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Morning Market Review for March 22, 2018

Futures simmer while trade wars heat up. (Comments are updated by 7:30 a.m. Central Time.

Overnight Trends:
 Up 1 to 2
Soybeans: Up1 to 2
Wheat: Up 2 to 7

Soybeans could be caught in the middle of U.S.-China spat 

Grain futures are mostly a little higher this morning, ignoring potential for another round of trade friction between the U.S. and China. The Trump administration is expected to slap $50 billion in tariffs on imports of Chinese goods for violation of U.S. intellectual property rights. A newspaper owned by the Communist Party yesterday accused the U.S. of dumping soybeans on the Chinese market, a tactic already used to squelch imports of U.S. DDGSs and sorghum. 

The trade news forced investors to quickly move on from the latest actions by the Federal Reserve. The Fed yesterday raised its base short-term interest rate by one-quarter of 1% and forecasts from participants in the central bank’s meeting projected two more such incremental steps this year. Projections for GDP growth were upped .2% to 2.7%, with unemployment continuing to edge lower as inflation stays subdued.

The dollar broke after release of the Fed’s statement, because some investors were betting on three or even four more rate hikes this year. Higher interest rates tend to lure investors to a currency, but money managers sold the greenback, keeping the currency near the low end of its 2018 range. The dollar is a little softer again today on trade fears, though crude oil and gold are both a little weaker today too. 

Crude oil prices jumped nearly $2 a barrel on Wednesday as declining imports caused a surprise reduction in crude oil inventories of 2.6 million barrels last week. Product stocks also fell, with diesel inventories down 2.1 million barrels on rising agricultural demand despite rising production in the Midwest, sending wholesale benchmarks up 7 cents a gallon.

Lack of demand continues to dog the global nitrogen market. Swaps for April urea at the Gulf dropped $7 a ton yesterday to close $14.50 below March and UAN also tumbled. The weakness may not come in time to help retail fertilizer prices much, however, as stocks in position for farmers remain tight.

Weather continues to make news in agriculture, and not only for crops. USDA announced its regular export sales report will be delayed until Friday after snow closed government offices in Washington yesterday.


Corn prices are a little higher this morning, attracting slow but fairly steady buying overnight after May futures held their 50-day moving average yesterday.

Another South Korean buyer stepped into the corn market today, completing the latest in a series of deals. Feed makers typically hedge their bets by buying some of their needs ahead of major USDA reports.

Traders expect another good week of export sales when USDA reports totals from last week on Friday. Numbers could be down from last week’s very strong numbers but still top 75 million bushels. USDA Wednesday separately announced the sale of 5.4 million bushels to South Korea under its daily reporting system for large purchases. 

Ethanol production last week rose to 1.049 million barrels a day, keeping year-to-date production in line with USDA increased forecast for the 2017 crop after margins improved. Stocks dropped by 523,000 barrels despite the production boost. 

Overseas markets were mixed. May futures on the Dalian Exchange in China were down 4.3 cents to $7.24 while May futures in Paris gained 2.3 cents to $5.123 after adjustments for volumes and currencies.

The preliminary report from the CBOT showed daily futures volume down 18% Wednesday to 306,364, while open interest dropped 15,118 despite light new fund buying. Options volume was off 12% to 97,544, 52% of it calls with new interest noted in the September $3.90 straddle. Implied volatility was up another 1% Wednesday to 15.86.

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 gains after absorbing a couple waves of selling overnight. May futures held some minor support this week but remains in a downtrend off early March highs.

While traders brace for potential retaliation by China against U.S. tariffs, they expect export sales totals out Friday to be down a little from the prior week, but still easily beat the rate needed to reach USDA forecast for the 2017 crop. Chinese buying actually picked up recently after a slow start in the first half of the marketing year.

Vegetable oil markets in Asia were mixed today. May soybean oil futures in China edged higher to 40.663 cents per pound while May futures for palm oil in Malaysia were down slightly at 28.414 cents per pound.

Oilseed prices internationally were also mixed. May futures on the Dalian Exchange in China closed less than a penny lower at $15.978, May rapeseed futures in Paris gained 2.1 cents to $9.73 and May canola futures in Winnipeg was 3.5 cents lower at $9.244. 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 44% yesterday, rising to 199,996 with light new fund buying adding 4,661 to open interest. Options volume more than doubled to 91,069, 57% of it calls as traders added April $10.40 calls that expire Friday, spending a penny or two on a bet for a quick bounce. Implied volatility in options jumped nearly 8% Wednesday to 16.06.

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, finding fairly steady buying surfacing ahead of the trading day in Europe. Winter wheat contracts rallied above 100-day moving averages, keeping Minneapolis to an inside day higher following yesterday’s break to new lows. 

While forecasts for the next week look a little drier for the southwest Plains, the second week of the outlook continues to call for above normal precipitation for the hard red winter wheat crop.

Export sales out Friday are expected to be up from last week’s dismal showing but still have trouble topping USDA’s forecast for the 2017 crop.

Overseas markets are firm today. May futures for Eastern Australian Wheat settled unchanged at $5.633 and May futures in Paris morning trade are up 2.1 cents to $5.488 after adjustments for volumes and currencies.

Preliminary volume in soft red winter wheat dropped 4% Wednesday to 144,478 with light new fund selling helping to add 5,930 to open interest. Options volume was slightly lower at 35,102, 55% of it calls as traders added near-the-money July strikes, with more new interest noted in the March 2019 $5 put. Implied volatility fell more than 3% Wednesday to 24.16.

Volume in hard red winter wheat as 4% higher at 70,590 on open interest that was up 3,114. 

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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