DTN Before The Bell Grains

Morning CME Globex Update:

The Dow futures are pointing 195 points higher following Thursday's 22-point gain. March crude oil is up 7 cents per barrel, the U.S. dollar index is down 0.2780, and February gold is up $8.10 per ounce.

Other Markets:

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

Corn:

Corn is up a bit Friday morning in continued choppy trade. March is sitting right at the 50-day moving average and the trend line. Recent trade has been subdued as we are in the fifth week of the U.S. government partial shutdown and have not seen any USDA data for some 4 weeks. Thursday's volume on corn was said to be 190,000 contracts, nearly half of Tuesday's volume. U.S. corn continues to be very competitively priced to world importers, and with a deficit of 26.5 million metric tons (mmt) projected for corn in China, the big question remains, will they buy U.S. corn? So far this year, China's corn imports are up 25%. There are other importers seeking corn with Japan, Malaysia, Mexico, Colombia and Egypt among the buyers. Brazil corn exports for January are said to be 3.55 mmt. Ethanol production last week was down again, and corn usage for ethanol missed the mark needed each week to reach USDA's yearly usage. Analysts feel that corn use for ethanol may be some 25-50 million bushels under expectations by year's end. Funds remain net-long corn, with the best estimate in the absence of COT reports to be 55,000 contracts including options. Look for $3.82-$3.38 to be initial resistance on corn, and $3.76-$3.77 support again. It is just a matter of time before the Brazilian safrinha crop becomes impacted by the ongoing hot and dry pattern in parts of Brazil, especially around Parana, where a drought is in full force. Planting has begun for the safrinha crop, and will likely be completed over the next 3-4 weeks. The troublesome weather pattern, following weekend showers, is forecast to continue. DTN's National Corn Index closed at $3.46 on Thursday, with an average basis of 31 cents under March.

Soybeans:

Soybeans continue to chop around aimlessly awaiting a solution to the U.S.-China trade impasse, with the next meeting scheduled to begin five days from now. The extent of the trade war impact on soybeans, along with the African swine fever epidemic, was revealed in Thursday's customs data, which showed that China's December soybean imports from the U.S. had fallen by 99% to the lowest level since 2008. The full year shows imports of just 16.6 mmt, about half of the previous year. Last week, the U.S. resumed shipments of soybeans to China with six cargoes headed there. As weather continues to pull Brazilian soy yields lower, Parana (one of the hardest hit areas) lowered their soy production to 16.8 mmt from 19.2 mmt previously. Total soy production continues to gravitate toward 115 mmt, some 4.8 mmt below last year's record production. China has supplemented soy import needs from Brazil, but stocks of soy meal continue to be large as African swine fever has dampened demand. China pork consumption last quarter is down 10-15%, and the population is said to be moving toward more poultry consumption. Pig feed consumption in the first quarter of 2019 is projected to be some 30-35% lower than the previous year. With China import needs clearly impacted by swine fever, JCI - an analytical firm in China - stands alone in their projection that China soy imports will be up 8% to 101.5 mmt. Palm oil futures are up 3% for the week, and have hit the highest level in seven months, as biodiesel usage of veg oils is on the upswing. Farm Futures revealed their acreage projections on Thursday, and soybeans were down 5 1/2% at just 84.6 million acres. There is much disagreement with a number this low. The International Grains Council (IGC) on Thursday lowered world soybean production by 4 mmt. Look for the $9.20 to $9.25 area on March soybeans to be resistance, while $9.10 to $9.15 remains short term support. DTN's National Soybean Index closed at $8.26, and reflects an average basis of 90 cents under March.

Wheat:

Wheat continues its correction on Friday, down another 2 cents in the overnight. Any weakness is likely temporary as U.S. wheat continues to be one of the cheapest on a FOB basis, with U.S. wheat said to be a $12 per metric ton discount to Russian wheat. With all of the talk of sharply higher Russian values, fueled by lower stocks and rising interior values, Sov Econ came out overnight and raised their Russian wheat export estimate to 35.6 mmt from 35.1 mmt. World wheat values have moved sharply higher in the past few weeks and the U.S. seems well positioned to garner new business, along with Argentina. There are plentiful wheat tenders around with the Philippines, South Africa, Taiwan, Jordan, Turkey and Ethiopia among the buyers seeking wheat in the near term. Argentina's Buenos Aires Grain Exchange (BAGE) lowered the Argentine wheat crop to 17.7 mmt from the USDA's 19.5 mmt, a function of extreme wet conditions during harvest. Bearish for wheat is the IGC forecast for a 7 mmt increase in world production on Thursday to 737 mmt. With the coldest temperatures in years expected to hit the U.S. central Plains and Midwest and even down into the TX and OK panhandles next Tuesday and Wednesday, the fear of winterkill damage for any unprotected wheat will continue to underpin wheat values. Snow cover is said to be lacking in many southern SRW areas. DTN's National HRW index closed at $4.87, and the average basis is at 24 cents under March.

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

Follow Dana on Twitter @mantini_r

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