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Morning Market Review for April 23, 2018

Futures edge higher after bruising week. (Comments are updated by 7:30 a.m. Central Time.

Overnight Trends:
Corn:
 Up 1 to 2
Soybeans: Up 1
Wheat: Mixed

Mixed weather outlook keeps traders cautious

Grain futures are narrowly mixed this morning after ability to hold chart support overnight spurred a little short covering and new buying. Export and trade news is light, helping markets focused on a mixed weather outlook.

Influence from outside markets is also minimal as investors take a break from recent volatility. Stocks traded mostly lower in Asia and Europe following last week’s downturn, leaving Wall Street set for a flat open today.

The dollar is firm, pressuring gold and crude oil modestly. Money managers added nearly $1.65 billion to their net long position in crude oil last week, helping futures rally to a three-day high. But big speculators cut bullish bets in crops and livestock by 52,084 contracts.

 

Corn prices are posting modest gains after holding a test of the 200-day moving average and Friday’s lows overnight. While forecasts hint at better weather for planting in the central Corn Belt, storms moving north of the Ohio River Valley should keep southern areas of the Midwest wet to start the week.

Growers posting Feedback From The Field through the weekend noted cold soils and muddy conditions, but wheels are starting to turn in a few areas. What’s happening in your fields? Let us know with our interactive feature and check out what other producers are saying. 

Overseas corn prices were a little stronger. May futures on the Dalian Exchange in China gained a half cent to $7.177 and futures in Paris were up 1.6 cents to $5.064 after adjustments for volumes and currencies 

Big speculators cut 45,014 contracts off their bullish bet on corn last week, according to Friday’s Commitment of Traders, selling a little more later in the week.

The preliminary report from the CBOT showed daily futures volume up 35% to 408,092 with open interest down 17,824 on heavy fund liquidation. Traders liquidated 34,728 May ahead of first notice day at the end of the week.

Options volume was 47% higher at 92,457, 64% of it calls as traders opened June and July options to replace May strikes that expired Friday. Implied volatility rose 8% Friday to 13.27. 

Bottom line: When will the markets be concerned about the weather? Traders think farmers can plant the crop in a week if needed, so it may take a while. Keep pricing old crop on rallies while waiting for better opportunities to sell 2018 production at profitable levels. For more, see my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Soybeans are fighting to stay above water this morning after a rebound from a lower open ran out of gas slowly overnight. May futures found support at the 50% retracement of its bounce off early April lows put in after China threatened a 25% tariff on imports.

While traders ponder whether the duty will ever take hold, vegetable oil prices in Asia slipped overnight, though soybean oil futures in Chicago are trying to firm. May soybean oil futures in China eased to 40.647 cents per pound and May futures for palm oil in Malaysia fell to 27.957 cents. 

Oilseed markets internationally were steady to weaker. May futures on the Dalian Exchange in China closed unchanged at $16.142, May rapeseed futures in Paris lost 2.1 cents to $9.411 and May canola futures in Winnipeg were off 3.9 cents at $9.434. Note: International prices are converted to bushel or pound equivalents after conversions for currencies. 

Big speculators beefed up bullish bets in beans to the highest level since 2016, but sold meal and oil as of Tuesday, according to the CFTC report, by sold beans the rest of the week.

The preliminary report from the CBOT showed daily futures volume 5% lower at 249,779 with fairly active fund liquidation helping to take 20,738 off open interest. 

Traders abandoned 404 in-the-money May $10.30 puts on Friday.  Options volume was 6% higher at 82,131, 55% of it puts as traders added out-of-the-money June and July puts and June calls. Implied volatility dropped almost another 5% to 13.66. 

Bottom line: Soybean supplies are large and higher prices may be attracting more acres. While the market could have legs into summer, use rallies to get some coverage on for new crop production, because prices are at profitable levels. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Wheat prices are mixed this morning, with trends shaped by weather outlooks. Minneapolis edge to new two-week lows overnight on prospects for better seeding conditions, though weekend storms were disappointing in some areas of the dry southwest Plains, supporting winter wheat contracts.

Overseas markets were mixed. May futures for Eastern Australian Wheat lost 3.2 cents to $5.908 but May futures in Paris morning trade gained 1.6 cents to $5.066 after adjustments for volumes and currencies.

Funds were mixed on their moves last week, Big speculators sold soft red winter wheat as of Tuesday and bought HRW with large traders also adding Minneapolis futures. Only 25 contracts are registered for delivery in Toledo ahead of first notice day.

Preliminary volume in soft red winter wheat was 18% higher Friday at 154,951 with modest new fund selling added 8,199 to open interest.

Options volume eased 4% to 23,090, 54% of it puts as traders added out-of-the-money July and September puts. Implied volatility eased almost 4% to 24.84. 

Volume in hard red winter wheat fell 4% to 54,592 as open interest fell 826.

Bottom line: The clock is ticking on the wheat market into the May 10 USDA report. For more details on the outlook, see the Wheat Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Explanation of pivot points. 

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This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed as to the accuracy, and is not to be construed as representation. The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results.
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