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Morning Market Review for April 23, 2019

Slow planting, export hopes provide support. (Comments are updated by 7:30 a.m. Central Time.)

Futures try to recover from contract lows

Overnight trend:
Corn: Mixed
Soybeans:  Steady
Wheat: Steady to up 2

Grain futures are narrowly mixed this morning following two-sided overnight trade, with corn and some wheat contracts trying to recover from new contract lows.

The late start to spring fieldwork and planting continues to provide support as traders watch weather reports starting to peer into May. Another big system moving through the southern Plains this morning will also bring more rain to the drenched Delta, while the upper Mississippi River Valley braces for more storms as well in the next week.

Official 6 to 10 and 8 to 14-day forecasts out yesterday showed a zonal flow bringing warmer and drier conditions to the South. But the latest updates from the ensemble model this morning challenged even that respite, showing below average temperatures and above average precipitation emerging in many areas across the country.

While much of the discussion so far about weather focused on the upper Midwest, parts of the eastern Corn Belt are also soggy.

“Very little has been done in east-central Indiana,” reported a grower on Feedback From The Field
Monday. “Anhydrous toolbars are hooked up with no place to go. The ground gets close and then another one-inch rain shows up.”

Farm Futures wants to know what farmers are experiencing as the spring of 2019 unfolds. Click this link to tell us what’s happening in your area and we’ll publish regular updates featuring first-hand accounts from growers.

Financial markets are also unsettled as activity returns following Easter Monday holidays in some countries. Stocks were mixed in Asia and Europe, pressured by more hints that China won’t stimulate its economy more. U.S. investors focus on earnings, with index futures pointing to a recovering today after losses Monday.

The dollar and Treasuries are both firm this morning on safe-haven interest. But money continues to pour into the petroleum market, helping crude oil test $66 a barrel overnight as the U.S. prepares to end waivers on sanctions that allowed some trading partners to buy from Iran. That’s supporting diesel prices, keeping cash Midwest wholesale benchmark prices around $2.10 a gallon.

Corn prices are trying to reverse higher, following another new contract low by the May contract overnight. Volume is brisk, but most of that is coming in the May-July spread as traders get ready for options expiration Friday and the start to deliveries next week.

More than 1,500 lots are registered along the Illinois River, where cash is moving closer to option nonetheless. Traffic along the waterway continues to flow despite high water, providing a supply of grain to the Gulf. Shippers are warning that traffic north of St. Louis on the Mississippi River may not resume until mid-May, which could provide basis opportunities for growers elsewhere. Export inspections surged to 53.3 million bushels last week, topping trade guesses and the weekly rate needed to reach USDA’s forecast for the marketing year.

Corn planting remains slow, with just 6% of acres seeded, half of the five-year average, with many states barely started according to Monday’s Crop Progress report.
The preliminary report from the CBOT showed daily futures volume up 22% Monday to 357,856 while open interest rose 15,370 on fairly active new selling from funds, which already have a record bearish bet on against corn.

Options volume slipped 7% yesterday to 70,191, 65% of it calls as traders added May and July $3.70 cals along with September and August $4.05 calls and $3.65 puts. Implied volatility in at-the-money December options rose to 19.46%
Overseas markets are weaker today. May futures in China lost a penny to $7.082 with more talk circulating in the trade about China importing corn in the coming year. June Paris futures are off 3.6 cents to $4.692 after adjustments for volumes and currencies

Bottom line:  Corn is trying to hold on for a planting rally, but traders aren’t biting yet, believing the crop can be planted quickly thanks to modern technology. Large old crop supplies are also limiting gains. For more, see my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Soybeans are little changed as May futures try to recover from a near-six-month low posted overnight. Lack of news about trade talks with China is keeping the market on the hook for now as export news remains tepid.

Export inspections reported Monday for last week of 14 million bushels were at the low end of trade guesses and far short of what’s needed to reach USDA’s forecast for the 2018 crop. Perhaps more importantly, China accounted for just 2.5 million bushels though buyers still have more than 270 million bushels of unshipped sales on the books.

USDA said 1% of soybeans are planted nationwide, down 1% from average, with most of the progress in the Delta, where fieldwork is stalled due to torrential rains over the winter and spring.

The preliminary report from the CBOT showed daily futures volume up 1% Monday to 170,451 while open interest fell 1,429 despite light new fund selling. Options volume was off 20% to 36,981, 51% of it calls with a little new interest noted in the November $10 call and $8 put. Implied volatility in at-the-money November options rose to 16.23%.

Vegetable oil prices in Asia were lower today. May soybean oil futures in China fell to 35.986 cents per pound while May palm oil futures in Malaysia gapped lower, settling at 22.81 cents.

Oilseed markets internationally are stronger after some reopened following Eastern Monday holidays. May soybean futures in China gained 2.2 cents to $13.457, May rapeseed futures in Paris are up 1.3 cents to $9.281 and Winnipeg canola overnight was 1.9 cents higher at $7.531 after adjustments for currencies and volumes.

Bottom line: Old crop carryout is still burdensome. With more acres likely than USDA found March 29, rallies on a trade deal with China are the best hope for making old crop sales. 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 today, with hard red winter wheat and Minneapolis trying to bounce back from new contract lows overnight.

Winter wheat ratings improved last week, adding another quarter bushel per acre to yield potential, with our projections nationwide ranging from 48.5 bpa to 50.8 bpa depending on the model use. Changes were not uniform, however, with states from Kansas and Oklahoma to Michigan and Ohio steady to lower after flooding raised concerns from the eastern Plains through the Delta and Ohio River Valley.

Weather also was an issue for spring wheat. Planting progress rose just 3% to 5%, compared to the five-year-average of 22% with nothing in the ground in the key state of North Dakota.

Export inspections last week jumped to 29.8 million bushels, well above trade expectations and easily beating the rate needed through May to reach USDA’s forecast for the 2019 crop. Those shipments were scattered among a flurry of small buyers taking advantage of low prices, in addition to regular customers. One of those, Taiwan, picked up a couple more loads of U.S. wheat today in a tender.

Volume in soft red winter wheat fell 8% yesterday to 127,945 while light new fund selling added 3,276 to open interest. Options volume edged 2% higher to 30,024, 55% of it calls as traders liquidated December $5.40 calls. Implied volatility in at-the-money July options increased to 22.02%.

HRW volume dropped 24% to 49,376 on open interest that was up 3,332.

Bottom line: Acreage in 2019 is the lowest on record but winter wheat looks off to a very good start. And export demand remains limited in a highly competitive world market. 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.

exports-042319.jpg

Pivots042319-SIZED.jpg

 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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