DTN Before The Bell Grains

Morning CME Globex Update:

Outside markets are a mixed bag Thursday morning with Dow futures down 4 points following yesterday's Dow Jones plunge of 351 points, February crude oil is down $1.35 per barrel, the U.S. dollar index is down .6150, and February gold is up $3.80. Several of the major ag exporter competitor currencies are lower including Russia, Canada and Australia. The Fed's decision to raise the Fed Funds rate another 0.25 basis points sent the equities reeling again, but the outlook for 2019 rate increases appeared to be more dovish.

Other Markets:

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

Corn:

In continued choppy holiday trade, March corn is a bit higher early Thursday following Wednesday's weakness. Corn had more bad news on the ethanol front Wednesday with reports of plant closures and layoffs by major producers, and ethanol stocks which climbed 4.3% from the previous week to 8-week highs. Ethanol margins continue to be negative, with average plant losses said to be near 40 cents per bushel. Trade was once again disappointed in the lack of China announcements for corn as talk has been rampant about China buying U.S. corn lately. Export sales were as expected, sizeable, at 1.97 million metric tons (mmt) (77.5 million bushels) today. Cattle on Feed and the Hogs and Pigs report are out today and are expected to reflect large animal numbers on feed with cattle at 103% and hogs 2-3% above year-ago levels. There are several end users looking for corn including Japan, Mexico, Malaysia, Colombia, Israel and Egypt. The EU, whose stocks are said to be at record lows, are pegged to import a record-large 21-23 mmt of corn this year. Corn basis has been firming of late, perhaps an indication that China is buying in the background. Funds are long a sizeable amount of corn futures now and are thought to be net long including options as well. We continue to trade March corn in a range of $3.80-$3.87. DTN's National Corn Index closed at $3.47 on Wednesday, with an average basis of 36 cents under March. At 8 a.m. USDA reported 426,800 mt corn sold to Mexico; 373,455 mt for 2018-2019 and 53,345 mt for 2019-2020 delivery.

Soybeans:

January soybeans are rallying a bit Thursday morning following yesterday's disappointing weakness once the new 1.199 mmt China purchase was announced. Since the trade is expecting 5 to 8 mmt of U.S. beans will be bought by Chinese government entities, anything less seems to be disappointing. The total to date looks like it is around 2.7 mmt or 99 million bushels (mb), hardly putting a dent in the massive carryout. China is obviously buying in a methodical fashion in order not to run the market on themselves. Weather today is a bit bearish with a drying pattern expected in Argentina and rains on the way for Brazil's dry soybean growing areas. Part of grain and soybean weakness of late can probably be attributed to the overall deflationary aspect of the sharp fall in crude oil which has plunged $30 per barrel from the October 3 high. Wednesday night's market action saw the famous post G-20 gap on January beans filled, and the market has bounced from there. Thursday's export sales were a hefty 2.84 mmt (104.3 mb) of 2018-2019 soybeans. Although Sinograin and possibly COFCO are likely buying more U.S. soybeans, any private importers are still facing the 25% tariff on U.S. soybeans. Commodity funds are net short soybeans, as even with the China purchases, both the world and U.S. landscape for soybeans remains bearish. DTN's National Soybean Index closed at $8.17, and reflects an average basis of 83 cents under January, stronger. At 8 a.m. USDA reported 204,000 mt soybeans sold to China, 257,000 mt soybeans sold to unknown destinations and 100,000 mt soybean meal sold to Colombia, all for 2018-2019 delivery.

Wheat:

All three wheat markets plunged Wednesday, but Thursday morning we find that U.S. HRW and SRW are very competitive in export markets. Egypt's GASC showed up last night for a Feb 11-20 wheat tender, and it is thought that U.S. SRW has a legitimate chance at business. Export sales on all wheat for last week came out at 313,600 mt, or just 11.5 mb. Friday, the Russian ag minister is meeting with exporters and trade will be closely watching for any developments from that. There has been mention of trade restrictions. However, consulting group UkrAgro on Wednesday raised Russian wheat exports by 6% to 35 mmt, and mentioned the potential for as much as 37-38 mmt. USDA is at 36 mmt, and Russia so far has reportedly shipped just 21 mmt. Traders have actually been disappointed in the lack of China wheat buying intentions so far, following the G-20 agreement, but there is no indication of any such buying behind the scenes. Competition remains stout for wheat exports, especially with recent weakness in major export competitor's currencies. Other wheat tenders include Syria, Japan, Ethiopia, Colombia, Brazil and Bangladesh, while Jordan was said to have passed again on their 120,000 mt tender. DTN's National HRW index closed at $4.79, and the average basis is 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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