DTN Before The Bell Grains

Firm Finish in Overnight Markets

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

Morning CME Globex Update:

The Dow futures are 217 points higher following Tuesday's modest 54-point gain. March crude oil is up another 55 cents per barrel. The U.S. dollar index is up 0.0330, and February gold continues its ascent at up $1.50 per ounce. The China-U.S. trade talks resume today, and though hopes are high, expectations for a final solution are much lower.

Other Markets:

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

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Corn:

Corn continues to trade back and forth in a very narrow range, with March corn currently perched just above the intersection of major moving averages. U.S. corn continues to be very competitive to world destinations with primary competition likely to be from Argentina, as Black Sea values have firmed. In the first daily sales report from the USDA on Tuesday, a 138,000 mt (5.4 million bushels) sale of corn to South Korea was reported as optional origin. USDA export sales and CFTC position data is expected to be disseminated twice per week until they catch up from the more than month-long government shutdown. Thursday's export sales report is expected to show sales from the week of December 20, 2018. South Korea reported its second case of foot and mouth disease on Tuesday, and that will be closely watched for any spread. Indonesia on Tuesday bought 150,000 mt of corn, likely sourced from South America. The new crop soy/corn ratio, sitting around 2.39 to 1, does not bode well for the sharp increase in corn seeding estimated a few months ago. Many analysts are still calling for a boost of 2-3 million acres of corn, and a drop in soy acreage. Funds remain long an estimated 46,000 contracts including options according to broker Linn Group. The CFTC Commitment of Traders report last had the corn net long at 62,000 back on December 18. Look for the corn support to continue to be $3.75-$3.77 on March, and resistance at $3.83-$3.85. DTN's National Corn Index closed at $3.47 on Tuesday, with an average basis of 30 cents under March.

Soybeans:

March soybeans are firmer to begin, perched just above the 200-day moving average and just below the recent high of $9.27 3/4. A rally and close above that level would be a bullish sign, and a rally above $9.41 (the highest level since June) would be very significant. As U.S. and China trade representatives meet Wednesday, trade is cautiously optimistic with gains expected to be made on ag and energy trade issues. Intellectual property and technology issues remain a stumbling block, along with enforcement of the same. Weather in Brazil remains front and center, with showers this weekend and early next week expected to stabilize crop conditions, but the hot and dry pattern that has prevailed is expected to again return late next week. Pod-filling beans have been impacted and one major crop scout on Tuesday dropped his soy production estimate to just 114 million metric tons (mmt), a 5 mmt drop from last year's record crop. The general average of estimates fall into that 115-117 mmt range. A bright spot in the soy complex appears to be soybean meal, and world meal demand remains strong with combined soymeal exports from the U.S, Brazil and Argentina up some 37% from last year, a record large. Commodity funds are thought to be even to slightly net-short soybeans, but renewed CFTC data over the next few weeks will give us a better idea. Look for March soybeans to continue to find support in the $9.10-$9.15 range, and longer term at trend line support near $8.93-$8.95. DTN's National Soybean Index closed at $8.29 on Tuesday, reflecting an average basis of 90 cents under March.

Wheat:

Wheat is stronger to begin Wednesday, led by Kansas City. Despite losing out on Tuesday's GASC (Egyptian state grain buyer) tender, which featured 360,000 mt of wheat bought from Romania and France, U.S. wheat remains well positioned to garner new sales. Although the lowest offer on a FOB basis to Egypt was U.S. soft red winter (SRW), it was a freight disadvantage that prevented a U.S. sale. However, one of the highest offers was from Russia, whose values have moved sharply higher in the last few weeks. Jordan bought 60,000 mt of hard milling wheat on Tuesday, reportedly sold by CHS. I am unsure if that is U.S. wheat. South Africa, Turkey, the Philippines, Ethiopia and Bangladesh are all seeking wheat as well. Despite the bone-chilling polar vortex sinking to the middle of the U.S. Tuesday through Thursday, it is not thought that there will be any significant winterkill problems with most U.S. wheat. It would seem that some areas of SRW are more at risk, with the cold not impacting southern Plains HRW (hard red winter) as much. Kansas City March wheat continues to trade slightly above the 20 and 50-day moving averages, and the chart still has a positive look to it. DTN's National HRW index closed at $4.76, 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

(KR)

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Dana Mantini