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Morning Market Review for July 18, 2019

Chart battles highlight risk. (Comments are updated by 7:30 a.m. Central Time.)

Opening Calls:
Corn: Down 7 to 8 
Soybeans:  Down 3 to 4
Wheat: Down 1 to 6

Prices test short-term support overnight

Grain futures are lower across the board this morning after an attempt to rally overnight fell apart before trading stopped in Asia. Bearish signals on price charts added to pressure from weather forecasts showing much cooler conditions next week.

While 100-degree temperatures bake parts of the Corn Belt this week, fronts moving through the Plains and Midwest should break the heat wave this weekend. U.S. models, including official 6 to 10 and 8 to 14-day forecasts out yesterday and the latest updates from the ensemble model this morning call for below average temperatures to return next week along with mostly drier conditions. The European Model appears to be hinting at a little more heat, though nothing as extreme as this week’s blast.

Growers posting Feedback From The Field Wednesday focused on the eastern Corn Belt where rains from Hurricane Barry were an issue.

A farmer near the Ohio River in southern Indiana received welcomed rain for the heat blast but noted “night time temps in high 70's -- not good for kernel set” on tasseling corn.

But Barry was missing in action in northwest Ohio, where producers were “high and dry. Now comes the extreme heat to ravage what little crop got planted this spring.”

“Probably 1/2 of the full-season soybeans here were planted around the same time we would normally plant double-crop beans (first 2 weeks of July),” said a producer in northeast Missouri. “I have seen no soybeans more than 8" tall within a 1-hour drive from here.”

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

Financial markets are also failing to regroup after breaking yesterday on worries about trade and slipping corporate earnings. Stocks moved mostly lower overseas and U.S. index futures point to a lower open on Wall Street today.

Crude oil moved back above $57 a barrel overnight on a weaker dollar, also supported by tensions with Iran. Crude oil inventories fell last week but product stocks swelled, including supplies of diesel, pressuring Midwest cash prices for fuel.

Corn prices are lower this morning, sending December below its support line off July lows. Next week’s cooler forecast for pollination so far is offsetting concerns about this week’s heat and uncertainty over acreage.

While rumors about prevent plant totals swirled through the market yesterday, the latest summary of business as of Monday from the Risk Management Agency showed only 30 million acres of corn reported, with 4.5% of the policies reporting losses.

The latest Vegetation Health Index improved a little for corn this week, but remains below average, suggesting lower yields that USDA Monday crop ratings. Our model from the VHI projects yields between 154.4 and 168.8 bushels per acre, with average of 161.6.

Demand factors aren’t helping the market much so far this week. Export sales out this morning are expected to improve from last week’s 15.6-million-bushel total, but not by enough to make a difference. And, while ethanol production rose last week, stocks were higher as well, sending prices for the biofuel down 4.7 cents a gallon.

Corn basis was mixed yesterday. While bids mostly weakened at ethanol plants in the face of declining margins, basis on parts of the river system improved.

The preliminary report from the CBOT showed daily futures volume down 14% yesterday to 330,770 on open interest that fell 6,297 despite more fund liquidation.

Options volume was 53% lower at 79,366, 52% of it calls as traders added August and September puts. Implied volatility in at-the-money December options dropped to 28.20%.

Overseas markets are mixed today. September futures in China rose 1.2 cents to $7.126 but November Paris futures in morning trade are down a penny at $5.021 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, sending November within two cents of its 50-day moving average. While U.S. and Chinese negotiators are expected to consult by phone today, more reports are suggesting the talks could drag on into next year when election uncertainty becomes a factor.

Export sales out this morning likely won’t reveal huge Chinese purchases, either, with the total for old and new crop deals by all customers running around 15 million bushels.

Vegetable oil markets in Asia moved lower today. September soybean oil futures in China lost a tenth of a cent to 35.683 cents per pound and September palm oil futures in Malaysia settled at 21.49 cents.

Oilseed markets internationally were also mixed. September soybean futures in China gained 1.5 cents to $13.367, August rapeseed futures in Paris is off 2 cents at $9.507 and November Winnipeg canola is a penny lower at $7.706 after adjustments for volumes and currencies.

The preliminary report from the CBOT showed futures volume down 41% to 146,847 while light new fund selling added 4,557 to open interest.

Options volume dropped 55% to just 37,640 contracts, 58% of it calls with new interest noted in September puts. Implied volatility in November at-the-money options increased dropped to 17.67%.

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 lower, taking futures at all three markets to tests of chart support. While hard wheat contracts are confirming breaks below July support lines, SRW failed to hold its 50-day moving average.

Harvest pressure in winter wheat and good conditions on the northern Plains are keeping a lid on prices, as export demand is limp. Japan filled a small weekly tender with no purchases from the U.S. and weekly export sales out today aren’t expected to be much better than last week’s total of 10.5 million bushels. Russian won’t yesterday’s tender by Egypt, keeping the U.S. shut out of that market.

Volume in soft red winter wheat fell 23% yesterday to 62,025 while open interest was up 2,355 on light new fund selling. Options volume was 32% lower at only 15,443, 68% of it calls as traders added August calls and September puts. Implied volatility in December at-the-money options rose to 23.84%.

Volume in HRW was 18% higher at 41,592 on open interest that increased by 2,167.

Overseas markets are mixed today. January futures for Eastern Australian Wheat edged 1.9 cents higher to $6.182 on the return of mostly dry forecasts. December futures in Paris midday trade are off 2 cents to $5.493 after adjustments for currencies and volumes.

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.

Pivots071819.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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