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Morning Market Review for Feb. 28, 2020

Buckle up for a rough ride Friday? (Comments are updated by 7:30 a.m. Central Time.)

Overnight trends:

Corn: Steady to down 1
Soybeans:  Down 8 to 9
Wheat: Down 3 to 5

*Prices as of 6:50am CST.

Financials, energy and grain futures all pointed lower again today amid coronavirus scare

Yesterday, the Dow closed down nearly 1,200 points, sealing the biggest one-day drop in its entire history after worries the coronavirus is spreading and could develop into a full-blown pandemic, coupled with some doubts that the Trump Administration is ill-prepared to handle a large-scale outbreak in the U.S., would that occur. Broad losses in other commodities have applied plenty of headwinds to grain futures this week, and Friday looks to be in store for more of the same. Soybean futures were down double digits earlier in overnight trading, with wheat showing more moderate losses and corn mostly treading water heading into today’s session.

The latest 72-hour precipitation map from NOAA shows some rainy weather possibly returning to the eastern Corn Belt this Monday after the central U.S. sees mostly dry conditions this weekend. Official 6 to 10 and 8 to 14-day forecasts out yesterday and the latest updates from the ensemble models show the first week of March could wrap up trending somewhat drier than normal, with seasonally warm temperatures prevalent across the eastern half of the country.

Global stock markets moved sharply lower Friday, with China’s Shanghai composite market tumbling 3.7% lower and other Asian markets absorbing similar losses. European markets were trending 2.5% to 3% lower in midday trading. Dow futures were pointed 263 points lower ahead of Friday’s opening bell, sliding all the way down to 25,311, with experts predicting it could “tank again” today after already suffering heavy bleeding earlier this week. (The Dow opened higher than 28,500 Monday morning.)

Worries over how the coronavirus could slow down the global economy spilled over to energy futures again Friday, with crude oil slumping another 3% overnight to fall below $46 per barrel. Gasoline was also trending about 3% lower last night, with diesel down around 1.7%. The U.S. Dollar softened slightly.

Yesterday, commodity funds were net sellers of corn (-24,000), soyoil (-6,000) and CBOT wheat (-6,000) contracts, but they were net buyers of soybeans (+7,000) and soymeal (+8,000) contracts.

Corn prices dialed in fractional losses overnight, pressured by a broad drop in other commodities but falling low enough to entice some possible bargain buyers today. As of 6 a.m. CST, March futures were holding steady at $3.6450, with May futures easing 0.25 cents to $3.6775.

Corn export sales are coming off a disappointing week ending February 20, with USDA reporting yesterday they only reached 38.5 million bushels in old and new crop sales. That was on the low end of trade guesses that ranged between 31.5 million and 51.2 million bushels. It also landed 26% below the prior four-week average. Cumulative totals for the 2019/20 marketing year are now at 531.3 million bushels, still significantly behind last year’s pace of 1.005 billion bushels.

The results of an exclusive Farm Futures survey of more than 700 farmers are in, with respondents intending to increase corn acres in 2020 by 7.7%, reaching 96.6 million acres (even higher than USDA’s February estimates). If realized, that would be the second-largest amount of corn acres ever planted in the U.S. Assuming a return to the five-year average of 173.4 bushels per acre, expect a mammoth haul of 15.3 billion bushels this year – a potential record-breaker.

The preliminary report from the CBOT showed daily futures volume rising significantly to 636,788, although open interest fell another 16,075. Options volume jumped to 119,036 and now leans more towards calls (70,101) versus puts (48,935). Implied volatility for near-the-money May contracts is on the rise, moving to 16.45%.

Overseas markets are trending lower today. March futures in China are now at $6.87, with March Paris futures spilling nearly 7 cents lower from yesterday to land at $4.71 in midday trading after adjustments for volumes and currencies.

Soybean prices caught a small breather Thursday, capturing modest gains after riding surging soymeal prices higher because of speculation around possible higher tariffs from Argentina. But coronavirus concerns crept back into play overnight, with soybeans spilling back into the red amidst spillover weakness from a broad range of other commodities.

USDA’s latest round of export data out yesterday did no favors, either. Total sales of 13.3 million bushels for the week ending February 20 were completely below trade estimates that ranged between 22.0 million and 33.1 million bushels. Soybean export shipments also tumbled 42% below the prior four-week average, with just under 22.0 million bushels.

Results of the latest exclusive Farm Futures planting survey were released yesterday, and the data suggests U.S. soybean farmers will plant 4.5 million more acres this year versus 2019, which was plagued by an unprecedented number of prevent plant acres. Our results suggest 80.6 million acres for 2020.

Why do soybean prices seem to have a short-term bearish mentality, and what are the prospects for a rally later this spring or summer? Naomi Blohm, senior market adviser with Stewart Peterson digs into these questions and more in our latest Ag Marketing IQ blog – click here to learn more.

The preliminary report from the CBOT showed daily futures volume jumping up to 349,136, although open interest fell another 18,836. Options volume more than doubled, reaching 58,384, while still closely favoring calls (30,235) versus puts (28,149). Implied volatility in near-the-money May contracts don’t expire until late April but are already on an upward swing, reaching 12.65%.

Vegetable oil markets in Asia saw mixed pressure overnight. May soybean oil futures in China managed to firm to 36.48 cents today, with March palm oil futures in Malaysia taking another spill since yesterday, sliding to 25.28 cents.

Oilseed markets internationally are mixed from a day ago, meantime. March soybean futures in China are trying to hold at $14.16. May rapeseed futures in Paris afternoon trade tumbled 15 cents lower to $9.50, while May Winnipeg canola overnight trended around a penny higher to $7.6250 after adjustments for currencies and volumes.

Wheat remains sensitive to outside commodities, dialing in overnight losses of around 3 to 5 cents as financial and energy markets prepare for another rough outing Friday. Expectations for bigger global crops next season are applying additional headwinds and will make it harder to drum up much of a rally in the short-term – especially until coronavirus concerns can be dampened.

USDA reported old and new crop wheat sales totaling 16.5 million bushels last week, which was on the low end of trade estimates that ranged between 15.6 million and 25.7 million bushels. Cumulative totals of 647.3 million bushels this marketing year remain ahead of last year’s pace of 575.1 million bushels, however. Wheat export shipments were down 32% week-over-week to land at 15.0 million bushels.

The Philippines purchased 10.1 million bushels of feed wheat from optional origins yesterday, with shipment expected between May and July. The Black Sea region is expected to be a major supplier in this deal.

France’s soft wheat crop quality declined slightly this week, moving from 65% in good-to-excellent condition down to 64% for the week ending February 24, per the country’s FranceAgriMer consultancy. Last year at this time, 85% of the country’s soft wheat crop was in good-to-excellent condition.

The preliminary report from CBOT showed daily SRW volume easing to 144,137 with open interest down another 5,304. Options volume moved up to 39,419, almost exactly split between calls (19,741) and puts (19,678). Implied volatility in May near-the-money options continue to trend higher, moving up to 23.69%.

Volume in HRW wheat retreated to 60,186, with open interest dropping another 3,986. Options volume remains relatively slim at 4,890, significantly favoring calls (3,768) over puts (1,122).

In overseas markets, May futures for Eastern Australian Wheat saw a severe drop since yesterday, falling to $6.26, and May wheat futures in Paris afternoon trade are down nearly 3 cents to $5.55 after adjustments for currencies and volumes.

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