DTN Before The Bell Grains

Soybeans Firm, Wheat Weaker in Quiet Trade

Dana Mantini
By  Dana Mantini , Senior Market Analyst
(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

Outside markets are mixed with Dow futures recovering a bit following Monday's plunge, up 140 points. January crude oil is down $1.32 after hitting a sub-$48 low overnight. The U.S. dollar index is down .2560, while February gold is fractionally lower.

Other Markets:

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

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Corn:

March corn is once again unchanged in very quiet trade as the China watch continues. Volume was very light on Monday and should continue that way Tuesday. Corn export inspections, though lower than the previous week at 34.8 million bushels (mb), remains the bright spot in U.S. export markets with total corn shipments so far at 629 mb versus 364 mb last year, 73% higher. Trade is expecting large sales on Thursday's export sales report. While the trade awaits some word from China about buying U.S. corn, Brazilian corn for Jan-Feb currently works into China on a landed basis at some $5 to $10 per metric ton (mt) cheaper than U.S. The rumors continue to circulate that China could buy up to 3 mmt of U.S. corn, although last year they bought just over 350,000 mt from the U.S. Ethanol margins, though slightly improved, continue to reflect a net loss after processing or 30-40 cents per bushel. There are a host of others seeking corn including Mexico, Malaysia, Japan, Israel, South Korea and Egypt. The corn basis has been showing signs of life, with the PNW basis for February said to have risen to 105 cents over March futures. Look for corn to continue in the $3.80 to $3.87 range on March, with $3.90 the good resistance above, and the $3.78-$3.80 gap area the logical support. DTN's National Corn Index closed at $3.49 Monday with an average basis of 35 cents under March, firmer.

Soybeans:

Soybeans continue to hold out hope for additional large sales to China to be announced soon. The basis on soybeans continues to ratchet higher at the ports, perhaps an indication of some behind the scenes buying. New sales are sorely needed as U.S. soybean shipments thus far are 557 mb versus 952 mb the previous year, a drop of 41%. On the other side, African swine fever continues to expand in China, dampening demand for soy. President Trump authorized the 2nd round of trade mitigation payments, said to amount to $12 billion, and to average out to $1.62 per bushel per soybean producer. Weather in South America continues to be closely watched. In a year in which few weather issues have impacted South America, the recent heavy rains in Argentina and growing heat and dryness in parts of northern and central Brazil have created some concern. Dryness in Parana is especially concerning, with rainfall approximately two thirds of normal this year, and pod-filling is said to be occurring. Showers are expected to fall by the end of the week. Rains in parts of Argentina could lead to some replanting of soybeans. NOPA released crush figures on Monday, and although a bit lower than the 168.3 mb expected, the 167 mb for November was said to be a record for that month. Trade will closely watch the Fed Open Market Committee on Wednesday, where it is expected that they could raise the Fed Funds rate another .025%. With the recent free fall in both global and especially U.S. equities, there has been much talk about money moving into cheap ag commodities for investment through Index funds, and out of equity markets. January beans are moving in a $9.00 to $9.25 range, with the gap still below at $8.96 1/2. January soybeans DTN's National Soybean Index closed at $8.19, and reflects an average basis of 86 cents under January, also firmer.

Wheat:

Wheat is taking a little breather, down slightly following recent gains and continues to be driven by weather in the Black Sea wheat areas where winterkill is a concern, and soaring world wheat values, led by Russia. Russian wheat offers are said to have risen $13 per metric ton in the past two weeks. Heavy rains in Argentina is also underpinning wheat, with the thought that perhaps there are some 1.5 to 3 mmt of Argentine wheat in the northeast that could be subject to quality issues. There are some who feel that the Argentine wheat crop might be closer to 17 to 17.8 mmt compared to the recent Buenos Aires Grain Exchange 19 mmt forecast. There is also some thought that Friday's meeting between the Russian ag minister and exporters could lead to some export restrictions, which would play into the hands of U.S. hard wheat exporters. There is some thought that China could agree to buy more U.S. wheat, and it makes more sense than corn, with China having imported close to one million tons of U.S. wheat just last year versus just over 350,000 mt of corn. Wheat inspections have picked up in the past few weeks with last week's 25.1 mb said to be a marketing year high, but total shipments for the year at 430 mb still lag behind last year's 505 mb. There are still plenty of wheat tenders around, with Jordan back in for 120,000 mt, along with tenders by Syria (non-U.S.), Ethiopia, Colombia, Indonesia and Brazil seeking wheat. DTN's National HRW index closed at $4.93, and the average basis is at 29 cents under March, stronger.

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

Follow Dana on Twitter @mantini_R

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Dana Mantini