DTN Before The Bell Grains

Morning CME Globex Update:

Dow futures are 160 points higher following Tuesday's 302-point lower close on the Dow Jones average. March crude oil is up 24 cents per barrel, the U.S. dollar index is up 0.0030, and February gold is down $2.50 per ounce.

Other Markets:

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

Corn:

Corn continues its choppy trade pattern -- down one day, up the next. March corn had threatened once again to break under key trend support, but Wednesday morning is a bit higher. Export inspections for last week, reported Tuesday, showed 43.6 million bushels (mb) shipped out of the U.S., with the total for the year at 810 mb some 61% above last year's 503 mb. U.S. corn has been the world's cheapest feed grain for multiple weeks now. There are multiple tenders for corn with Indonesia having bought South American corn and Turkey buying 342,000 metric tons (mt) of optional origin corn. Iran is seeking 200,000 mt, and Japan, Malaysia and Mexico all seeking corn nearby. A prominent crop scout reduced Brazil's total corn crop by 1 million metric tons (mmt) to 92 mmt Tuesday, suggesting recent hot and dry weather is just beginning to impact corn output. That total is still 11 million metric tons higher than last year, and under the USDA's last estimate of 94.5 mmt. Argentine corn estimates have recently risen to close to 44 mmt, and that is some 16 mmt higher than last year. There are some better rains on tap for central Brazil this week, with a return to the hot and dry pattern expected. Ethanol continues to be an issue for domestic demand and ideas are that ethanol production, due to the recent slowdown, could fall 25 to 50 million bushels below the USDA's 5.6 billion bushel production number. Ethanol producers are still seeing an average loss of 15-20 cents per bushel in many locations. Look for $3.84-$3.85 to be resistance for March corn, and $3.76-$3.77 to be support. On new crop December, the $4.05-$4.10 area looks to be a very strong sell area. DTN's National Corn Index closed at $3.47 on Tuesday, with an average basis of 32 cents under March.

Soybeans:

Soybean futures have also been choppy, with Tuesday's fall of 7 1/2 cents nearly wiping out Friday's 9-cent gain. A late day rumor of the U.S. halting a low-level meeting with two Chinese vice premiers regarding trade issues sent March beans as much as 16 cents lower at one point. That rumor was denied by economic advisor Larry Kudlow, leading to a rally back into the close. China's GDP of just 6.4% was the lowest in years and fell behind last months' 6.8%, considered bearish by the trade. U.S. soy inspections continue to lag severely behind last year by some 40%. Last week's inspections of 40.8 mb were a 10-week high, but total shipments at 717 mb are well behind last year's total of 1.186 billion bushels, and remain some 40% lower compared to the USDA projection of an 11% drop. China rumors will continue to swirl, but beyond the widely assumed purchase of 5 mmt of U.S. beans, cash markets are not suggesting additional demand. With Brazil's harvest expanding, Brazilian offers for Feb-March are now cheaper than U.S. Weather in Brazil will be closely watched, as the hot and dry weather that has plagued Parana, Mato Grosso and the northeast province of Bahia will see a brief respite from those conditions with showers this weekend, with a return to the hot and dry pattern expected next week. Two prominent crop scouts on Tuesday dropped their production estimates for Brazil to 115 mmt and 117 mmt, both down from 2.8 mmt to 4.5 mmt from last year's record production. Argentina's soybean production is still estimated at about 56 mmt, which would be up some 16 mmt from last year. A bright spot for the soy complex is bean oil where we have seen four straight higher closes, with a possible fifth today. Soybean oil is responding to the increased use of bean oil for biodiesel, which could be double that of a year ago. Look for a key area for March soybeans to be $8.91-$8.93, which represents the uptrend line. On a rally, the $9.20-$9.25 range will be first resistance. DTN's National Soybean Index closed at $8.18 and reflects an average basis of 91 cents under March.

Wheat:

Wheat has been the shining star of late, with the higher start today possibly leading to five consecutive higher closes. Rumors of Egyptian private buying of U.S. wheat last week along with a host of tenders, concern over Russian supplies tightening, and Ukraine having already shipped 84% of their wheat exports, will possibly shift the export advantage toward U.S. wheat. Also considered supportive is the news that Egypt's GASC will once again begin opening letters of credit right away. With Russia's prices having rallied sharply, and the ag minister's efforts to regulate domestic prices, it would appear that U.S. wheat will compete against Argentine wheat as the two cheapest options. Export inspections last week, however, still lagged the weekly total needed at just 19 mb, and total shipments of 515 mb is 10% behind last year's 575 mb. Rumors of China buying U.S. wheat, Ethiopia and the Philippines seeking wheat, along with ideas that GASC will return this week, is underpinning wheat. There is a surge of very cold air headed to the U.S., and trade will continue to monitor threats of winterkill in coming days. It appears that below normal temperatures will remain until mid-February. Some private analysts see winter wheat acreage being some 500,000 acres to 1 million acres below what USDA is carrying, but the crop is said to be looking very good in the absence of any drought issues. DTN's National HRW index closed at $4.85, 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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