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Morning Market Review for Feb. 20, 2020

Grain prices tilt lower overnight. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trends:

Corn: Down 1

Soybeans:  Down 5

Wheat: Down 2 to 4

*Prices as of 6:50am CST.

Corn, soybeans and wheat all spill into the red ahead of Thursday’s session

Grain markets will only be open four days during this holiday-shortened week, but they have exhibited plenty of volatility so far – especially for wheat, which surged more than 4% higher Tuesday before getting clipped by a round of profit-taking Wednesday that pushed prices back down more than 1%. Will that trend continue Thursday? It appears a possibility, with overnight losses trimming a few more cents off. Corn and soybeans also showed modest overnight losses as traders await a round of export data and acreage estimates from USDA later this week.

A shifting jet stream this coming week could push colder air further south to close out the month. Official 6 to 10 and 8 to 14-day forecasts out yesterday and the latest updates from the ensemble models show much colder weather likely for most of the country for the end of February, with mostly wetter-than-normal conditions likely for the Midwest and Plains, as much drier conditions are expected to develop further west.

Asian stock markets were mostly higher Thursday after China’s Shanghai Composite saw a 1.84% boost. Japan saw a much more modest increase today, with Hong Kong down slightly. European markets were narrowly mixed in midday trading. Dow futures on Wall St. are pointing modestly lower, with some technical selling possible Thursday after reaching record highs yesterday. Coronavirus jitters still lurk in the background, with nearly 75,000 total cases now confirmed in China.

Energy futures posted narrowly mixed results overnight, with crude oil tacking on 0.3% to stay above $53 per barrel. Gasoline is pointed about 0.5% higher heading into Thursday’s session, with diesel softening slightly. The U.S. Dollar firmed slightly.

Corn prices eased slightly overnight, moving about 0.25% lower ahead of Thursday’s session. That is an extension of Wednesday’s trends so far, when March futures lost 2.5 cents to close at $3.8050 yesterday.

Traders will have some extra data to chew on later this week – most notably USDA’s weekly export report, out tomorrow morning, as well as the agency’s annual crop acreage estimates, which it will unveil at the Ag Outlook Forum in Washington, D.C., later this week.

What will the latest ethanol production trends be? The U.S. Energy Information Administration has shown some back-and-forth swings in recent weeks, with the daily average as high as 1.095 million barrels per day in early January down to 1.029 million barrels per day late last month. EIA’s next report comes out later this morning.

Corn basis bids were largely steady yesterday, but they did rise a penny at an Illinois river terminal and 3 cents at an Indiana processor. Farmer sales have been generally sluggish so far this week.

Ahead of USDA’s Ag Outlook Forum, analysts expect the agency to report U.S. corn plantings at 93.6 million acres this year. If average yields can hit 176.5 bushels per acre, that would mean a total production of 15.111 billion bushels and ending stocks of 2.443 billion bushels.

In Europe, grain trade lobby Coceral is forecasting 2020 EU corn production at 2.559 billion bushels, which would trend 6.6% above last year’s total, if realized.

The preliminary report from the CBOT showed daily futures volume at 341,346, with open interest tracking 1,932 higher. Options volume of 43,539 continue to heavily favor calls (29,092) over puts (24,447). Implied volatility for near-the-money March contracts, which expire tomorrow, are currently at 17.87%.

Overseas markets didn’t see much action today. March futures in China added a penny to climb just above $6.78, and March Paris futures held mostly steady at $4.64 in midday trading after adjustments for volumes and currencies.

Soybean prices carved out modest gains Wednesday but coughed them up after falling about 0.5% in overnight trading as traders grow impatient for new Chinese purchases to materialize after the phase-one trade deal with the U.S. was enacted this past week. Traders may await acreage and export data from USDA later this week before making adjustments to the latest downward price swing.

Yesterday, soybean basis bids slipped 2 cents lower at an Illinois river terminal and an Ohio elevator today, while holding steady elsewhere across the central U.S.

Analysts expect USDA to estimate 2020 soybean plantings at 84.6 million acres at its Ag Outlook Forum meeting. With an average yield potential of 50.3 bushels per acre, that means a total production of 4.225 billion bushels and 2020/21 ending stocks of 519 million bushels.

In China, the country’s commerce ministry expects domestic consumption impacts from the coronavirus to bottom out in March before recovering throughout the second quarter of 2020. A ministry official also warns that if the fallout lasts a relatively long time, its food and agriculture industries could be “heavily impacted.”

The preliminary report from the CBOT showed daily futures volume were at 333,861 with open interest tilting 4,203 higher. Options volume were for 37,004 and moderately favor calls (21,212) versus puts (15,792). Implied volatility in near-the-money March contracts, which expire tomorrow, are at 16.42%.

Vegetable oil markets in Asia were steady to soft today. May soybean oil futures in China tipped 0.245 cents lower to 37.44 cents per pound, with March palm oil futures in Malaysia hovering around 28.95 cents.

Oilseed markets internationally were mostly muted. March soybean futures in China dropped nearly 4 cents to $13.77. May rapeseed futures in Paris afternoon trade were fractionally higher midday at $9.83 and May Winnipeg canola overnight slipped fractionally lower to $7.85 after adjustments for currencies and volumes.

Wheat prices have shown plenty of volatility so far this week, with overnight signals that trend may continue Thursday after overnight losses eroded most contracts nearly 1%. Profit-taking could continue today, absent the influx of any new fundamental factors entering the fray.

Analysts expect USDA to estimate 2020 wheat plantings at 44.9 million acres later this week, with average yield potential at 49.1 bushels per acre, for a total production of 1.860 billion bushels and 2020/21 ending stocks at 829 million bushels.

European grain lobby Coceral is forecasting EU soft wheat production in 2020 to fall 5.4% to 5.429 billion bushels. Coceral also estimates EU barley production will trend lower this year.

Ukraine’s 2019/20 grain exports are still trending more than 25% ahead of last year’s pace, anchored by wheat exports that have now reached 598.9 million bushels. The country’s total grain harvest reached a record 75.1 million metric tons last fall.

Saudi Arabia issued an international tender to purchase 26.3 million bushels of wheat for delivery between April and June. The tender closes tomorrow.

The preliminary report from CBOT showed daily SRW volume now at 182,925 with open interest falling 4,822. SRW options volume is at 51,238, still moderately favoring calls (30,187) over puts (21,051).

Implied volatility in March near-the-money options, expiring tomorrow, remains high at 32.93%.

Volume in HRW wheat reached 58,627 on open interest dropping 904. Options volume was at 5,815, favoring calls (3,908) over puts (1,907) by a nearly 2:1 margin.

May futures for Eastern Australian Wheat are at $6.59 and May wheat futures in Paris afternoon trade are at $5.68 adjustments for currencies and volumes.

 

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