DTN Early Word Grains

Grains Firmer as Traders Look for Trade War Truce

6:00 a.m. CME Globex:

March corn was up 3/4 cents, January soybeans were up 3/4 cents, and March KC wheat was up 3 1/4 cents.

CME Globex Recap:

Global equity markets appear to be stabilizing to close the week but the selling continues in U.S. equity futures. Crude oil is working on its third lower close in a row as prices bob just above the 50-handle area. Grains are mostly firmer ahead of the weekend although traders are slowly growing impatient for any physical sign the trade war is moving in the right direction.

OUTSIDE MARKETS:

Previous closes on Thursday showed the Dow Jones Industrial Average down 79.40 at 24,947.67 and the S&P 500 down 4.11 at 2,695.95 while the 10-yr Treasury yield ended at 2.89%. Early Friday, DJIA futures are down 86.00. Asian markets were higher with Japan's Nikkei 225 up 177.06 points (0.82%) and China's Shanghai Composite was up 0.71 points (0.03%). European markets are higher with London's FTSE 100 up 103.72 points (1.55%), Germany's DAX up 83.17 points (0.77%), and France's CAC 40 up 65.64 points (1.37%). The euro was down 0.00055 at 1.13755 and the U.S. dollar index was up 0.0960 at 96.8700. December 30-year T-Bonds were down 6/32nds while February gold was up $2.20 at $1245.80 and January crude oil was down $0.19 at $51.30. Soybeans on China's Dalian Exchange closed down 1.38% and soymeal closed down 0.75%.

BULL BEAR
1) The Chinese Commerce Ministry stated Thursday they were "very confident" of reaching an agreement in the next 90 days on ag, energy and autos. 1) Egypt's GASC purchased 350,000 metric tons of wheat for Jan 21-31 shipment with no U.S. wheat offered and prices nearly unchanged from the last tender.
2) Weekly ethanol production continues to defy poor operating margins, increasing 2.0% on the week to near marketing year highs. 2) Private forecasters continue to describe South American growing weather as favorable with planting campaigns nearing completion in both countries.
3) Chatter has increased about the difficulty in obtaining phytosanitary certificates for the export of Russian wheat, slowing the supply chain. 3) StatsCan increased their estimate of the Canadian wheat crop to 31.8 million metric tons vs. 31.0 mmt in September and 30.0 mmt a year ago.

MORE COMMODITY-SPECIFIC COMMENTS

CORN Corn prices are a bit firmer Friday morning with the Sunday night gap looming large below the market. Traders in all pits remain concerned with the U.S.-Chinese trade war situation as an agreement could bring with it huge short-covering in all markets, but a collapse in talks will surely result in selling. As we've discussed, a true agreement between the two countries should bring about the purchases of DDGs, ethanol and sorghum in addition to soybeans. Market watchers continue to follow ethanol production data, waiting for the inevitable slowdown thanks to poor operating margins. That hasn't happened yet with weekly production at 1,069 thousand barrels per day, up 21,000 bbl/day on the week. This is still a hair below the needed level to hit the USDA's forecast but solid nonetheless. Ethanol stocks were up 100,000 bbl to 23.030 million bbl. Part of the reason ethanol production has been able to remain strong was strong exports of the fuel during October. Census data released yesterday showed October ethanol exports at 175.4 million gallons, the largest monthly total since March and up a staggering 67% from a year earlier. 2018 calendar year ethanol exports are already the largest in a single year with two months of data remaining. Export sales are expected to be solid given firming cash markets and competitive offers against Ukraine and Argentina. Big deliveries overnight with 712 contracts put out and no real strong stopper with the exception of ADM taking 124.

SOYBEANS Soybeans are lightly mixed Friday morning, attempting the fifth higher close in the last six sessions. Despite Thursday being a down day, the rally off the lows was impressive and also created an exhaustion tail on candlestick charts. Exhaustion tails are usually a sign either bears have given up trying to force a market lower or bulls have given up trying to force a market higher. Supportive comments from the Chinese Commerce Minister as well as one commercial exporter who said they expect state-owned grain reserve purchases soon. Census soybean exports for the first two months of the year showed cumulative exports for the marketing year at the lowest since 2011. This is not fresh news, but simply confirms the weekly sales and inspection data through October. Soybean exports are currently off 37.5% from a year ago while the USDA is only expecting a 12.6% decline. Spot offers in Paranagua Brazil fell 20 cents today but remain $16.00/metric ton more expensive than U.S. soybeans. The Gulf is also $18/metric ton cheaper than Argentina. Still no word of a bid off the Pacific Northwest which would be a big indicator a trade deal has actually been conducted.

WHEAT Wheat prices are higher this morning, working to the green side of the ledger as the night session has progressed with export sales data eyed in a couple of hours. Despite winning a share of two recent GASC tenders, U.S. SRW was not offered in the latest tender as Black Sea mopped up the business quite easily. The average C&F price was $253.14/mt which is just 17 cents/mt higher than the last tender at the end of November. Traders were also impressed with the volume of wheat offered in the tender considering the letter of credit issues Egypt is facing. Census wheat exports in October were actually the highest for the month since 2013 which was a bit surprising considering the slow pace of sales this fall. Cumulative 2018/19 exports are the lowest since 2015 but the second lowest export total since 1971. HRW deliveries were cleaned up last night with zero put out Friday morning. Chicago wheat saw 109 of the 140 receipts registered for delivery by ADM. Minneapolis delivery activity would also appear to be finished. Spot floor activity in both Minneapolis and Kansas City showed cash basis firmer on the day with MGEX 15.0% up 10-40 c on the day to +160H. Generic rail freight from the Dakotas to Chicago is around $1.15-$1.30/bushel, which should support basis levels paid to the farmer.

DTN Cash Change From National Contract Change from
Commodity Index Prev Day Avg. Basis Month Prev Day
Corn: $3.46 -$0.01 -$0.37 Mar $0.000
Soybeans: $8.22 -$0.04 -$0.87 Jan $0.001
SRW Wheat: $4.83 -$0.03 -$0.32 Mar -$0.008
HRW Wheat: $4.60 -$0.02 -$0.36 Mar $0.001
HRS Wheat: $5.35 -$0.05 -$0.34 Mar $0.009

Tregg Cronin can be reached at tmcronin31@gmail.com

Tregg can be followed throughout the day on Twitter @5thWave_tcronin

(KR)