DTN Before The Bell Grains

Corn Barely Higher, Soybeans & Wheat Continue Bearish Slide

Dana Mantini
By  Dana Mantini , Senior Market Analyst
(DTN photo by Greg Horstmeier)

Morning CME Globex Update:

Following Friday's 443-point gain, Dow futures are trending slightly lower in the overnight, down 57 points. March crude oil is up 47 cents, the U.S. dollar index is up 0.1460, and April gold is up $13.00, at the highest level since mid-June of 2018. Trade is awaiting Thursday's six weeks of export sales to be released by USDA.

Other Markets:

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

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Corn:

March corn continues to trade right on the uptrend line, and slightly below key moving averages in very slow trade. Although it is a quiet start to the holiday-shortened week, traders are looking forward to an impressive data release this week. On Thursday, the FAS (Foreign Agricultural Service) is expected to release export sales for a six-week period, bringing us up to date after the government shutdown. In addition to that, the USDA Outlook Forum Thursday and Friday will release their 10-year S & Ds. There are a few corn tenders around, with South Korea having bought 60,000 metric tons (mt) and 65,000 mt parcels of corn Friday. Trade talk that China could ultimately buy at least 5 million metric tons (mmt) of U.S. corn once the trade deal is settled continues to make the rounds. Some analysts feel that China could take as much as 8-10 mmt of U.S. corn. With Argentina on track for a record large corn crop, and with current rains and a wetter outlook promising a change in soil moisture for Brazil's safrinha corn crop, demand could soon shift to the south. Chinese press are reporting that a trade deal is near. That counters U.S. trade representative talk that, although progress is being made, there is much more work to be done. On a positive note, ethanol margins are improving in the U.S. March corn continues to trade within the narrow $3.73-$3.83 range that has marked the last few months. December corn, on any bounce, will continue to find stiff resistance around $4.05-$4.08, with a rally and close above that area bullish. February average price for insurance is $4.01, and now the trade is leaning toward more corn acreage. DTN's National Corn Index closed at $3.48 on Friday, with an average basis of 27 cents under March.

Soybeans:

March soybeans are little changed and continue to hover right above the uptrend line, but below the 20 and 50-day moving averages. While Friday was a slow trading day, Thursday's sharp fall in futures was a result of the old news of China cancellations from January 22. Trade now suspects that this may have been private Chinese crushers, having bought optional origin beans switching from U.S. to Brazil, not a sign that the U.S.-China negotiations had broken down. Those talks continue this week in Washington, with optimism high. However, the talk is that U.S. trade officials could extend the deadline again, from March 1 to another sixty days, to give talks more time. Brazil's soybean harvest is now 36% done. Ag Resource says that they don't see final Brazilian soy production falling below 114 mmt, while some private estimates have been down near 112 mmt. While U.S. soybean sales have been well behind a year ago due to the trade conflict and African swine fever, the EU has picked up some slack with their soybean imports since July 1 up 10% and soybean meal imports up 8% versus last year. African swine fever continues to be a demand killer, with yet another case reported over the weekend in a new province in China's south, and Vietnam reporting new cases as well. Ag Resource suggests that 10-15% of China's total pig herd has either been infected or destroyed from this disease, the highest estimates so far. The NOPA crush revealed a record for the month, at 171.63 million bushels (mb) versus trade estimates some 2 mb below. Good crush margins continue to encourage solid demand domestically. Weather in South America is now much improved, at least stabilizing the crop, but some dryness is beginning to creep into parts of southern Argentina. China reports plans to increase soybean acreage, while keeping corn acres stable. Look for March soybeans to continue to find support at $9.03 and then $9.00, while resistance on any bounce will figure to be strong at $9.15-$9.20. The February insurance price to date is averaging $9.56 on November beans. DTN's National Soybean Index closed at $8.21, and reflects an average basis of 87 cents under March.

Wheat:

Wheat continues its downward slide that began a few weeks ago, with Kansas City spot March futures now having fallen close to 40 cents from the high on February 6. A sharp fall in world prices, with Russian FOB prices having backed off $12/mt, pressured U.S. wheat and encouraged commodity funds to sell. Sov Econ projected a Russian grain crop of 126 mmt last week, well above the 118 mmt that the Russian ag minister had projected. ABARE (Australia's Bureau of Agricultural and Resource Economists) raised Australia's wheat production slightly, to 17.3 mmt from 16.95 mmt, but that is the lowest production in eleven years. Ethiopia did buy 400,000 mt of optional wheat that closed late last week. Weather in the U.S. will feature very cold temperatures with heavy snows in the Midwest, and heavy rains in the Delta and Southeast over the next 48 hours. The average of the February insurance price for Minneapolis September futures is $5.84 halfway through the month. Kansas City wheat futures are getting to be very oversold on the charts. Look for KC March to have formidable resistance on a rally back to $4.85-$4.90. DTN's National HRW index closed at $4.56, 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

(KR)

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Dana Mantini