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Morning Market Review for January 18, 2018

Growers mull 20018 plans while market tries to turn the corner. (Comments are updated by 7:30 a.m. Central Time.)

Overnight Trends:
Corn:
 Steady to down 1
Soybeans: Down 1
Wheat: Up 1 to 2

Futures drift waiting for direction

Grain futures are quietly mixed this morning as markets absorb the long-term impact from last week’s USDA reports and outside markets post gains from signs of greater global growth. Farm Futures released results of its latest planting intentions survey for 2018, a sign that spring is already starting to enter the discussion.

Stocks in Asia and Europe traded mixed today after yesterday’s run to new records on Wall Street, despite news of stronger than expected Chinese growth data out overnight. U.S. stock index futures are trying to rally as the open in New York approaches, while the dollar, crude oil and gold are all firm.

Crude oil inventories likely fell last week but product inventories may show an increase when the government releases updated data today. Urea prices are softening on ideas India won’t be back in the market for a couple of months.

 

Corn prices are little changed this morning after trading in a range of just a half-cent for much of the overnight session. March futures try to hold on to their test of the 50-day moving average, which comes in around $3.5275 today.

Farm Futures reported farmers hope to plant 90.1 million acres of corn in 2018, down slightly from 2017. Corn doesn’t pencil out as strong as soybeans so far this winter, with futures also favoring beans.

Ethanol production has dropped sharply the last two weeks as margins stay under pressure despite a large discount between ethanol and gasoline that encourages blending. The government updates its production estimates today at 10 a.m. CST.

Export news is fairly quiet, though Taiwan did buy 2.6 million bushels of U.S. origination overnight.

Overseas markets are mixed. May futures on the Dalian Exchange in China lost 2.2 cents to $5.612 and March futures in Paris were up a half cent at $5.206 after adjustments for volumes and currencies. 

The preliminary report from the CBOT showed daily futures volume up 41% Wednesday to 394,598 on open interest that rose 9,876 despite active fund short covering. Options volume more than doubled to 100,967, 61% of it calls though new interest was noted in the May $3.20, $3.40 and $3.60 puts. Implied volatility jumped 10% to 11.64.

Bottom line: Supplies are big and corn could struggle into February before the market starts to focus on acreage and the size of the Brazilian crop. For more, see my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Soybeans are a little lower after choppy trade overnight. March futures yesterday filled Tuesday’s downside gap but reversed higher, though a bearish crossover is showing up on daily charts with moving averages. 

Farm Futures reported farmers hope to plant 90.1 million acres of soybeans this spring, a few more than corn and slightly more than they put in in 2017. Soybeans have an edge profit-wise against corn but could lose ground to cotton in the South. 

USDA Wednesday reported the sale of 4.8 million bushels to unknown destinations under its daily reporting system for large purchases, but weekly data is delayed until Friday due to Monday’s holiday.

Parts of the southern and northern end of the growing region in Argentina picked up storms over the past 24 hours, though rains don’t look impressive in forecasts for the next two weeks. Reports of bigger yields in Brazil are dampening expectations for losses in Argentina. 

Asian vegetable oil markets were weaker today. May futures for palm oil in Malaysia closed at 28.445 cents per pound and May soybean oil futures in China eased to 40.32 cents.

Oilseed prices internationally were mixed. May soybean futures in China lost 3.4 cents to $15.259, February rapeseed futures in Paris were up less than a cent at $9.551 and March canola futures in Winnipeg gained 5.6 cents to $8.978. Note: International prices are converted to bushel or pound equivalents after conversions for currencies.

The preliminary report from the CBOT showed daily futures volume 2% higher at 158,193       with open interest up 10,996 despite light fund short covering. Options volume fell 22% to 46,733, 62% of it calls with new interest noted in the March $9.80 and $10 calls as traders liquidated $9.40 puts. Implied volatility in options fell 3.1% to 11.23.

Bottom line: Soybeans face a make-or-break moment trying to hold Friday’s bullish reversal to mount a counter-seasonal rally. If successful, use gains to wrap of 2017 sales and get started on 2018. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Wheat prices are a little higher following slow but steady buying overnight. Uncertainty about weather damage to U.S. winter wheat from a series of cold snaps prompted a little short covering after futures at all three markets held lows Wednesday. 

Farm Futures survey showed growers on the northern Plains want to boost spring wheat seedings 6.7% to 11.8 million. Coupled with nearly steady winter wheat plantings reported last week that would take total acreage to 46.8 million, up nearly 2%. 

Japan as expected filled its latest tender with U.S., Australian and Canadian wheat. Algeria also bought a couple loads of durum.

Overseas markets are mixed. March futures for Eastern Australian Wheat fell 2.2 cents to $5.608 while March futures in Paris morning trade are steady at $5.193 after adjustments for volumes and currencies following a break to new contract lows yesterday.

Preliminary volume in soft red winter wheat dropped 45% yesterday to 83,931 while open interest was down 649 on light fund short covering. Options volume was 41% lower at 20,254, 70% of it calls as traders liquidated March puts. Implied volatility edged slightly lower to 16.76 

Volume in hard red winter wheat winter wheat was 27% lower at 41,130 on open interest that was up 2,126.

Bottom line: Wheat typically loses ground after the January reports and appears to be following that trend this year. 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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