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Morning Market Review for Feb. 21, 2020

Can grain prices push out of the red? (Comments are updated by 7:30 a.m. Central Time.)

Slight overnight losses showed signs of recovery early this morning

Overnight trends:

Corn: Steady to up 1

Soybeans:  Up 2

Wheat: Up 3 to 5

*Prices as of 6:50am CST.

Grain prices were narrowly mixed but mostly higher overnight and will face the opportunity to stay in the green later today if USDA’s weekly export sales report shows generally bullish data. Traders also still anxiously await for new Chinese purchases to materialize, with the phase-one trade deal signed a month ago and enacted a week ago. But China continues to battle a coronavirus outbreak, which could mute soybean and other import needs in the short-term.

The latest 72-hour precipitation map from NOAA shows mostly dry conditions in the central U.S. today and tomorrow, although parts of the Corn Belt could see mild to moderate accumulations Sunday into Monday. 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, but these models show some disagreement over whether precipitation will turn wetter or drier than normal over the next two weeks.

Global stock markets were mixed, with Asian markets closing as much as 1% lower in Hong Kong while climbing nearly 0.4% in China earlier today. Major European markets are all showing small losses in midday trading. Dow futures are tilted 95 points lower in overnight trading to 29,076 as investors remain spooked by an uptick in coronavirus cases, which surpassed 75,000 confirmed cases and 2,200 deaths yesterday. Some analysts are projecting zero global growth in the first quarter before rebounding later in the year because of this outbreak.

Slowing global growth prospects also kicked energy futures significantly lower overnight, with crude oil tripping nearly 2% lower to fall back below $53 per barrel. Gasoline and diesel saw similar cuts. Safe-haven gold proved to be one of the few sure bets overnight, trending more than 1% higher. The U.S. Dollar softened slightly.

Corn saw fractional gains overnight as traders absorb global headlines and square positions ahead of USDA’s weekly export sales report, out later Friday morning. Reports of an armyworm outbreak in China may lend some extra support in today’s session, especially if that pest creates significant yield erosion and sparks demand needs there.

USDA reported yesterday that U.S. farmers could plant 94.0 million acres of corn later this spring, exceeding the average trade guess of 93.6 million acres. That would also be the biggest U.S. corn acreage footprint since 2016, if realized. For a more complete look at all of USDA’s estimates, click here.

Ahead this morning’s export report from USDA, analysts expect the agency to show corn sales totaling between 27.6 million and 47.2 million bushels for the week ending February 13, giving about a 50/50 chance to see a higher tally than the prior week’s total of 38.1 million bushels.

Ethanol production for the week ending February 14 moved slightly higher, reaching a daily average of 1.040 million barrels, according to the latest data from the U.S. Energy Information Administration, out yesterday. April futures were down nearly 1.4% yesterday and dropped another 0.75% overnight, following other energy prices lower.

South Korea purchased another 5.3 million bushels of corn from optional origins in an international tender that closed earlier today. The country has taken advantage of lower grain prices so far in 2020 with a flurry of purchases in recent weeks.

Corn basis bids were mostly unchanged across the central U.S. yesterday but moved as much as 3 cents higher at an Illinois ethanol plant and as much as 5 cents lower at an Ohio river terminal.

The preliminary report from the CBOT showed daily futures volume moving moderately higher to 393,518, with open interest moving 11,497 higher. Options volume of 64,443 continues to favor calls (37,789) over puts (26,654). With near-the-money March contracts expiring later today, implied volatility jumped to 21.03%.

Overseas markets eroded a bit since Thursday. March futures in China were down a penny from yesterday, now at $6.77, and March Paris futures dropped two cents since yesterday, reaching $4.62 in midday trading after adjustments for volumes and currencies.

Soybean prices spent most of overnight with small losses, but a move slightly into the green just ahead of Friday’s open could be a signal that traders are optimistic that either (a) soybean export sales data from USDA will turn up bullish later this morning, (b) China will soon announce new purchases or (c) both. It’s too early to tell for now, however, with choppy action prevalent yesterday and overnight.

Analysts expect USDA show soybean sales ranging between 22.0 million and 44.1 million bushels for the week ending February 13 when it releases its weekly updates later this morning. Unless actuals fall on the very low end of analyst estimates, they will surpass the prior week’s total of 23.9 million bushels.

Less helpful for futures prices was the agency’s initial 2020 soybean acreage estimates, out yesterday. USDA’s predicts U.S. farmers will plant 85.0 million acres this spring, up substantially from last year’s tally of 76.1 million acres and slightly ahead of analyst estimates of 84.6 million acres. However, USDA still projects a waning domestic soybean supply, with ending stocks slipping to 425 million bushels in 2019/20 and just 320 million bushels in 2020/21, presumably on a significant upswing in Chinese demand as it has promised in its phase-one trade agreement.

Soybean basis bids rose 2 cents across multiple interior river terminals Thursday, holding steady at most other Midwestern locations yesterday.

The preliminary report from the CBOT showed daily futures volume falling to 242,372 with open interest also down 4,448. Options volume slid to 28,924 and were evenly split between calls (14,724) versus puts (14,200). Implied volatility in near-the-money March contracts expire later today and moved moderately higher to reach 17.55%.

Vegetable oil markets in Asia were mixed since Thursday. May soybean oil futures in China showed small losses, moving to 37.40 cents per pound, with March palm oil futures in Malaysia ticking slightly higher to reach 29.03 cents.

Oilseed markets internationally were also mixed from a day ago. March soybean futures in China recovered 2 cents to $13.79. May rapeseed futures in Paris afternoon trade trended 2 cents lower from Thursday, sliding to $9.81, May Winnipeg canola overnight held mostly steady at $7.85 after adjustments for currencies and volumes.

Wheat stumbled overnight but recovered with moderate gains early this morning, as traders squared positions ahead of the next USDA export sales report and digest last night’s news, which includes a Taiwanese purchase of U.S. wheat. Markets also continue to react to USDA’s latest acreage data, which it released Thursday, as well as reports of declining domestic stocks that were released just ahead of Friday’s open.

USDA’s latest 2020 wheat planting projection, issued at its Ag Outlook Forum yesterday, calls for 45.0 million acres, which is slightly below last year’s tally of 45.2 million acres and would land at the lowest levels since USDA began keeping records in 1919. USDA chief economist Robert Johansson speculated that saturated soils in the Northern Plains could delay or prevent some spring wheat acres this year.

Some analysts have bullish expectations for USDA’s next weekly sales report, predicting a wheat tally as high as 25.7 million bushels. But the low end of those trade guesses is a much more modest 14.7 million acres.

Taiwan reported earlier today it has purchased 3.8 million bushels of milling wheat from the U.S. in a tender that closed Friday. The grain is for shipment in April and May.

French consultancy FranceAgriMer estimates 65% of the country’s soft wheat crop is in good-to-excellent condition, which is unchanged from a week ago.

The preliminary report from CBOT showed daily SRW volume easing to 152,412 with open interest down another 4,025. SRW options volume fell moderately to 32,093, favoring calls (20,710) over puts (11,383) by a nearly 2:1 margin. Implied volatility in March near-the-money options, expiring later today, moved up to 34.20%.

Volume in HRW wheat fell to 52,863 on open interest dropping another 1,887. Options volume dropped to 4,128, still heavily favoring calls (3,112) over puts (1,016).

In overseas markets, May futures for Eastern Australian Wheat are down 2 cents from Thursday at $6.57, and May wheat futures in Paris afternoon trade are tracking fractionally higher at $5.6850 after adjustments for currencies and volumes.

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