DTN Before The Bell Grains

Morning CME Globex Update:

Equities are little changed with the Dow futures 21 points lower. February crude oil is up 73 cents, the U.S. dollar index is up 0.2040, and February gold is down 30 cents. Overseas markets are up despite news that Germany's GDP is at the lowest level in five years, and the bearish Chinese economic news from Monday, where both exports and imports were down sharply from the previous year. China revealed plans to lower taxes to stimulate the economy. The government shutdown continues.

Other Markets:

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

Corn:

Corn continues to hover just above that minor uptrend line from September lows and is slightly higher to start. Corn export inspections near 40 million bushels last week continues to be a bullish input, with total inspections now 61% higher than last year. Although the rumors have been rampant about China purchasing U.S. corn and by-products, in the absence of USDA reporting there is no confirmation. The fact that China corn for May is near contract lows would argue against that assumption. However, U.S. corn is said to be very competitive in world markets lately, and last week's late surge in the CIF corn basis may have been an indication of new business. Bearish is the fact that, although there has been some improvement, most ethanol plants are still suffering net negative margins. Funds remain long an estimated net 50,000 contracts of corn when including options. Argentina's corn is now 88% planted, and although weather in major growing areas appears to be mostly favorable, flooding in Northeast areas is sure to result in some losses. Weather in Brazil in the short term continues to be hot and dry in the center west and the northeast, drying out soils there ahead of safrinha corn planting. Safrinha makes up some 70% of total Brazilian corn production. Look for March corn resistance at $3.82 then $3.85, with trend support near $3.74-$3.75. DTN's National Corn Index closed at $3.46 on Monday with an average basis of 33 cents under March.

Soybeans:

Soybeans are a few cents weaker to start Tuesday morning following two-sided and quiet overnight trade. No news continues to be bad news as the trade is craving some official demand news, but with the shutdown it has been non-existent. Export inspections last week at 39.9 million bushels (mb) were better than expected, and though the gap is narrowing, shipments still lag last year by 40%. Total shipments of 676 mb are 458 mb lower than last year, with the USDA projecting only a 266 mb. News that China's soybean imports were down 8% year over year to 88.03 million metric tons (mmt) had a bearish impact on Monday, as did news that all China imports were down 7.6% and news that all exports were off 4.4% reinforced ideas of a slowing Chinese economy. Also bearish is the continued spread of African swine fever, now approaching 100 cases, and resulting in the culling of an estimated 916,000 pigs. On the bullish side, NOPA is scheduled to be released with crush estimated at 170-172 mb which would be record large for December. President Trump addressed the American Farm Bureau conference on Monday and hinted at good progress with China. The next meeting is not until January 30th, when primary trade representatives Lighthizer and Liu will again meet. The trade hopes that a deal can be finalized ahead of the March 1 deadline. Weather in Brazil continues to sap yield potential there, and although most weather analysts see the mostly hot and dry pattern continuing through January, there is a hint of better shower activity next week in the worrisome dry regions. Crop production estimates continue to leak lower. Look for the $9.00 area to provide some support for March soybeans, and then the trend line near $8.90. DTN's National Soybean Index closed at $8.12, and reflects an average basis of 91 cents under March.

Wheat:

Wheat is weaker Tuesday morning in all three markets. Export inspections for last week released on Monday were more than double the previous week, but total shipments remain some 11% behind a year ago, at 495 mb. U.S. wheat remains one of the cheapest world wheats on a FOB basis, but a freight disadvantage has hampered business, and without any sales confirmations, futures buyers have moved to the sidelines. The primary competitor to the U.S., Russia, is said to be offering FOB wheat at a premium of $11 to $12 per metric ton to U.S. Gulf HRW wheat for February through April. Commodity funds continue to hold a modest net short in Chicago wheat including options, estimated to be around 35,000 contracts. The southern Plains wheat areas have received some beneficial moisture lately and there is no drought threat anywhere in the U.S. DTN's National HRW index closed at $4.75, and the average basis is at 24 cents under March, firmer.

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

Follow Dana on Twitter @mantini_r

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