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Morning Market Review for July 16, 2019

Prices face downside of weather market (Comments are updated by 7:30 a.m. Central Time.)

Opening Calls:
Corn: Down 6 to 7
Soybeans:  Down 9 to 11
Wheat: Steady to down 3

Bearish charts and forecasts keep selling pressure on

Grain futures are mostly lower this morning, pressured by follow-through selling on the heels of yesterday’s losses and crop ratings that survived last week’s heat.

Bearish forecasts also dented the rally. While hot temperatures will sear the growing region this week, official 6 to 10 and 8 to 14-day forecasts out yesterday called for below average temperatures. The latest updates from the ensemble model this morning agree though dry conditions could persist over much of the Midwest.

Growers posting Feedback From The Field continue to wonder if heat is too much of a good thing.

“Turns out (very) hot and dry is (much) worse than cold and wet,” noted an Indiana producer. “Crops fragile from being mudded in are giving little resistance to hot and dry.”

Click this link to tell us what’s happening in your area and check the interactive map we update regularly.

Officials from the U.S. and China expect to talk later this week, with potential for another meeting next week in Beijing trying to advance trade negotiations. Stock markets meanwhile focus on corporate earnings reports, after posting new records yesterday. Financial markets were mixed overseas as U.S. stock index futures traded inside days higher so far.

The dollar is stronger, adding pressure to commodities and helping to keep crude oil below $60 a barrel.

Corn prices are lower, unable to hold an attempt to firm overnight when markets fell apart after the start of trading in Europe. December corn tested short-term support after the break on the heels of Monday’s reversal lower.

USDA’s ratings bucked expectations after a hot and mostly dry week in many areas showed improvement overall. Big gains in Illinois and Missouri offset losses in parts of the western Corn Belt, helping yield potential gain nearly a half of a bushel per acre. Our models based on the ratings increased yields to 168.9 to 171.1 bpa, with the average of the two right at 170.

But development continues to lag normal. Only 17% of the crop is silking, 25% behind average.

Export inspections showed more signs of demand rationing, slipping to 26.6 million bushels. That’s more than 15 million bushels below the rated needed weekly through August to meet USDA’s forecast for the 2018 crop, which the agency lowered last week. Corn basis eased yesterday in export markets and along the Illinois River, but was firm at ethanol plants despite weaker margins last week.

The preliminary report from the CBOT showed daily futures volume 1% lower yesterday at 461,088 while open interest fell 2,532 with heavy fund liquidation noted.

Options volume was off 30% to 142,317, 55% of it puts with active new interest noted in August puts that expire at the end of next week along with liquidation of the December $4.80 call. Implied volatility in at-the-money December options rose to 29.97%.

Overseas markets failed to show strength today. September futures in China were unchanged at $7.107 and November Paris futures in morning trade are down a penny at $4.986 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 are lower, breaking through last week’s sharp uptrend after Monday’s bearish reversal.

The crop progress report from USDA led to mixed changes in ratings models. The average came in at 50 bpa, up about a quarter of a bushel, in a range from 49.5 to 50.4 bpa. However, while the nationwide rating improved, our state-by-state analysis showed only steady conditions., with the upper Midwest seeing mostly weaker ratings.

Only 22% of the crop is blooming, compared to the five-year-average of 49%.

Demand news was mixed yesterday. Export inspections of 31.4 million bushels were near the level needed every week thorough August to reach USDA’s forecast for the 2018 marketing year. China, which has 210 million bushels of outstanding sales on the books, dominated the list of destinations with 16.9 million bushels.

But June crush by members of the National Oilseed Processors Association was 148.8 million bushels, below trade guesses, taking the year -to-date total closer to 1.5% increase forecast by USDA.

Vegetable oil markets in Asia settled a little lower today. September soybean oil futures in China ended at 35.883 cents per pound and September palm oil futures in Malaysia were at 21.52 cents.

Oilseed markets internationally were also lower. September soybean futures in China lost 13.4 cents to $13.448, August rapeseed futures in Paris are down 2 cents at $9.409 and November Winnipeg canola is 3 cents lower at $7.735 after adjustments for volumes and currencies.

The preliminary report from the CBOT showed futures volume down 11% yesterday to 141,887 as open interest decreased by 10,398 despite modest new fund selling.

Options volume fell another 25% to 55,280, 54% of it calls as traders liquidated the November $9.20 and $10.20 calls. Implied volatility in November at-the-money options increased dropped to 19.07%.

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 as markets try to recover from bearish reversals Monday. While winter wheat contracts remain under pressure, Minneapolis is trying to turn higher following news from the crop progress report.

Winter wheat harvest remains slower than normal but advanced to 57%, 14% behind the five-year-average. Spring wheat ratings were mixed. While USDA’s national rating for the crop slipped a little, state-by-state conditions improved.

After a couple of good weeks, wheat inspections slipped back 11.6 million bushels, as none of the scattered destinations was for more than one cargo. It’s still early in the marketing year and harvest is behind schedule, but lower world production doesn’t appear to be spooking buyers yet.

Volume in soft red winter wheat was 4% higher yesterday to 104,639 while open interest was up 4,445 on light new fund selling. Options volume increased 11% to 28,128, 51% of it puts with new interest noted in August puts that expire at the end of next week. Implied volatility in December at-the-money options increased to 23.82%.

Volume in HRW dropped 35% to 47,261 on open interest that fell 1,595.

Overseas markets are lower today. January futures for Eastern Australian Wheat dropped 7.7 cents to $6.16 despite dry forecasts for the next two weeks on the continent. December futures in Paris midday trade are off a penny at $5.157 after adjustments for currencies and volumes as production in Europe continues to recover from last year’s drought.

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.

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Pivots071619.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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