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Morning Market Review for June 20, 2018

Futures try to hold relief rally. (Comments are updated by 7:30 a.m. Central Time.)

Overnight Trends:

Corn: Up 1

Soybeans: Up 1 to 2

Wheat: Up 6 to 8

Markets move higher overnight as trade war fear eases a bit

Grain futures are higher across the board this morning, getting a modest relief rally following Tuesday’s severe downturn that took markets around the world lower on fears of a trade war between China and the U.S.

With no news so far from the trade trenches, financial markets are breathing easier. Stocks moved higher in Asia and Europe, poising Wall Street for gains on the open this morning. 

Gold is a little lower on lack of safe haven buying, while the dollar is firm. Crude oil traded both sides of unchanged but held above $65 a barrel ahead of today’s wee4kly inventory data in the U.S. While OPEC talks this week about boosting production, traders expect a drop in crude oil supplies though there’s uncertainty about diesel inventories.

 

Corn prices are fighting to hold on to gains following two-sided trade overnight. Yesterday’s selloff in corn was mostly in sympathy with soybeans because the U.S. exports little corn to China. But lack of a weather threat is also pressuring prices.

Still, Vegetation Health Index maps out yesterday continued to show readings below last year over a wide swath of the Corn Belt, despite some of the best ratings on record.

Farmers reporting Feedback From The Field yesterday continue to report hit or miss rains. “Fields are waterlogged and corn and soybeans are stressed,” said a southern Minnesota producer. But another producer to the south in Iowa said crops badly needed rain after recent heat.

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 on our interactive map

Storms focused on the southern and central Plains this morning are expected to provide good coverage to most of the Corn Belt over the next week. Official 6 to 10 and 8 to 14-day forecasts out yesterday show heat returning after mild conditions this week, though the latest morning updates are cooler.

The latest data on ethanol production out at 9:30 CST will show it strong usage of corn continued last week as plant margins improved due partly to cheap corn feed stocks.

Overseas markets were stronger today. September futures in China edged almost a penny higher to $6.931 and August futures in Paris gained 5.1 cents to $4.812 after adjustments for currencies and volumes  Mostly dry weather prevailed over key European growing regions so far this week.

The preliminary report from the CBOT showed daily futures volume up nearly 80% yesterday to a very large 814,825, while open interest rose 19,021 on heavy fund selling. Options volume nearly doubled to 363,729 with two-thirds of that in calls. While traders took profits on puts they rolled down September and August calls, with new interest again noted in new crop September calls and puts. Implied volatility in the at-the-money December options rose nearly 1% to 23.97. 

Bottom line: Aggressive sellers used the break to pick up call options insurance to protect sales if the market can muster a rally on weather. So far, however, rallies look doubtful. For more, see my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Soybeans are fading overnight gains as the session winds down, with the market still facing fallout from trade war fears.

Vegetable oil markets in Asiawere mixed today. September soybean oil in China lost another half cent to 38.49 cents per pound but July palm oil futures in  Malaysia edged slightly higher to 26.677 cents after yesterday’s selling.

Oilseed markets internationally saw a similar pattern. September soybean futures in China lost 1.5 cents to $15.39, with a small auction of 2013 crop government reserves getting a tepid response. August rapeseed futures in Paris were up 2.6 cents to $9.145 and July canola futures in Winnipeg gained a half cent to $8.845 after adjustments for volumes and currencies.

The preliminary report from the CBOT showed daily futures volume up 46% yesterday to 538,772 while open interest fell 9,367 despite heavy new fund selling. Options volume more than doubled to 228,423, 57% of it puts as traders liquidated July puts that expire Friday while again dumping November $13 and $11 calls. Implied volatility in November at-the-money options rose nearly 3.5% to 22.45.

Bottom line: Batten down the hatches until the market settles down. Rallies may not really pop up until later in the growing season. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Wheat prices are higher this morning after mixed action on price charts. While soft red winter wheat futures rejected a break below the 200-day moving average and 2018 trend line, hard wheat contracts remain in a more bearish condition.

Buyers so far remain cautious. Egypt filled its latest tender with 8.8 million bushels of Romanian wheat at a delivered price of $5.93. While lack of U.S. offers was not surprise – deliveries out of the Gulf cost 40 cents more – the lack of Russian supplies is an indication of rising prices after wheat trimmed expectations in the world’s largest exporter. 

Overseas markets were also stronger today. January futures for Eastern Australian Wheat gained 6 cents to $6.579 after scattered showers over the eastern part of the continue today. December futures in Paris were up 5.5 cents to $5.637 after adjustments for volumes and currencies

Preliminary volume in soft red winter wheat rose 27% yesterday to 253,320 with open interest down 12,013 on modest fund selling. Options volume was 35% higher at 60,041, with a few more calls trading than puts as traders liquidated July puts and calls that expire Friday. Implied volatility in at-the-money July options was up 6.8% to 45.31. 

Volume in HRW increased by 30% to 97,018 on open interest that fell 4,852,

Bottom line:Wheat is being swamped by weakness in broader markets and the strong dollar. That’s disrupted the narrative for a long-term bottom. 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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