DTN Before The Bell Grains

Morning CME Globex Update:

Following Wednesday's modest 22-point decline in the Dow Jones average, Dow futures are down 135 points. March crude oil is down 66 cents per barrel, the U.S. dollar index is up 0.1660, and April gold is down $1.80.

Other Markets:

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

Corn:

Corn, in dull trade, continues to coil in a very narrow range and just above key moving averages. Trade awaits Friday's USDA report which is anticipated to show a decline in corn yield and production, but also a likely drop in both ethanol and feed usage. Although delayed ethanol export data from November showed a large jump in U.S. exports, the 4.4% drop in production last week was the lowest since October of 2017. Multiple analysts are looking for a 50 to 100 million bushel cut in annual ethanol usage on Friday. Export activity on corn remains a bullish input with first quarter U.S. corn exports sharply above last year. Basis at both the Gulf and the PNW has firmed up in the last few days, suggesting more demand. Funds remain net-long corn, but have whittled that once large long down to an estimated 30,000 contracts when you include options. The trade estimate for Friday's corn yield is 177.8 bushels per acre, a reduction of 1.1 bushels per acre (bpa). Weather in Brazil has taken a turn for the better, with newly planted safrinha corn (at 35% planted so far) likely to benefit from the wetter outlook ahead. In Argentina, there is talk that the corn crop is getting bigger as cooler weather during filling is adding to what could be a record large yield there. March corn will continue to trade within the $3.75 to $3.83 range that we have seen, while December corn is also coiling within a triangle chart pattern with solid resistance in the $4.05 to $4.10 area. DTN's National Corn Index closed at $3.52 on Wednesday, with an average basis of 29 cents under March. The USDA delayed export sales reported for the week of December 27 are bullish for corn with total sales up 19%, and shipments up 75% from a year ago.

Soybeans:

March soybeans continue to trade around the 200-day moving average at $9.18 in slow trade. Since Friday, the USDA has announced a total of 4.2 million metric tons (mmt) of China soybean purchases, with most in the trade assuming that China bought a total of 10 mmt of U.S. soybeans since the trade talks began. The soy complex has been supported by the bullish soybean oil market, up again in the overnight and the highest in seven months, fueled by stronger biodiesel demand. Palm oil also was up another 1.7% on Thursday. Soybean meal has also been a bright spot on the export front with combined October-November meal exports at 2.2 million tons (mt), the second largest ever for that period. As China has stood by their pledge to buy that additional 5 mmt of U.S. beans, the basis at both the Gulf and PNW has firmed. U.S. soybean exports to others besides China have jumped sharply this year versus the last two years. However, U.S. sales and shipments still lag far behind last year. On Friday's report, trade expects USDA will lower soybean yield by 0.4 bpa. The big question is will they reduce U.S. soy exports? Also closely watched will be Chinese soy demand, weakened not only by the trade dispute, but also by the African swine fever epidemic. Private estimates range from 85 to 90 mmt on China imports versus the 94.1 mmt last year. Weather in Brazil is much more conducive to soybean yields in the weeks ahead following the very dry December-January in some key regions. Better rains are called for in much of Brazil. The crop has already been reduced, with many in the trade in the 115 to 117 mmt range. CONAB (the Brazilian government food supply and statistics organization) will be out on Friday ahead of the WASDE report with their own revision, and the trade expects a 116 to 117 mmt number versus the 118.8 in their last report. March beans will continue to have resistance in the $9.25-$9.30 range and $9.41 above, and support at $9.10-$9.15. November soybeans will have formidable resistance anywhere near $9.70-$9.80. DTN's National Soybean Index closed at $8.32, and reflects an average basis of 89 cents under March. The USDA delayed sales report for the week of December 27 continue to be bearish for soybeans, with total sales and shipments down 24% and 40% for the year.

Wheat:

Kansas City March wheat is under pressure Thursday morning and trading just above key moving averages at $5.03-$5.04. Some pressure on wheat may be coming from the higher U.S. dollar as the Euro is weaker on bad German economic news, and the Australian dollar weakened on ideas of falling interest rates there. Wheat has been the bright spot lately in futures markets with spreads tightening and basis rising, but Thursday morning those spreads are widening again, with the HRW basis having softened on Wednesday. Friday's USDA and WASDE report is expected to have few significant changes for wheat, but one that will be closely watched is winter wheat acreage which is pegged at the lowest level in over a hundred years. While good demand for U.S. wheat has been assumed lately, it is demand that we sorely need with export sales and shipments lagging well behind a year ago. Funds remain short a modest position in wheat. On KC March futures, look for $4.97-$4.98 range to be support, and the $5.15-$5.20 range to provide sell pressure. DTN's National HRW index closed at $4.89, and the average basis is at 23 cents under March, firmer. The USDA delayed sales report for December 27 were bearish for wheat, with total sales and shipments off 9% and 11% from a year ago.

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

Follow Dana on Twitter @mantini_r

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