DTN Before The Bell Grains

Morning CME Globex Update:

Outside markets have stabilized a bit, but global and U.S. equities were still lower overnight, fearing a U.S. government shut down and a weakening global economy. Dow futures are now up 2 points following the hard sell-off Thursday which saw the Nasdaq move into bear market territory. The House has passed a budget bill with $5 billion for a border wall, and that goes to the Senate today. February crude oil is again lower, at down 36 cents, and crude has now fallen over $30 per barrel since October 3, stoking fears of deflation. The U.S. dollar index is up 0.417, while February gold is down $3.30 after reaching a new recent high on Thursday.

Other Markets:

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

Corn:

Despite Thursday's marketing-year high export sales of 1.974 million metric tons (mmt) of corn, corn futures took a harsh beating, down over 6 cents on heavy fund liquidation, tied more to outside bearish macro forces than corn fundamentals. The impressive corn export sales number, with the lion's share attributable to Mexico, was followed by a new FAS flash sale announced for 427,000 metric tons (mt) (16.8 million bushels) additional to Mexico. That was not enough, as the plunging equities and crude oil markets, and disappointment over the lack of any China business, led funds to lay off some of their newly acquired length. Funds are thought to have sold some 12,000 contracts of corn with some commission houses suggesting quite a bit more. The 77.7 million bushels (mb) of corn sales for last week is well above the 34.1 mb needed to reach USDA's projection, and total corn sales are now 1.166 billion bushels compared to 997 million bushels sold last year. More bullish demand news came out Thursday afternoon in the cattle on feed and hogs and pigs reports, with on feed and inventory numbers well above year ago numbers, bullish for feed demand. On a not so bullish note, ethanol prices hovered just above a record low, and ethanol margins continue to be an average 30 to 40 cents per bushel in the red. In addition to Mexico buying, South Korea bought U.S. corn Thursday and a host of tenders exist with Japan, Malaysia, Mexico, Colombia and Egypt all seeking corn. With rampant rumors of China looking to buy up to 3 mmt (118 mb) of U.S. corn, the trade is tired of waiting. Even with a 3 mmt China purchase, U.S. corn stocks would remain more than adequate, with another 23 to 25 million tons of new South American production soon to be harvested. DTN's National Corn Index closed at $3.41 on Thursday, with an average basis of 34 cents under March, and continues to strengthen. At 8 a.m. USDA reported 222,504 mt of corn were sold to unknown destinations for 2018-2019 delivery.

Soybeans:

Soybeans also fell victim to bearish outside forces, and despite the 2nd largest export sales number recorded at 2.836 mmt of soybeans, and two additional flash sales of 204,000 mt to China and another 257,000 mt to "unknown", soybeans plunged, filling the gap left after the G-20 and then some. In the past week or so, sales to China have totaled 2.833 mt, with another 387,000 mt sold to unknown, which many suspect could be China. If that is the case, then a grand total of 3.25 mmt sold to China is still a huge disappointment to a crowd expecting 5 to 10 million tons to be sold. The sales of 104 million bushels for last week was well above the 24.8 million bushels needed per week to attain the USDA projection. Total soybeans sales remain some 30% below year ago levels. Soybeans were also pressured by the falling crude oil market and the sharp fall in equities, tied to world economic worries, a possible impending U.S. government shut down and the U.S. Department of Justice arrest of two Chinese nationals for hacking and stealing information. Also adding to the Thursday selling pressure was a more bearish forecast for South America, with favorable rains expected to halt the ongoing hot and dry pattern in central Brazil, and especially Parana, and favorable weather throughout much of Argentina. DTN's National Soybean Index closed at $8.10, and reflects an average basis of 84 cents under January, firmer. At 8 a.m. USDA reported 115,500 mt of soybeans sold to unknown destinations for 2018-2019 delivery.

Wheat:

Despite absolutely dismal U.S. wheat export sales on Thursday, wheat was one of the few ag quotes to finish in the green. That is not the case Friday morning with all of the wheats lower. Export sales for last week at just 313,600 mt (11.5 million bushels) is far below the 28 million bushels of the previous week, and the 15.7 million needed per week to reach the USDA number. Total wheat sales at 613 million bushels are 80 million behind last year's total. Egypt's GASC bought just 120,000 mt of wheat in the tender for February, with one from Ukraine and one from Romania. For the first time in a while, Russia did not get the business, and there were just two Russian offers, perhaps a sign of tightening stocks there as prices have recently soared. Friday's meeting between the Russian ag minister and Russian wheat exporters will be closely watched as rumors of some sort of export restrictions have been discussed. There was one cargo of U.S. HRW offered in the Egypt tender, which was less than $4 per mt above the cheapest FOB offer, but freight costs put the U.S. way out of contention. DTN's National HRW index closed at $4.81, and the average basis is at now 28 cents under March, much stronger.

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

Follow Dana on Twitter @mantini_R

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