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Morning Market Review for September 21, 2017

Grain market dips as traders flee risk. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trade:
Corn:
 Down 1
Soybeans: Down 6
Wheat: Mixed

Fed move sends ripples from stocks to commodities 

Grain futures are mostly lower this morning, giving back Wednesday’s gains in tandem with many markets around the world in response to the latest moves by the Federal Reserve.

While the U.S. central bank made no changes to interest rates yesterday, it signaled short-term rates could rise a full percentage point by the end of 2018. The Fed also said it would begin slowly reducing the $4.5 trillion in debt acquired trying to stimulate the economy in recent years, which sent longer-term rates higher today. For more on what the Fed action means for farmers, see my latest financial outlook.

The dollar gained Wednesday in response to the shift, and is trying to overcome profit taking today. Crude oil is lower but holding gains above $50. The latest inventory report from the government Wednesday showed a steep drop in diesel supplies just as farmers step up fuel use for harvest, sending wholesale diesel prices three cents a gallon higher. See my latest ethanol and energy outlook for details.

Farmers reporting Feedback From The Field this week are noting slightly better yields but still below those forecast Sept. 12 by USDA. Let us know what your yield estimates are by clicking the link.

 

Corn prices are slipping today in quiet trade. December futures held to an inside day with a trading range of just two cents for most of the overnight session.

While farmers and traders debate the size of the 2017 crop, more demand news is hitting the wire.

Ethanol production fell last week according to the latest government data but remained well above 1 million barrels a day. Stocks of the biofuel were mostly steady, helping send ethanol margins to their best level of the year.

Export sales out this morning are expected to fall below 35 million bushels, though that would still meet the rate USDA forecasts for the 2017 crop. 

While a storm moves across the Mississippi River from Iowa into Illinois this morning, a larger system is headed into the Plains and western Corn Belt into next week that could bring heavy totals according to maps for the next week. Official 6- to 10 and 8- to 14-day forecasts out yesterday show a shift towards cooler and drier conditions over most of the growing region, confirmed by the latest updates this morning 

The preliminary report from the CBOT had futures volume down 29% to 164,633 while open interest was up 8,689 despite light fund short covering, suggesting some harvest hedging starting to show up from elevators buying corn off the combine.

Options volume fell 25% to 68,080, 54% of it calls as traders liquidated October puts that expire Friday. Most of the new interest was in near-the-money November calls.

Implied volatility fell nearly 4% Wednesday to 17.61. 

Overseas markets were firm today. China found better interest selling reserves at an auction today and January futures on the Dalian Exchange in China were steady at $6.586. November futures in Paris were up 2.3 cents to $4.711 adjustments for volumes and currencies, 

Bottom line: Corn supplies look to remain burdensome for another year. The first test for the market will be to hold Aug. 31 lows. After that, a post-harvest bounce could provide a few hedging opportunities while waiting for basis to tighten. For more, see my Weekly Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Soybeans are lower, hit by steady selling overnight. November futures was again unable to hold yesterday’s move above the 50-day moving average, which comes in today around $9.6875.

Export sales out this morning could be down from the previous period but still close to 50 million bushels. Futures got a lift yesterday from announcement of huge new sales: 4.85 million bushels to China and 39.7 million bushels to unknown destinations, including 4.4 million bushels earmarked for the 2018-2019 marketing year.

Soybean oil led the soy complex lower in Chicago overnight as prices continued their downturn following a three-month rally. Vegetable oil markets followed suit. January soybean oil futures on the Dalian Exchange in China edged slightly lower to 43.191 cents but November futures for palm oil in Malaysia lost more than a third of a cent to 29.561 cents per pound.

Oilseed prices internationally were mixed. January soybean futures in China gained 2.1 cents to $15.649, November rapeseed futures in Paris were flat at $9.902 and November canola in Winnipeg was down 2.9 cents to $9.011 Note: International prices are converted to bushel or pound equivalents after conversions for currencies. 

The preliminary report from the CBOT showed daily futures volume 18% lower yesterday at 123,176 with open interest up 8,764 despite light fund short covering. Options volume dropped 21% to 46,416, 55% of it calls as traders added out-of-the-money November calls and rolled up puts.

Implied volatility rose more than 2% to 16.46.

Bottom line:  Soybeans have held a series of lows but need a move above $9.885 to confirm a higher trend. The best chances for rallies in the short term come from weather in Brazil, where conditions are dry, holding back early planting for at least another week. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Wheat prices are mixed today. While winter wheat contracts pull back from probes of chart resistance, spring wheat is attracting technical buying after reversing higher Wednesday following a tick into the June gap that kicked off its rally.

Rains over the next week should improve moisture for seeding hard red winter wheat, though totals could be too much of a good thing in some areas, flooding fields and causing delays.

Export sales are expected to run around 15 million bushels this morning, in line with the projection forecast by USDA for the 2017 crop. 

Overseas markets are higher today. January futures for Eastern Australian Wheat gained another 8.6 cents to $6.107, with local estimates running around 75 million bushels less than USDA for the continent as a hot, dry growing season wraps up. December futures in Paris morning trade are up 1.6 cents to $5.301 after adjustments for volumes and currencies.

Volume in soft red winter wheat was off 16% yesterday to 83,331 with open interest up1,462 despite light fund short covering. Options volume fell 18% to 22,837, 525 of it calls as traders added near-the-Money December calls. Implied volatility fell less than 1% to 23.15.

Volume in hard red winter wheat dropped 20% to 24,939 on open interest that was up 381.

Bottom line: Large global supplies frustrated wheat’s attempt for a last summer rebound. For more details on the outlook, see the Weekly Wheat Review. 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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