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Morning Market Review for Oct. 23, 2018

Can corn keep up the momentum? (Comments are updated by 7:30 a.m. Central Time.)

Overnight Trends

Corn: Steady to up 1
Soybeans: Down 5 to 6
Wheat: Up 1 to 2

Markets test small overnight gains, but soybean prices slip ahead of Tuesday’s session

Grain futures have absorbed another round of governmental export and crop progress data Monday, and now look to Tuesday for additional influences. Technicals are offering some mixed signals, with November soybean contracts possibly ready to test downward support at $8.52, with December corn possibly ready to break and stay above $3.70 today. 

Bears are lurking in overseas markets Tuesday as selloffs rolled through Asian and European markets, tilting further downward on Italy’s current budget crisis. The U.S. throws more tension into the mix, threatening to withdraw from a joint nuclear arms treaty with Russia regarding certain short- and intermediate-range missiles.

Asian stock markets tumbled 2% to 3%, with most European markets down 1% to 2%. Wall St. readied itself for another round of losses as investors keep selling off their technology and banking sector stocks, with the Dow dropping more than 100 points in before-the-bell overnight trading, although one-year returns remain a healthy 11.24% for now. 

Energy futures slumped overnight, with crude oil down another 1.6% and settling just above $68 per barrel. Gasoline and diesel were also trending significantly lower overnight. The U.S. Dollar softened slightly, while safe haven gold jumped ahead more than 1%.

 

Corn prices took a healthy round of export data and relatively slow harvest progress reported by USDA and are testing small gains of around 0.3% ahead of Tuesday’s session. 

Corn export inspections last week reached 37.4 million bushels, down slightly from the prior week and on the low end of trade guesses. Still, marketing year-to-date totals for 2018/19 continue to trend well above the prior year, reaching 308 million bushels since September 1. 

Sorghum export inspections are another matter. Totals for the grain continued to languish last week, adding just another 370,000 bushels.

And USDA marked this year’s corn harvest at 49% complete, which is still just above the five-year average of 47%. Crop quality degraded slightly but not as much as analysts anticipated, per the latest round of governmental data. Corn remains 68% in good-to-excellent condition for now.

Looking ahead, theofficial 6 to 10 and 8 to 14-day forecasts and the latest updates this morning from the ensemble model call for a lot of below-average temperatures across the central and eastern U.S. – particularly in the eastern Corn Belt and Ohio River Valley – through November 1. During the same time, large portions of the central U.S. could expect slightly wetter-than-normal conditions to prevail. 

NOAA also released its 2018/19 winter outlook late last week, calling mostly for a wetter-than-normal south and seasonally warm weather for much of the U.S. Click here to see what else the agency has predicted.

Farmers reporting Feedback From The Field last week pulled average corn yields in October down to 175 bushels per acre, moderately below the latest USDA estimates.Soybean estimates also dropped, now at an average 50 bpa. 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 by scrolling down to our updated interactive map

Overseas markets were mostly positive today. November futures in China were up fractionally to $6.730, and November Paris futures in midday trade rose nearly 3 cents to $4.875 after adjustments for volumes and currencies.

The preliminary report from the CBOT showed daily futures volume retreating to 255,133 while open interest still ticked 9,867 higher.

Options volume fell again, reaching 38,077 and still heavily favoring calls (24,773) over puts (13,304) for now. Implied volatility moved 0.8% higher to 16.35.

Bottom line: Ability to hold the break through the head-and-shoulders neckline on the December chart is key to hopes for a chance to hedge some 2018 inventory. For more, see Bryce Knorr’s latest Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Soybeans are tilted lower ahead of Tuesday’s session, with harvest progress rolling quickly ahead last week, and with friendly forecasts promising more of the same this week. Markets are also absorbing another round of export data yesterday that while positive, isn’t enough justification on its own for prices to shift higher.

Traders are also skittish that U.S. threats to abandon the aforementioned nuclear pact with Russia could amp up tensions with China and other key Asian trading partners, who are seen to be adversely affected if U.S. walks away from that deal. 

At least China is off the hook for its large soybean sale cancellation last Friday. A correction yesterday indicates “unknown destinations” was the actual culprit for the sale, totaling 6.6 million bushels.

Soybean export inspections totaled 42.2 million bushels last week, which was just fractionally below the prior week’s result and on the high end of trade estimates. Marketing year-to-date totals for 2018/19 continue to slump around 40% year-over-year, reaching 218 million bushels. 

Soybean harvest progress reached 53% as of October 21, up from 38% from the prior week but falling moderately behind 2017’s pace and the five-year average, both above two-thirds complete at this time of year. Crop quality held steady, with 66% of the crop in good-to-excellent condition.

Vegetable oil prices overseas were steady to weak today. December soybean oil futures in China held steady at 37.80 cents, with December palm oil futures in Malaysia dropping to 23.62 cents. 

Overseas oilseed markets tilted mostly lower. January soybean futures in China were down nearly 6 cents to $14.30. November rapeseed futures in Paris midday trade dropped another 4 cents to $9.6650 and November futureson Winnipeg canola overnight saw fractional gains to reach $8.51 after adjustments for currencies and volumes.

The preliminary report from the CBOT showed daily futures volume bounce higher to 264,454, with open interest dropping 9,116 lower.

Options volume dropped again to 33,936, now favoring puts (18,127) over calls (15,809) as traders continue to liquidate November calls that expire at the end of this week.

Bottom line: Soybeans are struggling in their bid to extend the rally toward the end of the month. 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 may try to bounce back from moderate losses Monday, with further support possible from the latest production headlines coming out of Australia, which could see its worst grain harvests in a decade. In the U.S., planting progress for the 2018/19 winter wheat crop moves steadily forward. 

USDA noted Monday in its latest crop progress report that the domestic winter wheat crop is now 72% planted, which is slightly behind 2017’s pace of 73% and the five-year average of 77%. And 53% of the crop is emerged, also slightly behind the five-year average. 

USDA also released lukewarm export inspection data for wheat Monday. Weekly inspections totaled 14.1 million bushels, down moderately from the prior week but in the middle of the average trade guess. Marketing year-to-date totals continue to slump below 2017/18 totals, with 398 million bushels since June 1. 

Overnight sales activity included China selling off another round of its state reserves of 2013 imported wheat, while Tunisia issued tenders to purchase durum, soft wheat and barley. Japan also offered to buy food-quality wheat from the U.S. and Canada in a regular tender that closes Thursday.

Russian consultancy IKAR increased its 2018 wheat export forecast by 1.5% to 1.123 billion bushels.

Overseas markets are also slightly bullish today. January futures for Eastern Australian Wheat treaded water at $8.172, but December futures in Paris midday picked up nearly 2 cents to $6.285 after adjustments for currencies and volumes.

Volume in soft red winter wheat slipped to 76,519, as open interest gained 2,989. Options volume of 23,282 cooled considerably but still heavily favors calls over puts. With another month to expire, implied volatility in at-the-money December options eased to 20.12.

HRW volume bounced to 54,569 with open interest tracking 4,003 higher. Options volume of nearly doubled and more closely favors calls (655) over puts (434). 

Bottom line: The logic for a wheat rally depends on global supply and demand. Without problems seeding the 2019 crop, rallies could depend on whether Russia aggressively exports or not. 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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