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Morning Market Review for Aug. 5, 2020

Will grain prices bounce back today? (Comments are updated by 7:30 a.m. Central Time.)

Overnight trends:

  • Corn: Up 1 to 2 cents
  • Soybeans: Steady
  • Wheat: Up 2 to 3 cents
  • *Prices as of 6:50am CST.

Corn, soybeans and wheat are pointed slightly higher overnight after heavy losses Tuesday

Tuesday was not a good day for grain prices, with corn futures dropping more than 2.5%, and with soybeans and some wheat contracts down double digits yesterday. But overnight activity is signaling the market may be ready for a modest round of recovery today. Corn, soybeans and wheat all tilted 0.25% to 0.5% higher ahead of Wednesday’s open.

The latest 72-hour precipitation map from NOAA shows almost no measurable rainfall in store for much of Michigan, Illinois, Indiana and Ohio through Saturday, although most areas west of the Mississippi River could see another 0.25” to 0.5” during this time. Official 6 to 10 and 8 to 14-day forecasts out yesterday show warmer, wetter weather is likely for much of the central U.S. in mid-August.

Global stocks are showing some positive momentum today. Asian markets were mixed but mostly higher today, and al major European markets were up around 1% in midday trading. Dow futures are also pointed higher, with a pre-opening jump of 164 points and preparing for a fourth consecutive session of gains on Wednesday.

Energy futures are showing further signs of recovery as well. Crude oil was up more than 2.5% overnight to move close to $43 per barrel. Gasoline and diesel also trended about 2% higher early this morning. The U.S. Dollar softened moderately.

Yesterday, commodity funds were net sellers of all major grain contracts, including corn (-32,500), soybeans (-12,000), soymeal (-3,000), soyoil (-1,500) and CBOT wheat (-10,500).

Corn prices will regroup and try to move higher Wednesday after suffering heavy losses on Tuesday. Modest overnight gains of around 0.5% suggest some bargain buyers may be ready to enter the fray today. Some bearish fundamentals still remain firmly in place, however – most notably, expectations for reaching trendline yields in the U.S. and a possible record-breaking crop this coming season in Brazil.

Be sure to watch for the U.S. Energy Information Administration’s data dump on weekly ethanol production later this morning. Production has increased 12 of the past 13 weeks, reaching a daily average of 958,000 barrels through July 24 – the highest output since late March. Stocks remain relatively high, however, which has been rough on ethanol futures throughout the summer.

Basis bids for corn yesterday slipped a penny lower at an Iowa river terminal but firmed 1 to 4 cents at two other Midwestern locations. Farmer sales have been sluggish this summer as futures prices struggle to gain meaningful traction.

Corn quality ratings nationwide are still solid, with 72% of the crop rated in good-to-excellent condition, although farmers reporting to Feedback From The Field say there are some localized problems with everything from overly dry weather to nutrient deficiencies. Click here to catch up on the latest round of farmer anecdotes and view our interactive map.

The latest updates to the Ag Economy Barometer from Purdue University / CME Group show farmer sentiment has held mostly steady from last month, with an index reading of 118 (any number over 100 is considered net positive). “Although overall farmer sentiment in July did not change much compared to June, sentiment was still much weaker than in February before the impact of coronavirus hit,” notes James Mintert, director of Purdue University’s Center for Commercial Agriculture. You can review the entire results of July’s Ag Economy Barometer survey here.

Brazilian exporter group ANEC says the country’s corn exports in August could climb 33% year-over-year to reach 248.8 million bushels. That’s also an improvement over July’s tally of 199.6 million bushels.

South Korea passed on all offers for its tender to purchase 2.4 million bushels of corn that closed earlier today, citing prices that were too high. But two other South Korean groups purchased nearly 5.2 million bushels of corn from optional origins in separate tenders that also closed Wednesday.

The preliminary report from the CBOT showed daily futures volume at 1,639,685, with open interest moving up 24,771. Options volume was at 74,150 and moderately favors puts (42,065) over calls (32,085) at this time. Implied volatility for near-the-money September is at 22.5% with 16 days until expiration.

Overseas markets are mostly lower today. September futures in China fell about 9 cents to $8.36, with August Paris futures holding mostly steady in midday trading at $5.42 after adjustments for volumes and currencies.

Soybean prices face a similar conundrum to corn prices heading into Wednesday’s session. Crop quality in the U.S. is in solid shape right now, hinting at trendline or better yields this fall. And our top overseas competitor, Brazil, is also expecting bin-busting crops this season. So while some modest recovery from yesterday’s selloff is possible, the overall uphill battle remains.

Soybean basis bids yesterday dropped 3 cents at an Indiana processor while holding steady elsewhere across the central U.S.

Brazil’s Agroconsult predicts the country’s 2020/21 corn production could reach a new record of 4.342 billion bushels, which would come in 9% higher year-over-year, if realized.

Brazil’s soybean exports in August could reach 246.9 million bushels, which would be 33% higher year-over-year, if realized, according to the country’s ANEC exporters association. July soybean exports were even better, at 294.7 million bushels. China is by far the No. 1 customer.

The preliminary report from the CBOT showed daily futures volume at 836,404, with open interest rising 9,825. Options volume reached 67,630, moderately favoring puts (37,935) over calls (29,695). Implied volatility in near-the-money September contracts were at 12.1%, with 16 days until expiration.

Vegetable oil markets in Asia were steady to slightly soft overnight. September soybean oil futures in China saw fractional losses to 41.38 cents today, with September palm oil futures in Malaysia holding steady at 30.04 cents.

Oilseed markets internationally are on their heels, meantime. September soybean futures in China are down about 5 cents to $18.21. September rapeseed futures in Paris afternoon trade are also pointed lower, while September Winnipeg canola futures were also slightly in the red overnight.

Wheat prices have shown plenty of volatility this summer, taking a turn for the worse yesterday on news of better than previously expected production in Russia. Prices still have a long way to go to make it back to seasonal highs captured back in late March, although even with this week’s slump, prices are still at the highest levels since early June.

In Lebanon, the country’s primary grain silos were destroyed in an explosion that’s currently being investigated. The blast left the country of 6 million people with less than a month of grain reserves. The only silver lining was that the silos were at less than 10% of their holding capacity when the blast hit.

France’s 2020 soft wheat harvest is expected to be down nearly 25% from a year ago, to 1.092 billion bushels, based on both lower total acres and lower yields per acre. The country’s durum wheat production is also expected to decline 25%, with spring wheat production jumping 41% higher.

The preliminary report from CBOT showed daily SRW volume at 202,883, as open interest shrank 3,340. Options volume was 34,252, narrowly favoring calls (17,807) over puts (16,445). Implied volatility in September near-the-money options reached 22.9% with 16 days until expiration.

Volume in HRW wheat were for 68,685, with open interest firming 2,288. Options volume moved to 8,698, still moderately favoring calls (4,982) over puts (3,716).

In overseas markets, September futures for Eastern Australian Wheat were at $7.96, with September wheat futures in Paris afternoon trade holding at $5.82 after adjustments for currencies and volumes.

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