DTN Before The Bell Grains

Morning CME Globex Update:

Following Tuesday's 372-point gain in the Dow Jones Industrial average, Dow futures are again pointing higher at up 86. March crude oil is 38 cents higher, the U.S. dollar index is up 0.2070 and April gold is down 10 cents an ounce.

Other Markets:

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

Corn:

After Tuesday's sharp rally on corn, March is currently up 1/4 cent in quiet trade. Tuesday's strength was attributed to not only more China buying rumors, fueled by another sharp jump in both the Gulf and PNW corn basis, but also by news that the EPA was working on expanding the use of a higher ethanol blend with gasoline, likely allowing year round sales of E-15. The basis strength for export ports was partly related to the poor transportation situation, with snow, ice and rain slowing transportation, as barge and rail freight rose. The rumors of China corn buying seem to be even more prevalent, with lots of talk of possibly 8 to 10 million metric tons (mmt). However, word is that China has not yet released its TRQ (tariff rate quota) on corn, which in the last few years has been around 7.2 mmt. The idea that China needs a trade deal more than the U.S. is exemplified by the number of bankruptcies in China, with 2018 showing nearly four times the amount in 2017, according to Linn Group, including a few major firms, with one energy related firm. China's President Xi Jinping will meet the primary U.S. trade negotiators on Friday in Beijing. President Trump has hinted that the imposition of additional tariffs could be postponed beyond the March 1 deadline if more progress is made this week. South Korea bought 138,000 metric tons (mt) of corn on Tuesday, and another 65,000 mt and is reportedly back in for more corn on Wednesday. USDA reported 122,000 mt sold to unknown on Tuesday. CFTC, playing catch up on their commitment of traders report, revealed positions from the week of January 15, but currently the net corn position including futures is estimated at a modest net short of 15,000 contracts. Look for March corn to continue in that $3.73 to $3.83 range, while December will continue to see resistance up near $4.05. DTN's National Corn Index closed at $3.50 on Tuesday, with an average basis of 28 cents under March.

Soybeans:

Soybeans rallied sharply Tuesday on trade optimism and news that an agreement in principle had been achieved on government funding, possibly avoiding another partial shutdown at Friday's deadline. That agreement still has to be passed by Congress and signed by President Trump. Also supporting soybeans was yet another major analytical firm, Brazil's CONAB (the supply and statistical agency) lowering the soy crop to 115.3 mmt, down from their 118.8 mt previous estimate and last year's record crop of 120.3 mmt. It is interesting to note that in the last two years, CONAB has underestimated Brazil's soy crop at this stage. Weather has turned much more favorable for crops, with a wetter pattern and 1-3" of rain expected over much of the Brazilian growing areas in coming days, and with the next 10-14 days promising a boost to soil moisture. Although too late for many beans, this will help late-planted soybeans and safrinha corn. Soybean harvest is already 26% done versus just 10% last year. Domestic soybean bids were 2-5 cents higher on Tuesday, and Gulf bids were also up, likely reflecting transportation woes. Brazilian soybeans are offered at just 5 cents over spot futures versus U.S. values and that compares to 20 over last year at this time. Look for March soybeans to continue to see resistance at $9.25-$9.27, and support down near $9.00. DTN's National Soybean Index closed at $8.30, and reflects an average basis of 89 cents under March.

Wheat:

Wheat is a mixed bag, following Tuesday's higher close in both Chicago and Minneapolis and lower finish in Kansas City. Spreads continue to tighten in both Chicago and Minneapolis, with the question being is this demand related? As in corn, rumors persist regarding China buying U.S. wheat, but so far, there is no solid indication of that. The U.S. dollar index is again moving higher, and a bearish input for wheat. For the fourth time since November, Chicago July wheat has stopped at $5.17 and rallied, with Tuesday being the most recent. There is demand around, and the recent sales report suggesting sales to Egypt and Nigeria are a step in the right direction. Bangladesh is back in for another 50,000 mt, and they are expected to buy as much as 6 mmt in 2018/2019, a 34% jump over their five-year average. Jordan has returned to buy 120,000 mt. We are still waiting to hear results of Ethiopia's 400,000 mt tender. Tunisia is in for 100,000 mt of milling wheat, and Algeria is in Thursday for 50,000 mt of wheat for March, which could be up to 400,000 mt. Wheat flat price is having a tough time rallying as the narrow spreads are encouraging cash movement, and unwinding of long KC and short Chicago futures spreads have pressured Kansas City. Weather in the U.S promises some issues, with bitter cold this coming week likely to again stoke winterkill fears, while heavy precipitation in the SRW areas could lead to problems there. DTN's National HRW index closed at $4.71, and the average basis is at 21 cents under March, firmer.

Dana Mantinican be reached at dana.mantini@dtn.com

FollowDana on Twitter @mantini_r

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