DTN Before The Bell Grains

Morning CME Globex Update:

Outside markets are mixed to lower after Friday's freefall in equities, with the Dow futures now off another 150 points, January crude oil up 16 cents per barrel, the U.S. dollar index down .2780, and February gold up $4.30.

Other Markets:

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

Corn:

March corn continues to trade in a narrow range and remains above the post G-20 gap left on charts. There appears to be a bit more optimism that China continues to make purchases of U.S. grains and soybeans behind the scenes and methodically. Monday morning there is more talk of China not only buying soybeans, but also possibly corn, ethanol, DDGs, and meat products from the U.S. Most feel the 3-month suspension of 25% of auto tariffs on U.S. cars might be a step in the right direction. Freight values have moved higher in the past week, both in the barge market and in BN freight car values going to the PNW, another sign that demand is picking up. Gulf corn values are up 10-12 cents, and PNW have rallied some 12-15 cents in the past week or two. Funds in the past few weeks have bought a significant amount of corn, picking up 63,000 contracts last week, and now are net long corn on a combined futures and options position. Argentine corn is just 47% planted, and there continues to be concern there with heavy rains slowing planting, and possibly washing out some newly planted soybeans. Dryness and heat in Brazil is slated to continue for 10 days but relief is in the forecast. Resistance on March corn will be at $3.90, and support at the gap at $3.78-$3.90. Export inspections will be released at 10 a.m. and any news from China will be closely watched. Informa, out with their acreage projections, have corn acres up 2.8 million, while others are up to 4 million acres higher. DTN's National Corn Index closed at $3.49 on Friday, with an average basis of 36 cents under March.

Soybeans:

January soybeans are higher as the trade expects more China soybean purchase announcements will be coming. With freight and basis rising at both the Gulf and PNW, China buying is suspected. Tenco reports that PNW basis is now offered at 80 cents over the respective futures month for Jan-Feb-March versus 40 cents over a few weeks ago. They also state that U.S. soybeans to China are now at parity with Brazil for December and January. Last week, the USDA announced flash sales totaling just under 1.5 million metric tons (mmt) by China, a far cry from the previous week's rumors of a total of at least 5-8 mmt. China is a shrewd buyer and is likely to buy piecemeal so as not to run the futures market up on themselves. Although this is a growing year without many South American concerns so far, there is some concern with heat and dryness in parts of Brazil are increasing crop stress, with relief hinted at past 10 days. Heavy rains in parts of Argentina produced up to 2" over the weekend in the northern third, with another 2-5" of rain likely impacting the central and east in coming days. Soybeans are 69% planted, but some washed out fields are likely. Wheat quality and quantity may also be compromised. Funds bought in some soybeans in the past week, but on a combined futures and options position, they remain net short an estimated 63,000 contracts of soybeans. Support will continue to be that post G-20 gap on charts at $8.96 1/2, with better support near $8.87-$8.88, but a fall under $8.80 could lead to further weakness. NOPA crush is out today, and is expected to show 168.3 million bushels (mb), which would be the 3rd largest November crush recorded. Also, export inspections will be closely watched as the U.S. tries to catch up, badly lagging behind last year's total. Informa's acreage projection shows a loss of 4 million acres of soybeans this year, though the soy-corn ratio sure does not bolster that argument. African Swine Fever continues to plague China, with over 80 cases now reported, and projections of a large upswing in pork prices there this summer. DTN's National Soybean Index closed at $8.13, and reflects an average basis of 87 cents under January.

Wheat:

Wheat is once again leading the pack higher as Russian values continue to soar, and U.S. hard wheat now appears to be very competitive in the world. Winterkill fears have crept into the Black Sea area with some of the coldest temperatures in years, possibly as much as 25 below zero, causing concern. The December 21 meeting between Russia's ag ministry and exporters could lead to some export restrictions from there as supplies tighten, and the interior basis firms. Also concerning to the wheat market are the untimely rains in Argentina, where some 32-33% of the wheat harvest remains and quality and quantity becomes more of a concern. Likewise, there is some concern in Australia, where heavy rains are said to be compromising an already short crop. USDA has that crop at 17 mmt, but other private crop scouts see that crop to be more like 15 mmt. As planting decisions are soon to be made in the U.S., many see spring wheat acreage gaining 3-5% from the past year. Winter wheat acreage could be smaller than many think, as bad weather hampered Plains planting efforts. There is some talk that China could also buy some U.S. wheat soon. Traders will be watching to see if the Federal Reserve decides to raise interest rates another 0.25%, and with the dollar at multi-month highs, this could stifle the wheat advance. Jordan is back for wheat needs and Syria, Bangladesh, Ethiopia, Colombia and Brazil are all seeking wheat. DTN's National HRW index closed at $4.88 with the average basis at 30 cents under March.

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

Follow Dana on Twitter @mantini_R

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