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Morning Market Review for March 20, 2018

Markets edge higher after Monday meltdown. (Comments are updated by 7:30 a.m. Central Time.

Overnight Trends:
Soybeans: Up 1 to 3
Wheat: Up 2 to 5

Can rain save hard red winter wheat crop?

Grain futures are mostly higher this morning, getting a relief rally on the heels of Monday’s drubbing. Outside markets are also trying to stabilize following a day when red ink flowed around the world. 

The Federal Reserve begins a two-day monetary policy meeting today, and betting in futures shows nearly a 95% expectation the central bank will raise its benchmark interest rate by one-quarter of 1% tomorrow. But the real news is likely to come in the so-called “dots” – charts that show participants’ expectations for interest rates in the future. The market will also test the mettle of new Chairman Jerome Powel at his first quarterly press conference.

Stocks traded mixed in Asia before turning solidly higher in Europe, as U.S. markets try to recover from yesterday’s selloff. Shares of Facebook weighed down indexes, triggering technical selling across the board as that social media company faces new questions about its control over users’ data.

The dollar is bouncing back this morning on interest rate expectations and the more positive tone. Gold is softer but crude oil is edging towards $63 as seasonal demand kicks in, taking diesel costs prices higher.


Corn prices are little changed following two-sided trade overnight. May futures held yesterday’s lows early Monday night but an attempt to rally faded after the first hour of trading in Europe as the nearby battles to stay above the 50% retracement of its winter rally.

Positive export news Monday got drowned in the wake of selling. Inspections last week came in at 55.5 million bushels, as exporters work off a record book of unshipped sales for this time of year. Though year-to-date inspections lag overall due to a slow start, last week’s total was in line with the rate needed for the rest of the marketing year to reach USDA’s forecast for the 2017 crop.

USDA separately announced the sale of 8.1 million bushels to Japan and 4.5 million bushels to unknown destinations under its daily reporting system for large purchases. Japan was the leading destination for U.S. corn last week, taking 13 million bushels in all.

Overseas markets are mixed. May futures on the Dalian Exchange in China lost 3.7 cents to $7.259 as high prices are likely to lure more acres into production than the government wants as it tries to get rid of supplies by pushing ethanol usage. But some blenders are already eying imports of the biofuel, which were choked off by officials last year. May futures in Paris gained 2.3 cents to $5.098 after adjustments for volumes and currencies.

The preliminary report from the CBOT showed daily futures volume up by more than a third on Monday to 460,580 though open interest fell only 4,393  despite heavy fund liquidation. Options volume was 19% higher at 120,693, 57% of it calls as traders continued to add September $4.50 and $5 calls while rolling down April and May puts. Implied volatility rose another 4% Monday to 15.58. 

Bottom line: Corn appears to be ready to consolidate winter gains into the March 30 reports. A steep selloff into the end of the month would be an opportunity to pick up some call options to cover expected new crop sales. For more, see my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.


Soybeans are trying to hang on to modest gains this morning after reversing higher early in the overnight session. May held a test of its short-term support line, with the 61.8% retracement and 50-day moving average just below the market. 

While some tried to tie yesterday’s selling to rains in Argentina, coverage was limited to areas outside the main growing regions for both corn and soybeans.

Disappointing export inspections last week of just 18 million bushels added to yesterday’s gloom, falling well below trade guesses and the rate needed to reach USDA’s forecast for the 2017 crop. China took only 4.6 million bushels, despite stepping up the pace of its buying recently. Year-to-date inspections are running 9% behind the rate forecast the government. 

Vegetable oil markets in Asia were mixed today. May soybean oil futures in China lost a fifth of a cent to 40.442 cents per pound but May futures for palm oil in Malaysia edged higher to 28.346 cents on hopes for better demand.

Oilseed prices internationally were mixed. May futures on the Dalian Exchange in China jumped 8.9 cents to $15.95, May rapeseed futures in Paris fell 2.8 cents to $9.632 and May canola futures in Winnipeg were 3.5 cents higher at $9.104. Note: International prices are converted to bushel or pound equivalents after conversions for currencies. 

The preliminary report from the CBOT showed daily futures volume up by more than two-thirds to 249,270 with active fund liquidation taking 3,224  off open interest. Options volume nearly doubled to 103,584, with a few more calls trading than puts as traders continue to add out-of-the-money November calls while liquidating April strikes that expire on Friday. Implied volatility in options fell 4% to 14.70. 

Bottom line: Soybeans appear ready for consolidation after making a seasonal top in February, but how long that may last is unclear. The market is on high alert for an increase in production. We’ll report results of our latest survey March 23. 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 on short covering and bargain hunting following yesterday’s heavy losses.

Good rains across much of Kansas helped trigger the downturn, with areas to the north due for precipitation this weekend. The second week of the outlook continues to call for above normal precipitation across the growing region as traders try to assess the impact of drought on the hard red winter wheat crop. 

Ratings out Monday in a few key states showed a slight deterioration overall, as losses in Kansas and Texas more than offset improvement in Arkansas and Oklahoma.

Export inspections were a little better than expected at 16.3 million bushels, though that still fell short of the rate needed every week to reach USDA’s forecast for the 2017 crop. Year-to-date inspections are running around 2% behind that pace.

Overseas markets were mixed today. May futures for Eastern Australian Wheat fell 6.3 cents to $5.62 while May futures in Paris morning trade were up a half cent at $5.437 after adjustments for volumes and currencies.

Preliminary volume in soft red winter wheat was up 40% yesterday to 189,093 while open interest fell 11,629 despite active new fund selling. Options volume was 8% higher at 61,109, 58% of it calls with new interest noted in the March 2019 $4.90 put. Implied volatility rose 2% to 25.33, remaining well above levels in the stock market.

Volume in hard red winter wheat more than doubled to a heavy 149,921 on open interest was down 14,149 on fund liquidation. 

Bottom line: Winter wheat is fading its rally seasonally, waiting for news about production. 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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