DTN Before The Bell Grains

Morning CME Globex Update:

Outside markets are stronger, with the Dow futures up 200 points, continuing the late-week recovery from the recent plunge. February crude oil is up 78 cents per barrel. The U.S. dollar index is down .1590, and February gold was up early and had reached the highest level since June of 2018, but is now down $1.00.

Other Markets:

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

Corn:

In what is expected to be a slow news day, corn is up a half cent per bushel. There is a full trading day on Monday, with no night session either Monday or Tuesday and an 8:30 a.m. CST reopening on Wednesday. A Dec. 29 phone conversation between Presidents Donald Trump and China's Xi Jinping struck a bullish tone in soybeans on Monday morning. Adding to corn's mildly bullish start is a report from JC Intelligence in China that China corn imports could rise to as much as 14 million metric tons this year, assuming the resumption of purchases from the U.S. Corn basis late week certainly did not imply that business was being transacted, with CIF Gulf corn values down 1 cent to 3 cents from previous days. Weather in South America continues to be monitored, where it has been too hot and dry in some areas of Brazil, and too wet in parts of Argentina. Argentine corn planting, as of last report was 73% done. March corn futures continue to trade just a few cents above the minor down trend line that began in September. Resistance on any bounce will be strong in the $3.78 to $3.80 area -- the old support level. Although it should be a slow day, often month end and year end leads to dramatic moves. Commodity funds, who are long corn, could try to "dress up" (buy more) of that position at the close. DTN's National Corn Index closed at $3.41 on Friday, with an average basis of 35 cents under March.

Soybeans:

Soybeans are reacting in a bullish way to the reported Dec. 29 telephone conversation between President Donald Trump and China's Xi Jinping, which struck a mostly conciliatory and overall bullish tone. The late Friday rally in soybeans, and move above the trend line, may be an indication of more China soybean buying from the U.S. However, without any government sales reporting during the shutdown, it is all a guessing game. March soybeans are now some 18 cents above the trend line, and on a further rally, will surely encounter selling in the $9.10 to $9.15 area. Along with China, the news is mostly focused on Brazil, and the perception of the declining soybean crop there due to recent hot and dry weather in some key production areas. Whereas three to four weeks ago, the trade was convinced of another new record large crop, which many had pegged in the 125 million 130 million metric ton (mmt) area, now the consensus seems to be that the crop could be sub 120 mmt, with some low estimates well below that. Although the central and southern Brazil areas have seen hot and dry conditions impact soybeans, the forecast is expected to change late week, bringing relief, but certainly the top end of production may have been clipped. Some feel that some 5 million to 7 mmt of soy production potential could have been lost. A 120 mmt crop would still be near record large, and Argentina is expected to produce some 17 million to 18 mmt more soybeans than last year. The U.S. trade team will visit China on Jan. 7 to continue trade talks. The next big USDA report, scheduled for Jan. 11, is all of a sudden in jeopardy with the government closed. March 1 is the deadline for a trade deal to be finalized otherwise a 25% tariff will be placed on China. DTN's National Soybean Index closed at $8.00, and reflects an average basis of 95 cents under March.

Wheat:

Wheat is being pressured initially by a report out of Russia that the government there plans to subsidize rail shipments from the interior to keep supplies flowing to export ports. So with that news, and the Russian Ag Minister's projection of total wheat exports that could approach 37 mmt, Russia competition for wheat export business is continuing unabated. Wheat is getting little support from the continued heavy rains in parts of Argentina, where the final 20% of that wheat harvest could encounter both quality and protein issues. Going home Friday, following recent weakness, U.S. FOB wheat values had once again become competitive with other major exporters, but the market continues to be under pressure until we can see actual sales improve. There are a few wheat tenders around. Jordan, which had twice passed on their 120,000 metric ton (mt) tender, is back again. Bangladesh is still in for 50,000 mt. Morocco is seeking 345,000 mt of U.S. durum. Ethiopia, Colombia, Brazil and Indonesia are also seeking wheat. Safras and Mercado said that Brazil is likely to produce 5.6 mmt of wheat this year compared to 4.3 mmt last year, and the 2016 crop of 6.7 mmt. DTN's National HRW index closed at $4.68, and the average basis is at 28 cents under the March, firmer.

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

Follow Dana on Twitter @mantini_r

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