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Morning Market Review for May 25, 2018

Grains regather for another push. (Comments are updated by 7:30 a.m. Central Time.

Overnight Trends:

Corn: Up 2

Soybeans: Up 5

Wheat: Up 5 to 7

After Thursday’s potential rally fizzled, overnight markets creep higher again

Thursday was set for another round of gains before tepid export data and technical selling dampened prices. Even so, Friday’s session could remain focused on some of the same market factors (trade tension relief, production concerns in several areas, etc.) that have pushed grain prices moderately higher for most of the week.

Overnight, corn and soybean prices tested the waters with modest (less than 0.5%) gains, while some wheat contracts moved 1% or higher after absorbing some overseas production news.

World stocks were mixed, but most markets moved higher, with European markets trending higher. China’s Shanghai market slipped again, but Japan’s Nikkei index reversed some of Thursday’s losses with small gains. 

Energy prices slumped overnight, with Russia and Saudi Arabia signaling that previously planned supply cuts of crude oil may not materialize. That had crude oil prices down around 1.75% overnight and back under $70 per barrel. Gasoline and diesel prices saw similar losses Thursday night.

 

Corn prices erased Thursday’s small losses overnight, testing smallish gains of around 2 cents ahead of Friday’s open.

Details are thin for now, but U.S. Commerce Secretary Wilber Ross plans to visit China next week to further discuss trade relations between the two countries – another signal of trade optimism for now.

China also sold around 48.8 million bushels of corn at auction overnight – about 31% of its state reserves available for sale.

In the U.S., the upper Midwest and Northern Plains may see moderate rainfall this coming week, with the Southeast getting its first round of tropical moisture just ahead of the 2018 hurricane season. The latest 6 to 10 and 8 to 14-day forecasts (out yesterday) and the latest morning updates show hot, dry weather is probable for most of the U.S. at least into early June.

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.

Overseas corn markets cooled slightly today. July futures in China dropped 2 cents to $7.051 and November futures in Paris were down fractionally to $5.162 after adjustments for currencies and volumes.

The preliminary report from the CBOT showed daily futures volume rebounding moderately to 455,365. Options bounced up to 128,618, highly in favor of calls (90,324) over puts (38,294).

Implied volatility fell 3.77% to 22.70 yesterday but remains near the highest levels so far of 2018.

Bottom line: Easing trade tensions should allow the market to focus on weather. Prudence says wrap up old crop sales and get started pricing new crop too as prices hit profitable levels. For more, see Bryce Knorr’s Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Soybeans will take another shot at finishing the week higher after stumbling slightly Thursday, testing overnight gains of around 5 cents. Technical selling provided a roadblock yesterday but did not undermine this week’s overall optimism regarding U.S.-China trade.

Also putting a damper on Thursday’s prices was the latest USDA export report, which saw old crop soybean exports 5.1 million bushels in the hole last week, with reductions from unknown destinations and China overriding all new sales, and with new crop sales adding only about 250,000 to the total.

Vegetable oil markets in Asia were steady to slightly lower today. September soybean oil in China holding firm at 27.959 cents per pound with July palm oil futures in  Malaysia dropping slightly to 27.959 cents.

Oilseed markets internationally also trended slightly lower today. July soybeans in China held steady at $15.40, August rapeseed futures in Paris dipped 6 cents to $9.565 and July canola futures in Winnipeg remained steady at $9.450 after adjustments for volumes and currencies.

The preliminary report from the CBOT showed daily futures volume rebounded to 250,021. Options volume fell again to 77,511, meantime, still favoring calls (43,756) versus puts (33,755). Implied volatility gained another 3.59% to 19.92, reaching the highest levels in more than a month. 

Bottom line: Be ready to make sales if the market returns to profitable levels because there’s no guarantee the trade war truce will last. For more, see Bryce Knorr’s Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Wheat prices appear poised for more gains on Friday after a technical selling setback on Thursday. Winter and spring wheat prices all explore around 1% gains overnight, which pushed most prices around 5 to 7 cents higher. 

Overseas markets also posted steady to firm results today. July futures for Eastern Australian Wheat remained steady at $6.653, with traders still closely monitoring drought conditions in that area. July futures in Paris gained another 2.5 cents to $5.783 after adjustments for volume and currencies. 

Russia’s IKAR consultancy downgraded its estimates for 2018/19 wheat production by about 5% from earlier estimates, and also downgraded total export estimates to about 1.260 billion bushels. Some of Russia’s key production areas are currently battling drought conditions. 

French consultancy FranceAgriMer shared a mixed assessment of its cereals crops, meantime, estimating 79% of the country’s soft wheat crop is in good or excellent condition (up from 78% last week), while 76% of its barley crop is in good or excellent condition (down from 77% last week).

Preliminary volume in soft red winter rebounded considerably to 280,168. Options volume also tracked moderately higher, reaching 57,424 and moderately favoring calls (34,980) over puts (22,444). Implied volatility eased 0.47% lower to 31.87 but remains near the highest levels seen this year. 

Volume in HRW rose to 99,655 with options doubling from the prior day to 6,045. Options tilted in favor of puts (3,900) versus calls (2,145).

Bottom line: Hope wheat has finally made a long-term bottom should support the market but big rallies aren’t likely for now unless spring wheat suffers. For more details on the outlook, see Bryce Knorr’s 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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