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Morning Market Review for Sept 25, 2018

Soybeans bounce despite better ratings. (Comments are updated by 7:30 a.m. Central Time.)

Overnight Trends

Corn: Down 1
Soybeans: Up 3 to 5
Wheat: Down 3 to 5

Financial markets rebound, discounting China trade flap for now

Grain futures are mixed today, reversing trends from Monday. Soybeans are trying to reverse higher, following the lead of stock indexes in Europe and the U.S. posting gains following yesterday’s downturn. 

The more optimistic tone comes as the Federal Reserve begins a two-day meeting on monetary policy widely expected to end with another quarter-point hike in its benchmark short-term interest rate Wednesday. 

The dollar is steady, but gold and crude oil are both higher as investors look ready to take more risk. Crude moved above $72.50 a barrel overnight after yesterday’s rally helped Midwest diesel prices surge to their highest level in nearly four years Monday as harvest demand picks up.

 

Corn prices are a little lower after Monday’s short-covering bounce. December futures are trying to hold their move chart resistance, including the trendline drawn off spring and summer highs. 

USDA’s Crop Progress report noted improvement in corn conditions this week. Our average projected yield based on ratings was up eight-tenths of a bushel per acre, with the yield estimates ranging from 177 to 178.3 bpa. Harvest progress advanced to 16%, 5% above the five-year average. 

Export inspections improved to 49.7 million bushels, above trade guesses and the rate needed every week during the rest of the marketing year to reach USDA’s aggressive forecast for the crop. Year-to-date inspections are well ahead of that pace in the open weeks of the new season.

Storms continue to move through both ends of the growing region, with another system also likely over the next week. While the Plains look on the dry side this week, the official 6 to 10 and 8 to 14-day forecasts out yesterday  and the morning updates from the ensemble model call for above normal precipitation over most of the U.S.

Farmers reporting Feedback From The Field Monday remain mixed in their ideas. Two growers in Louisiana cited problems from excess rainfall. Shippers refused to take damaged soybeans, said one producer. “We haven't had many days with rain lately after a dry summer,” said the other.

But farmers elsewhere noted good yields, including 210-bushel corn and 70-bushel soybeans in central Kansas. 

“Unbelievable crops,” posted a central Indiana grower with corn and soybeans yields both 20 bushels or more above average.

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 eased today. January futures in China reopened after a holiday losing 9.6 cents to $6.908, and November Paris futures in midday trade are down 3.7 cents to $5.243 after adjustments for volumes and currencies.

The preliminary report from the CBOT showed daily futures volume down a little Monday at 243,521 while moderately active fund short covering took 7,490 off open interest. 

Options volume was a little higher at 106,311, 71% of it calls as traders added December $3.70 and $4 calls along with March $3.80 and $3.20 puts. Implied volatility in at-the-money December calls rose to 19.41. 

Bottom line: The market may need time to absorb the shock of record yields. If demand holds up, the market could be poised for a modest post-harvest rally, and higher prices will be needed to convince farmers to expand production in 2019. 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 hold a reversal higher on daily charts after follow-through selling dried up in the overnight session. 

Soybeans’ turnaround came despite improving crop ratings put out by USDA Monday.  While soybean ratings in North Carolina dropped sharply again this week in the wake of Hurricane Florence, most states improved. Those gains added a quarter bushel per acre to our projected yield, with models ranging from 50.9 bpa to 51.7 bpa. USDA also said 14% of the crop was harvested, up from 8% on average. 

Export inspections of 25.5 million bushels fell 14 million short of the amount needed weekly to reach USDA’s forecast for the 2018 crop. Total inspections so far in the young marketing year are 25% behind last year. China wasn’t completely absent: The report showed buyers continuing to load out small amounts of U.S. corn, including 66,536 bushels in containers from Illinois in the latest week.

USDA separately announced the sale of 5.95 million bushels to unknown destinations under its daily reporting system for large purchases.

The preliminaryreport from the CBOT showed daily futures volume down 12% Monday at 128,223 while light new fund selling added 1,746 to open interest.

Options volume plunged 57% Monday to just 28,084 contracts, 59% of it puts as traders rolled down out-of-the-money November puts. Implied volatility in at-the-money November options fell to 18.35.

Vegetable prices in Asia were higher today. November palm oil futures in Malaysia closed at 23.71 cents per pound and January futures China reopened after a holiday by gaining a fifth of a cent to 38.266 cents 

Oilseed markets were steady to higher. January futures in China were up 5.5 cents to $14.826, November rapeseed futures in Paris midday trade gained 6.7 cents to $9.75 and November futures Winnipeg canola overnight are steady at $8.564 after adjustments for volumes and currencies.

Bottom line: Soybean supplies should start shrinking eventually unless the market begins to offer growers a profit. For now, start running the numbers to see if good yields, existing sales and “Sonny Money” is enough to secure a profit on 2018 production. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Wheatprices are lower, giving back some of Monday’s gains, with futures in all three markets trying to consolidate last week’s breakout on price charts.

Asian buyers, including Taiwan and Japan, were in the market overnight as buying focuses on regular customers. Wheat inspections reported Monday of 15.1 million bushels were unchanged from the previous week, staying below the rate forecast by USDA. Total inspections are down 29% from year-ago levels, while the government forecasts a 24% increase for the marketing year ending May 31, 2019. 

USDA said 28% of the winter wheat crop is seeded, 2% ahead of the five-year average.

Volume in soft red winter wheat was 24% higher yesterday at 76,946 while light fund short covering took 2,562 off open interest. HRW volume was 3% lower at 26,230 on open interest that was up 1,064.

SRW options volume rose 34% to 29,099, two thirds of it calls as traders liquidated December $5.50 and $6.10 calls. Implied volatility in at-the-money December options fell again to 23.62. 

Overseas markets are mixed. January futures for Eastern Australian Wheat gained back 5.9 cents to $8.743 as forecasts show no easing in drought conditions. December futures in Paris midday trade are down 2 cents at $6.475, after adjustments for volumes and currencies, despite dry forecasts for France.

Bottom line:The logic for a wheat rally depends on global supply and demand. Without problems seeding the 2019 crop, rallies could become more difficult with larger than expected Russian 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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