DTN Before The Bell Grains

Morning CME Globex Update:

Dow futures are down 10 points, March crude oil is down 63 cents, the U.S. dollar index is up 0.1360, and April gold is $6.20 lower. Quiet overnight trade prevails as traders await the release of export inspections, more export sales data, Chinese ag purchases, and the all-important USDA report this Friday.

Other Markets:

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

Corn:

Following Friday's late day sell-off, corn is once again trading around unchanged and at the intersection of the 50 and 100-day moving averages as we await more export data this week. While world corn prices have been elevated, with Ukraine at a seasonal high, the U.S. and Argentina are the world's two cheapest values. With China celebrating the Lunar New year holiday this week, it will likely be export sales and inspection data and this Friday's WASDE report that drive markets. The expectation is for a smaller U.S. corn crop to be revealed on Friday, but there is some thought that both ethanol and feeding demand could also be cut. Weather in Brazil will take on greater importance for corn as the safrinha corn planting expands. While there are some showers around, the demand for moisture will become much greater following the two-month hot and dry pattern that areas like Parana, Mato Grosso do Sul and northeast Brazil have endured. The funds remain net long corn an estimated 50,000 to 60,000 contracts including options, with the delayed CFTC commitment of traders (COT) report reflecting the Christmas position for non-commercial to be close to 200,000 contracts of futures only at that time. March corn continues to chop around in a $3.75-$3.83 range, and even though basis has been very firm and likely to get firmer with this week's snow, cold and winds, nearby spreads would not indicate any China activity on corn. For new crop corn futures, the $4.03-$4.08 range continues to be one of great resistance, with more at $4.10-$4.12. The hope is that China will come to buy U.S. corn, ethanol and DDGs soon. DTN's National Corn Index closed at $3.49 on Friday, with an average basis of 29 cents under March.

Soybeans:

Following the statements by Chinese officials that they have agreed to buy an additional 5 mmt (184 million bushels) of U.S. soybeans, the market rallied sharply but fell into the close to finish just a few cents higher on Friday. During the trading session, it was revealed by several trading houses that China had indeed purchased another 1 mmt at least of U.S. soybeans. Ag Resource had reported in their overnight wire that as much as 2 to 2.5 mmt of additional U.S. soybeans were transacted on Friday. The trade will look for USDA daily sales to confirm. Apparently COFCO - China's state trading entity - had announced on their website that China had purchased millions of tons of U.S. soybeans on Saturday. With export shipments of U.S. soybeans sitting at roughly half of last year's total, this is business that is sorely needed. Optimism over China and the trade deal was more widespread late last week, with China more willing to negotiate on intellectual property and technology transfer issues. The trade looks forward to the President Trump and Xi Jinping meeting later this month in hopes of finalizing a deal. Some shower activity will occur in key growing areas of Brazil, but many see a return to the hot and dry pattern that has sapped yield potential since December. In fact, commodity broker/analyst INTL FC Stone dropped their Brazil soybean estimate to just 112.2 mmt, down 4 mmt from their last estimate, and the lowest number we've seen. Much of the trade remains in the 115-117 mmt camp. FC Stone also reduced Brazilian exports to 68 mmt from 72 mmt. Look for March soybeans to continue to have selling pressure up around the $9.23-$9.30 range with a rally over $9.41 bullish, and support to continue to be $9.10-$9.15, with the trend line support down around $8.95-$8.97. DTN's National Soybean Index closed at $8.28, and reflects an average basis of 90 cents under March.

Wheat:

Wheat was the lone bright spot on Friday's close, finishing with strong gains as going into Friday, the U.S. FOB cash discount to Russia was at its widest level in years. While world wheat values have risen, and talk of Black Sea tightness have prevailed, U.S. wheat had become much more attractive and nearby spreads would indicate that new business is being consummated. Both Black Sea feed and milling wheat have recently reached multi-year highs. Kansas City's March-May spread had narrowed to 7 3/4 cents. There continues to be more talk of China making U.S. wheat purchases. However, as in soybeans, U.S. wheat sales and shipments to date have been a disappointment with a 1 billion bushel ending stocks number possible. Underpinning wheat has been not only recent weather, where any unprotected wheat may have been subject to cold damage, but also thoughts that Friday's winter wheat acreage could be much lower than the average trade guess and at a 110-year low. There is more cold and windy weather in store this week, though not as severe as last week's polar vortex. Look for Kansas City March wheat to support at the 20 and 50-day moving averages ($5.03-$5.04), and resistance to be at $5.17-$5.20. DTN's National HRW index closed at $4.85, and the average basis is at 23 cents under March, firmer. The cash index has been steadily rising on HRW wheat over the last several weeks.

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

Follow Dana on Twitter @mantini_r

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