DTN Before The Bell Grains

Morning CME Globex Update:

March corn is up 1 1/4 cents, March soybeans are up 4 1/4 cents, Chicago March wheat is 2 1/2 cents higher, Kansas City March is up 1 3/4 cents and Minneapolis March is up 4 3/4 cents per bushel, and now some 13 cents above the new contract low set on Thursday.

Other Markets:

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

Corn:

So far, March corn has respected the minor uptrend line drawn from mid-September, and is bouncing slightly Friday morning. However, any good demand news will have to be put on hold, as we will not have an export sales report on Friday with the government shutdown. Demand for corn has been the one bright spot for U.S. ag exports this year, as shipments far exceed last year, and, September through November U.S. corn disappearance is being called a record-large 614 million bushels (mb) by Ag Resource. The recent reduction in the EU corn crop by almost 5 million metric tons (mmt), should be a bullish indicator for expanding demand. Much of the EU corn imports are typically sourced from the Black Sea. Dec 1 stocks are also anticipated to be sharply below last year, and the trade senses a reduction in the final production number on the Jan. 11 USDA report. That report is currently in doubt with the shutdown. Funds are thought to still be holding a net-long of close to 100,000 contracts of corn. Argentine corn planting is now 73% planted, and progress could be stalled due to heavy rains in the next two weeks. So far, cash markets are not hinting at the much-rumored China purchases of U.S. corn. Linn Group suggests that Sinograin could be rotating some 20 mmt of China corn reserves, implying that they could buy corn from world markets. U.S. corn is now said to be very competitive to the world markets. Look for the trend-line support of $3.71 to $3.72 to hold March corn, and if it breaks through, next support looks to be $3.65 to $3.68. DTN's National Corn Index closed at $3.40 on Thursday, with an average basis of 35 cents under March.

Soybeans:

Soybeans are getting a bounce after having fallen to the minor uptrend line that began in September. That $8.82 to $8.83 level on March soybeans will be support, but a break below trend will see the next support down near $8.70 to $8.75. There are mixed reports on South American weather Friday morning, with some saying that Brazil weather, though hot and dry in some key areas, is set to change and turn wetter, while others, such as the Refinitive Eikon Ag farmer's union in Brazil, said that rain will be below normal all the way to Jan. 10 in key areas of Brazil, which produce some two thirds of Brazil soy. There are now reports out there that Brazil's soybean production could now fall to a range of 117 mmt to 120 mmt compared to earlier lofty production numbers of 125 mmt to 130 mmt, and the USDA's most recent 122 mmt. There was even a low ball estimate of 113 mmt on Thursday, according to Linn Group, with the origin of that unnamed. Last year's Brazil soybean crop was 120.3 mmt. Talks with China are set for the week of Jan. 7. News that China will allow U.S. rice imports without tariffs, is said to be a sign of trade progress. I'm not sure how much U.S. rice China might import. The sharp recovery in equities, with the Dow on Thursday finishing 900 points above the daily low, was encouraging, and rumors of money flowing out of bonds and into equities are making the rounds. Perhaps the bearish macro influence on grains and soy the last two weeks will subside. No export sales or flash sales announcements due to the shutdown makes it that much tougher for soy bulls. Funds sold an estimated 6,000 soybeans on Thursday and are thought to be adding to a net-short. March soybeans DTN's National Soybean Index closed at $7.87, reflecting an average basis of 96 cents under March.

Wheat:

Minneapolis wheat set the tone for a mini wheat recovery on Thursday as March set a new contract low for the second straight day and recovered, and is now some 13 cents above that low. Following the recent wheat beat down, U.S. wheat values are now said to be very competitive with other major exporters. One bullish input being talked about is the temperature difference in the Black Sea -- much colder than last year's abnormal warmth, which allowed wheat exports much later than usual. The colder temperatures could slow export activity from there and help the U.S. to garner more wheat export business. Argentine wheat harvest is said to be 82% complete, with the remaining harvest likely to be slower, with heavy rains expected, and quality issues in Argentine wheat will be closely watched. Rains of 3 to 7 inches are expected for the next 10 days in some areas. There is also talk around that Australia's wheat crop could fall another 300 mt to 500,000 mt. Funds are thought to be net-short 18,000 Chicago wheat contracts, but fairly close to even in Kansas City. DTN's National HRW index closed at $4.67, and the average basis is at 28 cents under March, firmer.

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

Follow Dana on Twitter @mantini_r

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