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Morning Market Review for August 18, 2017

Futures fight against renewed selling. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trade:
Corn:
 Steady
Soybeans: Mixed
Wheat: Up 1 to 4

Markets try to calm down after harrowing week

Grain futures are trying to hold on to small overnight gains as the morning break nears, following another week of selling. Ongoing pressure from large supplies and lack of a weather threat kept markets on the defensive this week.

Farmers posting Feedback From The Field this week improved yield estimates a little but remain 6% to 10% lower than USDA’s forecasts Aug. 10. Let us know what your yield estimates are by clicking the link.

Wall Street joined commodities in bleeding red ink yesterday. Investors rushed to the sidelines as news spread of the Barcelona terror attacks, which undermined a market already worried after bearish statements from central banks and political turmoil in Washington.

 

Corn prices remain range bound, holding a tick above this week’s 10 ½-month lows when an attempt to firm fell flat. 

Rains so far this week continued to miss large parts of the eastern Corn Belt, where pockets of dryness are starting to show up on the weekly Drought Monitor out Thursdays. Another system early next week could continue that pattern, according to maps for the next week, Official 6- to 10 and 8- to 14-day forecasts out yesterday showed a shift to below average temperatures and the latest updates this morning confirmed below average precipitation for the eastern Midwest.

Outlooks for fall out yesterday show above normal temperatures and mostly normal rainfall in the Midwest.

Export sales of 28.9 million bushels were for new crop except for 2.5 million bushels of 2016 production. New crop bookings are down almost half from last year’s strong showing that was swelled by a short crop in Brazil. This year growers in South America are wondering where to store a large crop, even as they start planting another this fall.

Overseas markets were mixed. September futures on the Dalian Exchange in China rose 1.1 cents to $6.45 while November futures in Paris eased 2.2 cents to $4.783 after adjustments for volumes and currencies.

China sold 40% of the 48 million bushels of reserves auctioned Friday. Buyers shunned old grain, some of it dating to 2011, taking mostly 2014 bushels as the government continues its attempt to whittle down massive inventory. France said 79% of its corn crop was in good to excellent condition, unchanged from last week.

The preliminary report from the CBOT had futures volume down 44% on Thursday to 273,066 with modest new fund selling helping to boost open interest by 15,524 contracts. Options volume was off 56% to 65,112, 40% of it calls as implied volatility rose 1.5% to 20.32. Active trade was noted in the March $3.90/$4.30 bull call spread for a 10-cent bet on a rally.

Bottom line: USDA may be wrong with its forecast for both yields and acreage, but confirmation will take time to develop. The best to hope for now is a consolidation into Labor Day as a flood of old crop grain is moved. For more, see my Weekly Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Soybeans tried to keep their three-day rally alive overnight, surviving an attempt to break lower around midday in Europe. November futures held on to a fledgling uptrend after making seven-week lows Wednesday.

Better demand news helped the recovery. Export sales jumped to 49.7 million bushels last well, well above the high end of trade guesses. Almost one-third of the total was old crop, helping send unshipped 2016 sales to a record level. Some of those will likely be rolled to new crop, helping improve the slow pace of 2017 crop bookings, which are at an eight-year low.

USDA later announced the sale of 6 million bushels to China under its daily reporting system for large purchases, but the deals can be sourced from destinations other than the U.S.

The preliminary report from the CBOT showed daily futures volume up 10% to 173,779 but still lower than wheat. Open interest rose 5,661 despite modest fund short covering. Options volume fell 22% to 73,579 with implied volatility down a half a per cent to 18.04. Traders liquidated out-of-the-money September puts that expire at the end of next week.

Vegetable oil markets in Asia were higher. September soybean oil futures on the Dalian Exchange in China closed at 41.541 cents per pound while September futures for palm oil in Malaysia rose a quarter cent to 28.345 cents.

Oilseed prices internationally were firm. September soybean futures in China ended less than a penny higher today at $15.473, November rapeseed in Paris was steady at $9.778 and November canola in Winnipeg gained 2.3 cents to $8.984. Note: International prices are converted to bushel or pound equivalents after conversions for currencies.

Bottom line: Until signs of stress emerge in the U.S., or later in South America, buyers have no need to worry about supplies. That should keep the markets under pressure. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Wheat prices are a little higher at all three markets. Winter wheat contracts held to inside days after this week’s break to new contract lows while Minneapolis held support to maintain its small uptrend for the week. 

While some parts of the hard red winter wheat growing region were shorted on rainfall this week, most areas received good coverage, and forecasts look wet into fall. 

Export sales last week were respectable at 23.3 million bushels, keeping the year-to-date total in line to surpass USDA’s forecast for the crop. 

Overseas markets were missed. January futures for Eastern Australian Wheat held steady at $5.429 and

December futures in Paris morning trade lost 1.6 cents to $5.167 after adjustments for volumes and currencies. 

Volume in soft red winter wheat fell 4% to 179,455 with light new fund selling adding 5,516 to open interest. Volume in hard red winter rose 2% to 71,289 on open interest that was 4,984 higher.

Options volume in soft red winter wheat dropped 16% to 40,899, 58% of it puts as implied volatility jumped 7% to 26.70. New interest was noted in 2018 crop puts.

Bottom line: Large global supplies appear to be frustrating wheat’s attempt for a seasonal rebound. For more details on the outlook, see the Weekly Wheat Review. 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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