DTN Before The Bell Grains

Morning CME Globex Update:

With global equities markets lower, the Dow futures are currently down 227 points as the U.S. government extends the shutdown. Crude oil is up 79 cents per barrel. The U.S. dollar index is down .089, and February gold continues its ascent, at up $6.10.

Other Markets:

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

Corn:

Corn is up slightly and March remains about 3 cents above the minor uptrend line. U.S. corn is now said to be the world's cheapest feed grain, and rumors abound about China not only buying more U.S. soybeans, but also U.S. wheat and corn. There was some basis move on Wednesday, with morning CIF values at the Gulf said to be 5 cents to 6 cents higher in the morning, but those values were just 3 cents higher by the end of the day. If there is any export trade going on, traders are in the dark as the U.S. government shutdown extends another week. Talks between President Trump and Democrats and Republicans are again scheduled for Friday, and that is the day that a determination about the scheduled Jan. 11 USDA report will be made. U.S. export shipments of corn so far, at 17.9 million metric tons (mmt), are far above the 10.6 mmt shipped at this time last year. Total shipments need to be 1.2 mmt per week (47 million bushels) to reach the USDA projection. While export demand has been a bright spot, domestic demand has had its challenges. Corn has been more of a follower, with the focus now on threatening South American weather and its impact on maturing soybeans. Funds remain long only corn at this point, but with no Commitment of Traders report, it is a guessing game as to how much. DTN's National Corn Index closed at $3.43 on Thursday, with an average basis of 33 cents under March.

Soybeans:

Soybeans are up again this Thursday morning, and March beans remain some 29 cents above the trend line support. There are two factors driving the soybean market -- 1) the hot and dry weather pattern in some key areas of Brazil, and 2) rumors that China has bought another 1.8 mmt to 2 mmt of U.S. beans for their reserve the past few days. There was a pick-up in CIF soybean values, said to be 2 cents to 3 cents Wednesday, with PNW soy values just steady. Funds have been buying in some of their short soybean position, adding to recent gains. Traders continue to be in the dark with respect to Chinese and other purchases in the absence of both daily flash and weekly export sales reports. In Brazil, the ridge over the southern and central Brazil areas is expected to weaken, bringing rain and showers, but in Parana, where soybeans are filling pods, that rain may not be enough to prevent the ongoing losses. That ridge is also expected to rebuild early next week. On a percentage basis, the area in question is said to comprise just 15% of Brazil's soybean area. Lofty and record production estimates have come down steadily in the past few weeks, from 125+ mmt to 117 mmt to 119 mmt, with some much lower estimates out there. While Brazilian production is slipping, with the huge U.S. ending stocks and Argentina likely to produce some 17 mmt to 18 mmt more than last year, there is no shortage of world soybeans. African swine fever continues to be a demand dampening issue in China, with the largest hog farm to date impacted recently. DTN's National Soybean Index closed at $8.15, and reflects an average basis of 92 cents under March.

Wheat:

After setting yet another new contract low on Wednesday, Chicago wheat is up 3 cents Thursday. U.S. wheat is now said to be the cheapest in the world on a FOB basis, with U.S. HRW now some $15/mt or 27 cents per bushel (bu) under Russian FOB wheat, and cheaper than EU and Argentina as well. Perhaps we'll see a pick-up in export business, as that has been sorely lacking for U.S. wheat. The enthusiasm could be tempered by the TPP (Trans Pacific Partnership) soon to take effect, giving some U.S. competitors the upper hand on wheat, with reduced tariffs. There is beginning to be more talk about U.S. spring wheat acres possibly rising by 5% to 10%, and stealing acres from soybeans in the north, but that has been tempered of late, with the recent fall in wheat values versus soybeans. Argentina's wheat crop was thought to be 19 mmt a few weeks ago, but with the challenging harvest time heavy rains in some areas, those ideas have moved to 18 mmt or slightly lower, as excess rains have impacted both quantity and quality there. The funds remain short a modest position in wheat. DTN's National HRW index closed at $4.68, and the average basis is at 25 cents under March, firmer.

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

Follow Dana on Twitter @mantini_r

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