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Morning Market Review for July 15, 2019

How long will heat last? (Comments are updated by 7:30 a.m. Central Time.)

Opening Calls:
Corn: Down 1
Soybeans:  Down 4 to 5
Wheat: Mixed

Traders turn cautious as forecasts disagree

Grain futures are mixed this morning after failing to hold on to a higher open overnight. Differing weather forecasts could help or hurt crops already stress by a difficult growing season.

Temperatures look hot for the next week, as the remnants of Hurricane Barry soak the lower Mississippi and Ohio River valleys. Systems to the north will keep the upper Mississippi River Valley wet, but parts of the central Corn Belt and Plains face another dry week. Forecast models show variance for the second week of the outlook. Official 6 to 10 and 8 to 14-day forecasts out yesterday called for above normal temperatures with most dry conditions. The latest updates from the ensemble model this morning are cooler and wetter but the European model keeps heat around longer.

Growers posting Feedback From The Field last week noted a small improvement in corn though soybean conditions slipped. Corn remains better than average overall with soybeans below normal, but Feedback ratings are behind those reported by USDA’s Crop Progress reports. Click this link to tell us what’s happening in your area and check the interactive map we update regularly.

A producer in northwest Indiana was typical, noting wide variation in both size and condition. “Crops were improving rapidly during the warm and moist phase which was brief,” was the report. “Unfortunately, have gone into hot and dry. We will see how much more this crop can handle.”

While funds bought futures aggressively following Thursday’s USDA reports, big speculators sold agriculture into Tuesday, when data from the latest Commitment of Traders was collected. Money managers were also liquidating crude oil positions, just in time for the market to surge on a big drop in inventories.

Crude held on to its move above $60 a barrel today and stocks also appear ready to keep waving their rally flag. S & P 500 futures made a new record overnight, though stocks were mixed in Asia and Europe.

The dollar is firm with other safe havens mixed.

Rains from Barry could add more headaches for exporters, who face another potential challenge in some markets this year due to a big move in ocean shipping costs. The Baltic Dry Index hit a five-and-a-half-year high last week, lifted by a surge in demand for iron ore.

Corn prices are fighting to hold onto gains as the morning break nears. December corn gapped higher at the start of trading overnight, breaking out of its June-July wedge. But futures couldn’t old the move, filling the gap and threatening a reversal lower.

Corn basis strengthened nearly three cents a bushel last week, with bids firming even on Friday’s rally as cash is well above average in many areas. End users are scrambling for supplies, especially where production will be lower this year, like the eastern Corn Belt. USDA Friday announced the sale of 4.6 million bushels of new crop to Panama under its daily reporting system for large purchases.

Big speculators were only light buyers into early last week according to the CFTC tally, but jumped in after the USDA reports. July 11. The preliminary report from the CBOT showed daily futures volume rising slightly Friday to 463,414 while heavy new fund buying added 20,426 to open interest.

Options volume was 8% higher at 202,931, 64% of it calls as traders rolled up December calls and added the September $4.60 and $5 calls. Implied volatility in at-the-money December options rose 1% to 30.43%.

Overseas markets are mixed today. September futures in China were up 4.5 cents to $7.108 while November Paris futures in morning trade are steady at $5.04 after adjustments for volumes and currencies.

Bottom line: Markets must wait until Aug. 12 to learn more about acreage, which should create uncertain markets trading weekly Crop Progress reports and weather forecasts. While the story of 2019 will take time to play out, add to new crop sales cautiously due to potential for lower yields to raise the cost of production per bushel. In the meantime, sell remaining old crop. For more, see my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Soybeans reversed lower overnight, unable to hang on after selling developed early in European trading as traders reevaluate potential following last week’s USDA reports. While stocks should be down in the year ahead they’re still plentiful, with Chinese demand likely to be weak due to slower economic growth and the effects of African Swine ever.

Still, basis strengthened nearly a nickel on average last week as shippers rush to fill a record book of outstanding sales. Processors also boosted bids, incentivized by crush margins that remain profitable as well.

Vegetable oil markets in Asia were stronger today. September soybean oil futures in China gained nearly a fifth of a cent to 35.902 cents per pound and September palm oil futures in Malaysia ended higher at 21.63 cents.

Oilseed markets internationally are mixed. September soybean futures in China jumped 14.3 cents to $13.585, August rapeseed futures in Paris are up a half cent at $9.47 and November Winnipeg canola after adjustments for volumes and currencies edged a penny lower to $7.835.

Big speculators added to bearish bets in soybeans and meal while buying oil last week, according to Friday’s Commitments, but bought across the board later in the week.

The preliminary report from the CBOT showed futures volume up 11% Friday to 159,481 while open interest was up 5,386 despite modest fund short covering.

Options volume was 39% higher at 73,477, 64% of it calls as traders added August and September strikes along with the November $9.60 call and $9 put. Implied volatility in November at-the-money options increased more than 1% 20.46%.

Bottom line: Soybeans face lost acres and lower yields that could make for an interesting market. Hold off on new crop sales for now. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Wheat prices are mixed after fading early gains at the start of trading in Europe. Another mostly clear week for harvest on the Plains should keep hedge pressure from a decent crop in lay.

Harvest sales and tepid export demand combined to pressure wheat basis last week with SRW cash notably weaker. Big speculators were mixed, selling SRW and buying HRW while large traders were fairly active sellers in Minneapolis too.

Volume in soft red winter wheat dropped 31% to 100,218 while light fund short covering took just 194 off open interest. Options volume was off 39% to 25,305, 46% of it calls with new interest noted in the July 2020 $5.60 put. Implied volatility in December at-the-money options was steady at 23.64%.

Volume in HRW fell 19% to 72,770 on open interest that was down 988.

Overseas markets are mixed today. January futures for Eastern Australian Wheat rose another 5.7 cents to $7.107 as forecasts look mostly dry for the rest of the month. December futures in Paris midday trade fell a penny to $5.592 after adjustments for currencies and volumes with good weather prevailing.

Bottom line: Wheat is trying to prove harvest lows but still faces harvest on the northern Plains. 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.

Pivots071519.jpg

Investopedia says a pivot point is a technical analysis indicator, or calculations, used to determine the overall trend of the market over different time frames. The pivot point itself is simply the average of the high, low and closing prices rom the previous trading day. On the subsequent day, trading above the pivot point is thought to indicate ongoing bullish sentiment, while trading below the pivot point indicates bearish sentiment.
 
Senior Editor Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Advisor. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Call on www.FarmFutures.com he writes weekly reviews for corn, soybeans, and wheat that include selling price targets, charts and seasonal trends. His other weekly reviews on basis, energy, fertilizer and financial markets and feature price forecasts for key crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association. And you can follow Farm Futures throughout the day on Twitter at www.twitter.com/farmfutures, and be sure to like or follow the new Farm Futures Facebook page.
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