DTN Before The Bell Grains

Morning CME Globex Update:

Dow futures are up 60 points following Thursday's modest loss of 15 points. March crude oil is up 18 cents per barrel, the U.S. dollar index is 0.1280 lower, and February gold is down 20 cents. Positive statements from both President Trump and Robert Lighthizer following the two-day trade talks with China, and the alleged promise to buy more U.S. soybeans, have given soy and grains a boost.

Other Markets:

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

Corn:

Corn futures continue to chop back and forth, but were 3 cents firmer in the overnight session on some optimistic rhetoric following the trade meeting. Noted China hawk Robert Lighthizer commented that though there is more work to do, "substantial progress was made". A final agreement will have to wait until later in February when Presidents Donald Trump and Xi Jinping are scheduled to meet. Corn has been up one day and down the next. It is firmer to start on Friday on the heels of a very strong soybean start. U.S. corn remains one of the world's cheapest feed grains, so exports continue to be strong. Argentina appears to be the primary competition in the near term, as despite what Ukraine officials reported as a record large corn production of 35.6 mmt, Black Sea values have moved sharply higher. There is much optimism after having made a further commitment to buy 5 mmt of U.S. soybeans that next in line will be corn and/or ethanol purchases. Argentina's Buenos Aires Grain Exchange (BAGE) on Thursday raised their estimate of that corn crop to 45 mmt, up 2 mmt from their previous estimate, 2.5 mmt higher than USDA, and 13 mmt (512 million bushels) above last year's drought-ravaged crop. Despite ongoing concerns with low soil moisture levels as Brazil's safrinha planting is underway, Argentina's crops have thrived under mostly favorable conditions. Corn sales for the week of December 20 were strong at 66.9 mb, taking total commitments to 1.233 billion bushels (bb) versus 1.046 bb last year. U.S. corn exports continue to be a bright spot on the U.S. ag export scene. Look for the $3.75-$3.77 range to continue to support March corn, while $3.83-$3.85 will provide resistance. DTN's National Corn Index closed at $3.47 on Thursday, with an average basis of 30 cents under March.

Soybeans:

Soybeans are the star of the show in ag futures markets Friday following Thursday's weak close. Comments from both President Trump and China news agencies are reflecting a very positive outlook for a final trade agreement to be reached, and a promise from Vice Premier Liu that China would buy 5 mmt (180 mb) of U.S. beans sparked the overnight strength. There is still some discrepancy on the promised purchase of 5 mmt of U.S. soybeans, with the market reacting as if it is an additional 5 mmt to the December-January purchase, making a total of 360 mb, while some are not so convinced. Both parties claim substantial progress not only on the purchase of U.S. ag products, but also on the intellectual property and technology issues. The next meeting will be in mid-February by trade delegates, followed by Presidents Trump and Xi in late February. Argentina's BAGE left their soybean estimate unchanged at 53 mmt, but that is below other private estimates of as high as 56 mmt, compared to last year's 38 mmt. Thursday's export sales data from December 20 at 87.9 million bushels was a huge number and included China, but total commitments (a seven-year low), at 1.1 bb, lag the previous year's 1.483 bb. Weather in Brazil will be closely watched, with predictions that dry NE Brazil is in line for rains, while Parana and Mato Grosso do Sul are likely to get showers but will return to the hot and dry pattern that has sapped yield potential. Watch for a close above $9.27 3/4 to be bullish, with a rally above $9.41 on March beans even more so. Support will continue to be at $91.10 to $9.15. DTN's National Soybean Index closed at $8.25, and reflects an average basis of 90 cents under March.

Wheat:

After Thursday's weakness, wheat markets are along for the bullish ride on Friday, fueled by soybeans. U.S. wheat is the world's cheapest wheat on an FOB basis, and the prospect for export business is strong. The spread between U.S. hard red winter (HRW) and Russian wheat is the widest in quite some time, with U.S. at a steep $18/mt discount. The promise of China buying U.S. wheat in the trade agreement is alive and well, but there is no sign of that to this point. The market has seemingly ignored the brutal cold snap that most analysts are convinced has caused some winterkill issues in soft red winter (SRW) areas. The U.S. now warms up before the cold returns late next week. Export sales reported on Thursday, reflecting sales from the week of December 20, were poor at just 19.3 mb, but included in that were the widely rumored sales of U.S. HRW to Egypt. Total sales of 632 mb compares to last year at 711 mb. Bullish to wheat is the extreme temperatures and lack of moisture predicted in parts of Australia over the next three months according to the Australian Bureau of Meteorology. There continues to be a host of wheat tenders around. Turkey reportedly bought 295,000 mt of milling wheat for February-March and Ethiopia's tender for 400,000 mt closed on Thursday, with no results yet. DTN's National HRW index closed at $4.76, and the average basis is at 23 cents under March, firmer.

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

Follow Dana on Twitter @mantini_r

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