DTN Before The Bell Grains

Morning CME Globex Update:

The Dow futures are down 88 points following Wednesday's surge, which saw the Dow Jones average finish 435 points higher after the Fed decided to leave interest rates alone. March crude oil is up 17 cents per barrel, the U.S. dollar index is down 0.0730, and February gold is soaring, up $14.90 an ounce. The Fed's decision, along with dovish comments, suggesting no further rate increase to at least June, sent the Dow sharply higher, and the U.S. dollar lower.

Other Markets:

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

Corn:

Corn continues to chop around, down a bit this Thursday morning, as the trade digested the first USDA export sales report (below). Wednesday's 4-cent rally was fueled by good U.S. export demand as U.S. corn remains among the world's cheapest feed grains for several weeks running now. Ukraine, which has been a primary U.S. competitor, states that their corn crop production rose to 35.6 million metric tons (mmt) in 2018 compared to just 24.1 mmt in the previous year. The first daily sales report of South Korea buying 138,000 metric tons (mt) of U.S. corn on Tuesday was followed on Wednesday by talk that South Korea had bought another 60,000 mt of corn for March-April, likely from the U.S. Argentina appears to be the primary competition for U.S. corn sales. U.S. and Argentine corn offers to Asian destinations are said to be even money for March-April. Ethanol news continued to disappoint, with production down another 1.9% last week, and stocks rising again to a near record large 24 million barrels. Longer term, good news on ethanol may be near, as China's deficit of ethanol, looks to be near 6 mmt by 2020, and it is thought that they could import up to 10 mmt of ethanol. Weather in the U.S. recently has made transportation difficult and stressed livestock. The reading was 48 below zero in some parts of Minnesota on Wednesday morning. Brazil's safrinha (second) corn crop is being planted at a record pace, but with the hot and dry pattern in existence since December, worries about the lowest soil moisture in some key growing areas is pervasive. The safrinha crop is estimated to amount to some 70% of Brazil's total corn crop this year. Planting will continue for the next three weeks. Look for March corn support once again to be $3.75-$3.77, and resistance will be $3.82-$3.83. Thursday's release of export sales from the week of December 20 shows 66.9 million bushels of corn, leaving total corn commitments 18% higher than a year ago, with shipments up 76%. DTN's National Corn Index closed at $3.52 on Wednesday, with an average basis of 29 cents under March, it's highest level in nearly seven months.

Soybeans:

March soybeans continue to gravitate around the 200-day moving average, with a rally above the recent high at $9.27 3/4, thought to be bullish. Trade continues to await any news from the U.S.-China trade meeting today with President Trump expected to meet with China's Vice Premier. Weather continues to be a major market driver, with the forecast for Brazil drier than previous days. Some showers are expected to reduce stress, but a return to the hot and dry pattern is in the forecast for the next two weeks. The dry areas of Mato Grosso do Sul and Parana are expected to get only light showers and less than 50% of normal rains the next two weeks. Brazil's production potential continues to slip, with most private estimates now in the 114-117 mmt range. Brazil's early soybean harvest is accelerating, at roughly 15% done. The Brazilian Real currency is near a 3-month high, stifling farmer movement of new crop soybeans there. As mentioned, March bean resistance will be $9.27 3/4 initially and next at $9.41, with a close above the latter likely a bullish indicator. Thursday's delayed release of export sales from the week of December 20 shows soybean sales of 87.9 million bushels, with total soy commitments down 26% from a year ago and total shipments 41 lower%. DTN's National Soybean Index closed at $8.31, and reflects an average basis of 90 cents under March.

Wheat:

Wheat is a bit firmer to begin Thursday as the U.S. FOB discount to Russia has widened to as much as $18 per metric ton. There are a host of wheat tenders around this week, with Jordan having already bought 60,000 mt of wheat from CHS (Cenex), thought to be U.S. origin. Also seeking wheat are South Africa, the Philippines, Turkey, Ethiopia, Bangladesh, Jordan again and Syria. We'll see if the U.S. picks up more of that business as a freight disadvantage cost us the Egypt business on Wednesday. The severe cold snap, which descended into winter wheat country and found many areas without adequate snow cover, was sure to have resulted in some damage, but with the surplus of wheat, trade was not too concerned. The fall in the U.S. dollar as the Federal Reserve came out with dovish comments regarding rate increases seemed to support the wheat market late on Wednesday. News that five large grain ports in the Black Sea have restricted cargo operations due to poor weather could help steer some new export business toward the U.S. A very hot and dry weather outlook for the western part of Australia for the next three months will likely impact wheat production from that area, according to the Australia Bureau of Meteorology. The delayed release of wheat export sales for the week of December 20 shows sales of just 19.3 million bushels, with total commitments down 11% and total shipments down 13% from a year ago. DTN's National HRW index closed at $4.78, 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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