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Morning Market Review for Jan. 18, 2019

Markets pop again overnight
. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trend:
Up 1 to 2
Soybeans: Up 3 to 4
Wheat: Up 1 to 3

Trade hopes and weather fears spur more short covering

Grain futures are higher across the board this morning, putting 50-day moving averages in play in corn, soybeans and wheat. Concerns about dry conditions in Brazil and hopes for a breakthrough in trade talks spurred mostly short-covering ahead of a three-day weekend. Markets close Monday in observance of the Martin Luther King Jr. holiday.

Risk assets of all stripes are holding on to gains triggered yesterday by reports – officially denied – that the U.S. was considering lifting some tariffs against Chinese imports to spur a breakthrough in trade talks. Chinese negotiators are due in the U.S. Jan. 30-31 for another round of discussions.

Stock markets around the world moved higher, pointing to a higher open on Wall Street this morning. While investors sold safe havens like gold, losses in the dollar are muted by expectations other central banks around the world will join the Federal Reserve in holding interest rates steady to avoid tipping the global economy into a recession.

Crude oil cemented its move above $52 a barrel, keeping cash propane and diesel on the rise too. February urea swaps at the Gulf continued their retreat yesterday after India’s latest large tender brought out some lower offers.

Corn prices are higher, joining soybeans and wheat in a surge higher shortly before 4 a.m. CST.  The move coincided with news Russia was planning to regulate grain prices, raising concerns export controls could follow.

The gains kept alive momentum from this week’s rejection of a move below the trendline off March futures’ September and December lows. The nearby moved back above its 50-day moving average, holding a narrowing range as traders wait for key January reports postponed by the government shutdown.

Overseas markets are stronger today. May futures in China gained a penny to $6.831 and March Paris futures in midday trade was up 1.4 cents to $5.241 after adjustments for volumes and currencies.

The preliminary report from the CBOT showed daily futures volume up 32% Thursday to 375,734 while open interest fell 6,689 with  heavy fund buying noted. Options volume jumped 82% to 75,440, 73% of it calls as traders liquidated February and March $3.80 calls while adding the at-the-money strike that expires today. Implied volatility in at-the-money March options dropped to 15.31%.

Bottom line:  A smaller 2018 crop could help corn turn the corner, though the market suffers from fatigue. For more, see my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.


Soybeans are higher, though futures backed off their initial surge after the Russia story broke. The gains kept March futures above its 50-day moving average, supported by trade hopes on worries about drying conditions in Brazil.

Too much rain in Argentina likely trimmed acreage there modestly according to multiple reports, with potential for flooding in some areas of the next week as well.

The preliminary report from the CBOT showed daily futures volume 25% higher Thursday at 179,771 while open interest rose only 2,094 after active fund short covering. Options volume was up 60% to 56,662, 51% of it calls as traders rolled down out-of-the-money March calls and added the $9 November put. Implied volatility in at-the-money March options rose to 14.11%.

Vegetable oil markets in Asia were up about a quarter of a cent today. May soybean oil futures in China jumped to 37.239 cents per pound and March palm oil futures in Malaysia settled at 24.19 cents.

Oilseed markets internationally also posted gains. May soybean futures in China were 5.4 cents higher at $13.53, February rapeseed futures in Paris midday trade is up a half-cent to $9.538 and March Winnipeg canola overnight gained about a penny to $8.296 after adjustments for currencies and volumes.

Bottom line: Fundamentals remain bearish but are improving a little while charts try to maintain their bullish uptrend. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.


Wheat prices are a little higher but losing steam as the trade remembers past stories out of Russia that turned out to be smoke and no fire. Russian continues to dominate big tenders by Egypt, though U.S. originations have become more competitive.

A blast of cold air doesn’t look like it poses much risk to winter wheat because most fields in the I-80 corridor from Nebraska to Ohio are due for heavy snow from the system moving out of the western Plains today. Forecasts over the next week call for another storm as well, keeping precipitation totals heavy from the Delta through the Southeast.

The official 6 to 10 and 8 to 14-day forecasts out yesterday and the latest updates from the ensemble model this morning show the cold trend continuing with dry weather on the southwest Plains spreading to the southern half of the U.S.

Overseas markets are stronger today. January futures for Eastern Australian Wheat rose 7.8 cents to $8.321 and March futures in Paris midday trade are up a penny to $6.348 after adjustments for currencies and volumes.

Volume in soft red winter wheat was 29% higher yesterday at 97,290 with open interest up only 2,734 after modest fund short covering. Options volume gained 48% to 24,648, two-thirds of it calls as traders added the May $6 call. implied volatility in at-the-money March options rose to 20.26%.

HRW volume increased to 71,495 on open interest that was 1,151 lower.

Bottom line: Prospects for lower than expected acreage in 2019 could help firm the market, but confirmation won’t be coming soon from USDA. For more details on the outlook, see the Wheat Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.


 Explanation of pivot points. 

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This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed as to the accuracy, and is not to be construed as representation. The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results.
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