with last week's inspections over 43 million bushels (mb), and totals still some 61% above the previous year. Commodity funds remain net long corn, and including options, that position is believed to be near 60,000 contracts. Weather continues to be a concern in Brazil as safrinha corn planting accelerates, with dry soils in some areas a concern. The majority of the Brazilian corn crop is produced in this second crop. Currently, production estimates are still well above last year. March corn will once again try to stay above trend line support at $3.76-$3.77. Above the market, $3.80-$3.82 will be short-term resistance. DTN's National Corn Index closed at $3.47 on Wednesday, with an average basis of 32 cents under March.

Soybeans:

In a continuation of the choppy, two-sided trade that we have seen in soybeans, March beans are a few cents lower Thursday morning. With the lack of export sales reporting, constant rumors of U.S.-China trade progress, and the well-advertised weather concerns in parts of Brazil growing areas, this market is growing tired of the same old news and the waiting. There are several weeks left to determine the outcome of Brazil's soybean crop, but in general private estimates continue to gravitate around the 115-118 mmt range, slightly below last year's record large crop. Weather is still a concern for next week, as showers expected this weekend will stabilize some areas, followed by a return to hot and dry. Northeast Brazil is said to be the worst area currently, but that area is said to produce just 10% of Brazil's corn and bean crops. U.S. Gulf CIF values for barges reportedly jumped Wednesday for January, but likely a function of rising barge freight rather than new business, as February and March values are quite a bit cheaper. China has reportedly been buying Brazilian soybeans at a discount of 30 cents per bushel, according to one cash-connected commission house, with the rumored amount 1.5 mmt. Slightly bullish for soybeans is a private analyst's call for a sharp drop in soybean acreage, which the current soy/corn ratio does not suggest. The U.S. did ship about 359,000 mt (13.1 million bushels) of soybeans to China last week, but that is a far cry from the 2.7 mmt (99.2 million bushels) in the export line-up at Brazil ports headed for China. The next meeting between President Trump and China's President Xi Jinping is scheduled for January 30, and the trade anxiously awaits some resolution from that meeting. While it seems grain issues are progressing, there is said to be a lot of work yet to do on resolving other structural trade issues. March soybeans must stay above trend line support at $8.92-$8.93, and on the upside, look for resistance from $9.20-$9.25. DTN's National Soybean Index closed at $8.24, and reflects an average basis of 91 cents under March.

Wheat:

While wheat has been the star of the grains lately with five consecutive higher closes, Thursday morning we could see a bit of a correction. The wheat market has rallied lately on the tightening of Black Sea supplies, sharply higher Russian values, and new U.S. wheat export business. Ag Resource estimates that February 1 stocks of Russian wheat could be 30% lower versus last year. The U.S. exports will only be confirmed once the sales reports start up again. Russia has stated that it looks to control domestic grain prices, as the trade suspects that Russian supplies are lower than the previously thought. Wheat also received some support from the incoming brutal cold wave in the U.S. where freezing temperatures could be seen as far south as the Delta, and single digit readings in the Midwest could lead to some winterkill issues with unprotected wheat. U.S. wheat has been one of the world's cheapest values on a FOB basis, but the recent rally may have priced our wheat out of some destinations. Taiwan will tender for 50,000 mt of U.S. wheat. Japan and the Philippines both bought feed wheat, with the Japan purchase of 102,000 mt likely to include some U.S., but Philippines likely from Australia. Turkey and Ethiopia are in for large tenders. Minneapolis wheat may be higher as the trade feels that any China buying is likely to be primarily HRS wheat. DTN's National HRW index closed at $4.91, and the average basis is at 24 cents under March, firmer.

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

Follow Dana on Twitter @mantini_r

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