Small overnight losses may be signaling a round of profit-taking lies ahead on Friday
Corn: Down 1 to 2 cents
Soybeans: Steady to down 2 cents
Wheat: Up 1 to 2 cents
*Prices as of 6:50am CST
Grain prices took a big leap forward earlier this week on the heels of an unusual weather rally. Typically, widespread drought or flooding lies at the root of such rallies. But instead, a deadly round of storms ripped through the Midwest, damaging grain bins and blowing away millions of bushels of production potential. But after grain prices rose steadily for the past few sessions, traders appear ready for a pause Friday as they determine whether the markets have finally priced in recent crop losses. Consequently, corn and soybeans were pointed slightly lower in overnight trading.
The latest 72-hour precipitation map from NOAA shows mostly drier weather ahead for the Corn Belt between Friday and Monday, with one big exception – Minnesota, which will see another 1” to 2” during that time. Official 6-to-10 day forecasts out yesterday hint at seasonally cool, dry weather for the Midwest between August 19 and August 23.
Overseas stock markets were mixed. Asian markets closed mostly higher, anchored by 1.2% gains in China. European markets were all down 1% to 2% in midday trading, however. In the U.S., Dow futures were pointed 137 points lower ahead of Friday’s session, as investors were skittish about lawmakers’ inability to close the deal on a coronavirus stimulus package this week.
Energy futures were lightly mixed overnight. Crude oil was down 0.5% but is holding right around $42 per barrel. Gasoline was up around 1%, meantime, with diesel creeping 0.2% higher overnight. The U.S. Dollar softened slightly.
On Thursday, commodity funds were big net buyers of most grain contracts, including corn (+47,500), soybeans (+13,000), soymeal (+7,500) and CBOT wheat (+5,000) but were net sellers of soyoil (-4,000).
Corn prices tilted about 0.5% lower overnight, a possible signal that recent crop damage may have finally been baked into the markets. September futures have seen a sharp upward trajectory in recent sessions, trending 5.8% higher between Monday’s open and Thursday’s close. Export optimism has also been a part of that rise, so additional sales announcements could certainly help tip the scales back into the green.
Basis bids yesterday were mostly steady, although they di move as much as 3 cents higher at an Iowa river terminal and 2 cents lower at an Illinois ethanol plant Thursday.
Weekly export sales, announced yesterday, were decent. Corn exports gathered 14.8 million bushels in old crop sales plus 21.8 million bushels in new crop sales for a total haul of 36.6 million bushels. That was in line with trade estimates, which ranged between 15.7 million and 55.1 million bushels. Cumulative totals for the 2019/20 marketing year are well behind last year’s pace, with 1.576 billion bushels.
Corn export shipments were 43% above the prior four-week average, at 52.5 million bushels. China was the No. 1 destination, with 15.6 million bushels.
French consultancy FranceAgriMer noted a sharp decline in the country’s corn quality after a sustained heatwave has swept across much of Europe. Crop conditions tumbled from 74% rated in good-to-excellent condition down to 65% through August 10.
In Ukraine, grain exports have started the 2020/21 marketing year off sluggishly, trending 23% below last year’s pace since the first of July. That includes 64.6 million bushels of corn exports so far. The country is unlikely to match last fall’s record grain harvest in 2020.
The preliminary report from the CBOT showed daily futures volume at 1,568251, with open interest dropping by 30,395. Options volume remains robust, at 231,367 and heavily favors calls (149,508) versus puts (81,859). Implied volatility for near-the-money September contracts is on an upward swing, moving to 27.4% with just seven days to expiration.
Overseas markets are steady to firm today. September futures in China were up nearly 2 cents to $8.28, with August Paris futures also up slightly in midday trading after adjustments for volumes and currencies.
Soybean prices will face the same test as corn prices today – have the markets adequately priced in recent crop damage? It appears this may be the case, indicated by small overnight losses. Also, after multiple large sales to China and unknown destinations earlier this week, it will be interesting to see how traders react if another sale is announced later today – or if more sales fail to materialize.
