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Morning Market Review for July 20, 2018

Soybeans try to sidestep China threat. (Comments are updated by 7:30 a.m. Central Time.)

Overnight Trends:
Corn:
 Up 2
Soybeans: Up 6
Wheat: Up 4 to 6

Futures fight to extend rally despite new tariff uproar

Grain futures are higher this morning, with soybeans trying to recover from a stumble when markets swooned after CNBC aired an interview recorded Thursday with President Trump saying he was ready to put $500 billion in new tariffs on China. While the threat is not new, the story broke the relative calm from a week when trade wasn’t the top issue dominating headlines.

Though soybeans quickly recovered, U.S. stock index futures remained underwater. Stocks had ended higher in Asia and were also gaining in Europe before the tariff story broke.

The dollar pared gains from Thursday’s move to a new one-year high, providing a little breathing room for commodities. Gold edged higher and crude oil tried to hold a test of $70.

 

Corn prices posted modest gains overnight, but that was enough to take September futures to a test of the trendline drawn off highs for the last month. Encouraging news about demand and uncertain yields helped futures recover this week, though gains came on low volume.

Export sales reported Thursday for last week jumped to 55.7 million bushels, well above trade expectations. Though a surge of shipments will be needed to reach USDA’s forecast for the 2017 crop, new crop bookings are starting to pick up. 

The slow-moving system bringing rain this week will continue to work across the Corn Belt, with heavy accumulations still possible for the eastern Midwest. Official 6 to 10 and 8 to 14-day forecasts out yesterday showed below normal temperatures continuing into early August, with the turn drier lasting in the northern part of the growing region. The morning updates from the ensemble forecast remain a little wetter toward the end of the period. 

Farmers reporting Feedback From The Field this week rated crops average at best, a decline from last week.

What’s happening in your fields? Let us know by clicking this link to enter your data and comments and check out the latest reports by scrolling down to our updated interactive map.

Overseas markets are mixed today. September futures in China ended with another new low for the year, losing 1.6 cents to $6.677. as the government continued to auction off reserves this week. But August futures in Paris in midday trade gained 6.7 cents to $5.173, after adjustments for currencies and volumes. Fields in France will see only scattered showers in the next week and temperatures in South Russia are expected to heat back up to the mid- to upper 90s next week following showers and moderate temperatures this week. 

The preliminary report from the CBOT showed daily futures volume13% higher yesterday at 259,467 while open interest was up 20,819 despite only light fund buying. Options volume dropped 19% to 70,372, 62% of it calls with new interest noted in the December $4 call and $3.40 put. Implied volatility in the at-the-money December options eased to 19.52.

Bottom line: Demand is encouraging but the market may have to see USDA’s August production forecast before finally confirming a bottom. For more, see my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Soybeans are higher, recovering from a brief selloff in the wake of threats for new tariffs on China. August futures stayed in their uptrend for the week while November edged closer to the trendline drawn off highs for the last three weeks.

A solid week of export sales reported yesterday helped keep beans from slipping, supporting ideas that other countries are more than willing to buy what China will not. Net new bookings of 31.8 million bushels showed customers covering both old and new crop needs. 

Vegetable oil markets in Asiawere quiet. September soybean oil futures in China eased slightly to 36.815 cents per pound and September palm oil futures in Malaysia were unchanged at 24.519 cents.

Oilseed markets internationally are stronger today. September futures in China edged a half-cent higher to $14.10, August rapeseed futures in Paris in midday trade gained 1.3 cents to $9.543 and November futures Winnipeg canola overnight were up 2.9 cents to $8.482 after adjustments for volumes and currencies.

Thepreliminary report from the CBOT showed daily futures volume 7% higher at 127,092 Thursday with light fund buying helping to add 3,854 to open interest. Options volume was up 28% to 45,797, 55% of it calls with a little new interest noted in November calls. Implied volatility in November at-the-money options fell to 21.06. 

Bottom line: Expect only a modest short covering bounce from weather for now. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Wheat prices are starting to build momentum as the overnight session winds down, bolstered by price charts looking more bullish. September soft red winter wheat tested the 38.2% retracement of its buck-a-bushel selloff from May highs, HRW made a new seven-day high and Minneapolis finally broke out of a short consolidation.

Ideas lower global production will bolster prices and exports helped support the market. Export sales last week more than doubled to 11 million bushels, though that was below the rate needed to reach USDA’s forecast for the 2018 crop. Taiwan is tendering for U.S. wheat today while Japan announced it will begin buying Canadian wheat after finding no traces of GMOs in recent shipments.

Overseas markets also provided some juice. January futures for Eastern Australian Wheat gapped to new contract highs, closing up another 7 cents to $6.994, as rains remain limited on the parched continent. December futures in Paris midday trade were up 6 cents to $6.10 after adjustments for volumes and currencies. 

Volume in soft red winter wheat was slightly lower yesterday at 91,162, with open interest down 2.037 despite light new fund selling. Options volume was up 37% at 30,762, 69% of it calls, with more new interest noted in the March $5.60 call. as implied volatility in at-the-money September options was at 29.82.

Volume in HRW futures was up 7% to 37,579 on open interest that was up 1,987.

Bottom line:Wheat is trying to prove it’s time to start a post-harvest rally. 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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