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Morning Market Review for Aug. 19, 2019

Mild weather triggers retreat. (Comments are updated by 7:30 a.m. Central Time.)

Opening Calls:
Corn: Down 5 to 6
Soybeans:  Down 5 to 6
Wheat: Down 1 to 2

Lack of threat to crops keeps market on the defensive

Grain futures are lower across the board this morning after a week of beneficial weather looks to be followed by lack of a threat to crops for the rest of the month.

Rainfall last week came in as expected with most areas picking up moisture. Rains over the next week could leave parts of the eastern Midwest drier with mild temperatures prevailing. The official 6 to 10 and 8 to 14-day forecasts out yesterday and the latest updates from the ensemble models continue to see above average precipitation but are starting to agree with the drier European model on mild temperatures.

Growers posting Feedback From The Field last week continue to report yields well below USDA’s Aug. 12 estimates, but on average said ratings for corn and soybeans improved last week. Click this link to tell us what’s happening in your area.

Big speculators were only light sellers of crops and livestock last week while investors following index funds to gain exposure to agriculture extended their net long position. Money managers bought crude oil, adding $1.3 billion to bullish bets.

Crude oil moved higher overnight, trying to hold a move above $55 a barrel after a drone attack on Saudi petroleum facilities. Stock markets are in full rally mode following big gains at the end of last week on Wall Street. U.S. index futures pointed to more big gains on the open today on the heels of a rally in Asia and Europe.

The dollar is firm as financial markets get ready for news out of the Federal Reserve this week. The central bank releases minutes from its last meeting on monetary policy Wednesday then heads to Jackson Hole, WY for the annual Kansas City Fed conference, where chairman Jerome Powell speaks Friday.

Corn prices are lower, keeping December to an inside day as it tries to hold above a bear flag to keep from triggering another leg down.

USDA’s bearish report from a week ago continues to dampen sentiment despite ongoing uncertainty about crop development and potential production.

Corn basis was firm on average last week. Some ethanol plants boosted bids to keep running as margins improved a little on sharply lower corn feedstock costs. Barge freight rates also dropped, cutting the cost of shipping corn to the Gulf by a dime, allowing shippers to boost prices to attract inventory from farmers largely unwilling to sell at lower prices levels.

Big speculators likely wiped out most or all of their bullish bets in corn in the wake of the USDA report, trimming 42,088 contracts off their net long position in corn, taking it to 17,213 lots as of Tuesday according to Friday’s Commitment of Traders.

The preliminary report from the CBOT showed daily futures volume little changed Friday at 377,454 while modest fund short covering helped take 3,808 off open interest.

Options volume dropped 21% to 114,123, 60% of it calls with heavy new interest noted in out-of-the-money September calls that expire at the end of the week along with the December $3.50 put. Implied volatility in at-the-money December options fell nearly 1% to 20.79%.

Overseas markets are weaker today. September futures in China broke to new contract lows, slipping another 6.8 cents to $6.682 while November Paris futures in afternoon trade is off 3 cents to $4.707 after adjustments for volumes and currencies

Bottom line: Stability is the best hope now once selling from the USDA report subsides. Without clear damage to yields the size of the 2019 crop won’t be known for months, leaving the market to fester. For more, see my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Soybeans are lower after an attempt to rally following a weak open Sunday night quickly morphed into steady selling. November is holding to an inside day for the second straight session.

Soybean basis firmed a quarter cent overall last week, helped by weather woes in some areas. Bids strengthened in South Dakota, for example, where prevent plant claims were strong. Some rail bids out west also firmed as shippers looked for old crop anticipating the later harvest. Some processors both east and west strengthened basis thanks to good crush margins. USDA Friday also reported the sale of 10.9 million bushels of new crop to unknown destinations under its daily reporting system for large purchases.

Big speculators bought a little meal and soybeans last week to cover short positions but went all in on soybean oil after prices rallied sharply in Asia on ideas lower crush in China will tighten supplies. The hedge funds bought 43,591 oil contracts to take a small net long position for the first time since March.

The preliminary report from the CBOT showed daily futures volume off 3% Friday to 119,796 while open interest rose 4,625 despite light short covering from funds. Options volume was 41% lower at a thin 25,050, 62% of it calls as traders added the November $9 and $10 calls and $8.80 and $8.40 puts.

Implied volatility in November at-the-money options edged lower to 15.69%.

Vegetable oil markets in Asia were weaker today, giving back some of their recent rally. September soybean oil futures in China settled at 38.5873 cents per pound and September palm oil futures in Malaysia lost four-tenths of a cent to 22.88 cents.

Oilseed markets internationally were also lower. September soybean futures in China lost 4.3 cents to $13.052, November rapeseed futures in Paris is off a penny at $9.555 and November Winnipeg canola overnight is also down a penny at $7.725 after adjustments for volumes and currencies.

Bottom line: Soybeans got friendly news from USDA on acreage but not enough to change the landscape unless yields suffer too. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Wheat prices are a little lower as all three markets trying to avoid confirming charts that could take futures another leg lower following last week’s break.

Wheat basis was mixed, but most locations raised bids. Basis at the Texas and Louisiana Gulf and Pacific Northwest strengthened, thanks to export demand that’s picking up with the end of winter wheat harvest.

Big speculators were only slight sellers of soft red winter wheat last week but were more actively bearish in HRW. Large traders extended their net short position in Minneapolis to another record.

The preliminary report from the CBOT showed daily volume down 13% Friday to 107,452 while open interest was up 1,406 despite light fund short covering. Options volume dropped 40% to 16,215, 66% of it calls with active liquidation seen in September $4.90 calls that expire Friday. Implied volatility in December at-the-money options rose to 21.45%.

Volume in HRW decreased by 18% to 51,676 on open interest that was up 993.

Overseas markets are mixed today. January futures for Eastern Australian Wheat gained another 2.4 cents after rains again were modest and missed many areas in the east. December futures in Paris wheat in afternoon trade are off 2 cents to $5.202 after adjustments for currencies and volumes.

Bottom line: Wheat must prove export demand will offset a larger crop, which won’t be easy in a bearish grain 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.

 

Pivots081919.jpg

Investopedia says a pivot point is a technical analysis indicator, or calculations, used to determine the overall trend of the market over different time frames. The pivot point itself is simply the average of the high, low and closing prices rom the previous trading day. On the subsequent day, trading above the pivot point is thought to indicate ongoing bullish sentiment, while trading below the pivot point indicates bearish sentiment.
Senior Editor Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Advisor. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Call on www.FarmFutures.com he writes weekly reviews for corn, soybeans, and wheat that include selling price targets, charts and seasonal trends. His other weekly reviews on basis, energy, fertilizer and financial markets and feature price forecasts for key crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association. And you can follow Farm Futures throughout the day on Twitter at www.twitter.com/farmfutures, and be sure to like or follow the new Farm Futures Facebook page.
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