DTN Before The Bell Grains

Morning CME Globex Update:

Following Thursday's 103-point decline in the Dow Jones average, Dow futures are pointing 109 points higher Friday. March crude oil is up 47 cents, the U.S. dollar index is up 0.2430, and April gold is up $6.60 an ounce.

Other Markets:

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

Corn:

Following Thursday's price plunge, corn is getting a modest bounce in the overnight with March now resting just above the uptrend line. Despite what were some positive comments out of Beijing on Thursday regarding the ongoing trade talks, the release of delayed export sales from early January were not the kind of facts that bullish traders had hoped for. Funds began to sell, with soybeans and wheat collapsing, driving corn down to the low end of its multi-month range. There are more positive comments regarding the U.S.-China talks again this morning, with good progress made, and talks to continue in Washington next week. Although corn has been the only bright spot in U.S. export sales this year, with total sales some 19% above last year at this time, the 18 million bushels reported for the week of January 3 was far below the weekly amount needed for the second straight week of sales. The corn basis strength at both major ports continues to fuel rumors of China buying, and South Korea has been an active buyer of U.S. corn. A new S & D from China consultancy JCI showed China corn imports rising sharply in the coming year, but that remains to be seen. Funds sold an estimated 7-8,000 contracts of corn on Thursday, and are likely a modest net short. Southern hemisphere corn news is mostly bearish, with the weather change pattern favoring developing safrinha corn in Brazil, and Argentina's corn crop is thought to be record large, with the latest estimate from the Rosario Grain Exchange, at 46.5 million metric tons (mmt), trumping last week's WASDE estimate. Look for corn to remain in that $3.73 to $3.83 range, with more support below at $3.70. DTN's National Corn Index closed at $3.48 on Thursday, with an average basis of 27 cents under March. At 8 a.m. USDA reported 205,744 mt of corn sold to unknown destinations for delivery in 2018-2019.

Soybeans:

Soybeans plunged on Thursday, fueled by delayed export sales from the week of January 3, which revealed a net negative sales number of 22.5 million bushels (mb), including significant cancellations by both China and unknown. Total U.S soybean sales remain over 400 mb below last year. China cancellations, though old news, was a surprise to the trade. Funds were credited with selling an estimated 12,000 contracts of soybeans on Thursday. However, March soybeans continue to respect that uptrend line drawn from mid-September lows, but is just barely above. Despite the news that much trade progress is being made, and that talks will continue next week, this is a market that seeks more bullish demand news. Weather forecasts in Brazil projects 2-4" of rain to fall in nearly all of Brazil's growing areas, aiding late filling soybeans and developing safrinha corn. The recent fall in Brazil soybean production has likely stabilized, and Argentina's crop is currently pegged to be nearly 19 million tons above last year. China, in the past week is thought to have bought another 40 cargoes of South American soybeans. NOPA crush is expected to be released Friday, with trade estimates near 170 mb in January, just slightly below December's record of 171.7 mb. November soy futures also remain just above that uptrend line, but the current soy/corn ratio of 2.38 does not bode well for a sharp shift in acres from soy to corn. Look for March soy futures to support at the trend line at $9.03 to $9.04 and below that at $9.00, while resistance will be in the $9.15-$9.20 range. DTN's National Soybean Index closed at $8.17, and reflects an average basis of 90 cents under March.

Wheat:

Chicago and Kansas City wheat markets fell hard on Thursday as commodity funds turned sellers and sell stops were touched off below the markets. The U.S. dollar index was strong for much of Thursday and is higher again Friday, setting a new recent high in futures. Delayed export sales from the week of January 3, continued to reflect a sales pace that was some 8-9% below year ago levels. Total wheat sales of 658 mb compare to 718 mb last year, as U.S. carryout looks to be a burdensome 1 billion bushels (bb). There are multiple wheat tenders around. However, Algeria's 600,000 mt purchase for March-April was thought to be covered by French wheat, and the Philippines bought 55,000 mt of Australian wheat for April-May. Tunisia also bought 100,000 mt of soft wheat. Minneapolis wheat is slightly lower, and remains the only wheat market above key moving averages. A very strong basis and weather issues leading to transportation problems have supported the spring wheat market. Weather is expected to continue to be cold and wet in the PNW and norther Plains over the coming week. A sharp drop in temperatures extending into some key HRW areas of NE and KS could lead to some winterkill, but the trade seems unconcerned. Kansas City March wheat should encounter stiff resistance up around $4.95 to $5.00 on a rally. DTN's National HRW index closed at $4.61, and the average basis is at 20 cents under March, firmer.

Dana Mantinican be reached at dana.mantini@dtn.com

FollowDana on Twitter @mantini_r

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