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Morning Market Review for Aug. 6, 2020

Has weather pressure returned? (Comments are updated by 7:30 a.m. Central Time.)

Overnight trends:

  • Corn: Down 1 cent
  • Soybeans: Down 1 to 2 cents
  • Wheat: Down 4 to 5 cents

*Prices as of 6:50am CST.

Corn, soybeans and wheat all ease lower in overnight trading

Yesterday’s grain prices were decidedly mixed, with corn and winter wheat tracking a bit higher, while soybeans and spring wheat stumbled. Overnight trading suggests the overall bearish sentiment in the grain market hasn’t dissipated, as traders brace for possible record or near-record corn and soybean crops in the U.S. and Brazil. Modest losses ahead of Thursday’s open could indicate a broad round of technical selling will be in store today, depending on what USDA’s latest export report looks like later this morning.

The latest 72-hour precipitation map from NOAA shows some wetter weather possible in the central Corn Belt between today and Sunday, although much of Indiana and Ohio will receive little to no rainfall during this time. Official 6-to-10 day  forecasts out yesterday show seasonally warm weather returning to the central U.S. between August 11 and August 15, with wetter-than-normal conditions likely east of the Mississippi River.

Asian stock markets were mixed today, with China’s Shanghai Composite trending 0.25% higher while Japan’s Nikkei market closed down 0.4%. European markets were largely in the red in midday trading, while U.S. market preopening activity for the S&P was pointed more than 0.5% higher. Jobless claims data, out later today, will further inform stock prices Thursday.

Energy futures were mixed overnight. Crude oil fell nearly 1% to fall just below $42 per barrel. Diesel was also down around 0.5%, while gasoline ticked slightly higher. The U.S. Dollar firmed slightly.

On Wednesday, commodity funds were net buyers of corn (+7,500), soyoil (+1,000) and CBOT wheat (+2,000) contracts but were net sellers of soybeans (-3,500) and soymeal (-1,500).

Corn prices etched out modest gains yesterday, but sustained forward momentum could be hard to come by this summer as the U.S. braces for what could be a near-record crop in 2020. Prices were tilted slightly lower ahead of Thursday’s session.

Basis bids were largely steady yesterday, although they did erode 4 cents at an Iowa river terminal. Farmer sales have remained light this week amid low commodity prices.

The most recent data from the U.S. Energy Information Administration showed ethanol production for the week ending July 31 fell from the prior week’s daily average of 958,000 barrels down to 931,000 barrels per day. Ethanol stocks were also up 0.4%, reaching 20.346 million barrels.

USDA’s next batch of weekly export data comes out later this morning. Ahead of that report, analysts expect the agency to show corn sales ranging between 82.7 million and 126.0 million bushels for the week ending July 30. Analysts are confident the latest numbers will dwarf the prior week’s tally of 24.0 million bushels.

Our newest exclusive grower survey is out. Respondents suggest that corn yields could come in at 178.9 bushels per acre, for a total U.S. production of 15.032 billion bushels. Ending stocks for 2020/21 could climb to 2.68 billion bushels, which will be the largest volume since 1987, if realized. Click here for additional analysis.

China continues to significantly draw down its state corn reserves with another massive auction earlier today. All the available grain on offer was sold – a total of 157.2 million bushels.

The preliminary report from the CBOT showed daily futures volume rising fractionally to 1,641,698, with open interest also up 2,781. Options volume shrank to 40,440 and now slightly favors calls (25,929) over puts (23,511). Implied volatility for near-the-money September contracts was mostly steady, easing to 22.1% with 15 days until expiration.

Overseas markets are also pointed lower today. September futures in China dropped another 4 cents to $8.35, with August Paris futures down slightly in midday trading to $5.41 after adjustments for volumes and currencies.

Soybean prices face the same uphill battle as corn right now – namely, favorable weather has set the stage for potentially record-breaking crops in both the U.S. and Brazil, which makes any significant rally unlikely as the summer unwinds. Short-term opportunities still exist, however, especially if large sales to China pick up. Also keep an eye out for USDA’s weekly export report, out later this morning. Analysts aren’t expecting a repeat of the prior week’s mammoth haul, but they have been wrong before.

Basis bids yesterday held largely steady across the central U.S. but did slide 2 cents lower at an Indiana processor.

Analysts expect USDA to show soybean sales ranging between 29.4 million and 64.3 million bushels for the week ending July 30, expressing doubt that it can match the prior week’s immense tally of 132.4 million bushels. The agency’s report will be released later this morning.

Per the results of our exclusive grower survey, average soybean yields could reach 51.0 bushels per acre this year, a 3.6-bushel boost over 2019, if realized. That would also put 2020 soybean production at 4.233 billion bushels, which is 98 million bushels higher than July WASDE projections and 19% above last year’s production.

The preliminary report from CBOT showed daily futures volume down slightly, to 828,940, with open interest also down 6,368. Options volume fell to 33,744 and now favors calls (18,448) over puts (15,296). Implied volatility in near-the-money September contracts rose slightly to 12.3% with 15 days remaining until expiration.

Vegetable oil markets in Asia were steady to slightly soft again today. September soybean oil futures in China was down again, sliding to 41.28 cents today, with September palm oil futures in Malaysia coming in at 30.74 cents.

Oilseed markets internationally are still on their heels, too. September soybean futures in China are down nearly 8 cents to $18.26. September rapeseed futures in Paris afternoon trade are narrowly mixed, as were Winnipeg canola contracts in overnight trading.

Wheat prices were mixed on Wednesday, but overnight trends suggest a round of technical selling will resume on Thursday, as it has been hard to shake the focus on large domestic and world stocks, with the U.S. struggling to compete among stiff global competition. Some contracts slumped as much as 1% lower ahead of Thursday’s open.

Ahead of the next weekly export report from USDA, out later this morning, analysts expect the agency to show wheat sales ranging between 7.3 million and 29.4 million bushels for the week ending July 30.

Farm Futures survey respondents expect to see a 1.8 bushel-per-acre drop in wheat yields this year after dry growing conditions afflicted the Southern Plains. Survey participants estimate that cumulative 2020 wheat yields will fall a hair below 50.0 bushels per acre (49.9) across the U.S. Click here to learn more.

Egypt purchased 15.1 million bushels of wheat from Russia and Ukraine in an international tender that closed earlier this week. The grain is for shipment in September.

Japan purchased 4.8 million bushels of food-quality wheat from the United States, Canada and Australia in a regular tender that closed earlier today. Of the total, just over half was sourced from the U.S.

South Korean flour mills have purchased 2.1 million bushels of wheat from the United States in a tender that closed earlier today. The grain is for shipment in November.

Pakistan importers have purchased 2.2 million bushels of wheat from optional origins, following purchases of 11.0 million bushels in late July. The latest buy is for shipment in early September.

The preliminary report from CBOT showed daily SRW volume falling to 150,501, as open interest firmed by 74. Options volume moved up to 37,019 and now significantly favors puts (25,040) over calls (11,979). Implied volatility in September near-the-money options rose to 23.2% with 15 days before expiration.

Volume in HRW wheat fell to 44,429, with open interest also down 2,823. Options volume was trimmed to 3,165, still slightly favoring calls (1,660) over puts (1,505).

In overseas markets, September futures for Eastern Australian Wheat were at $7.91, with September wheat futures in Paris afternoon trade moving to $5.78 after adjustments for currencies and volumes.

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