Trade tensions with China remain high, but more talks are expected to happen via videoconference this weekend. Total Chinese imports from the U.S. are down 3.5% year-over-year between January and July, which is below its phase one trade targets so far. “Under the current situation, it is required that the both sides need to work together and step up cooperation to overcome the difficult times,” according to China’s assistant minister of commerce Ren Hongbin. U.S. officials, including White House economic adviser Larry Kudlow, have recently described relations as “fine,” meantime.
Export sales were robust last week. Old crop soybean sales jumped 96% above the prior four-week average, reaching 20.9 million bushels. New crop sales added another 104.3 million bushels, for a total haul of 125.2 million bushels. That bested all trade estimates, which ranged between 44.1 million and 86.3 million bushels. Cumulative totals for the 2019/20 marketing year are still moderately behind last year’s pace, with 1.509 billion bushels.
Soybean exports shipments moved 36% higher week-over-week and bested the prior four-week average by 83%, with 40.6 million bushels. China was the No. 1 destination, with 23.1 million bushels.
Basis bids were steady to mixed across the Midwest yesterday, moving as much as 3 cents higher at an interior river terminal and falling as much as 4 cents lower at an Iowa processor.
Prior to the next monthly report from the National Oilseed Processors Association (NOPA), analysts expect the group to report a July soybean crush of 172.015 million bushels, which would be moderately higher than June’s tally of 167.263 million bushels, if realized. NOPA’s official figures will be released Monday morning.
Iran reportedly purchased 130,000 metric tons of soymeal from South America in an international tender that closed earlier this week. Shipment will likely commence in September or October.
The preliminary report from CBOT showed daily futures volume at 323,685, with open interest falling by 2,199. Options volume was for 121,873 and moderately favors calls (77,005) over puts (44,868). Implied volatility in near-the-money September contracts are at 13.3% with seven days to expiration.
Oilseed markets internationally are lightly mixed today. September soybean futures in China are up about 4 cents to $18.40. But September rapeseed futures in Paris afternoon trade are down slightly, in contrast, as are Winnipeg canola contracts in overnight trading.
Wheat prices tested fractional gains overnight. Prices have stayed in a very narrow channel this week, in contrast to the big gains that corn and soybeans captured. Earlier this week, wheat saw some minor spillover strength, but prices have mostly been kept in check by fears over large domestic stocks and heavy overseas competition, which have made meaningful rallies very hard to come by.
Exports were disappointing last week, only reaching 13.5 million bushels and falling on the low end of trade estimates, which ranged between 9.2 million and 29.4 million bushels. Cumulative totals for the first five weeks of the 2020/21 marketing year reached 183.6 million bushels, which is slightly better than last year’s pace so far.
Wheat export shipments slid 18% below the prior four-week average to 17.2 million bushels. The Philippines topped all destinations, with 3.3 million bushels.
Drought conditions are threatening Argentina’s newly planted 2020/21 wheat crop, which has a footprint of about 16.062 million acres. The country’s Rosario exchange has yet to reduce its yield estimates, however, which range between 661 million and 698 million bushels. Argentina was the world’s No. 6 wheat exporter last year.
Ukraine has exported 87.8 million bushels of wheat since the first of July. The country’s total grain exports have sagged 23% lower year-over-year so far in the young 2020/21 marketing year.
Pakistan purchased 2.2 million bushels of wheat, likely sourced from the Black Sea region, in a deal that closed earlier this week. The grain is for shipment in September.
The preliminary report from CBOT showed daily SRW volume at 182,11, with open interest firming by 12,838. Options volume was at 32,980 and moderately favors calls (19,738) versus puts (13,242). Implied volatility in September near-the-money options is relatively high, reaching 25.7% with seven days before expiration.
Volume in HRW wheat reached 66,718, with open interest moving 1,026 higher. Options volume made it to 4,628 and favors calls over puts by a more than 2:1 margin.
In overseas markets, September futures for Eastern Australian Wheat were at $7.88, with September wheat futures in Paris afternoon trade moving up to $5.77 after adjustments for currencies and volumes.