Corn: Down 5 to 6
Soybeans: Down 3
Wheat: Down 1 to 2
Crops face better weather for a change
Grain futures are lower across the board this morning, giving back some of Friday’s rally as a heat wave ended with forecasts for some of the best growing conditions of a challenging year.
While temperatures will trend a little warmer than average over the next week, the heat doesn’t look threatening though many areas will be dry. Official 6 to 10 and 8 to 14-day forecasts out yesterday called for above normal temperatures next week, but the latest updates from the ensemble model this morning are much cooler with above average precipitation over the Midwest and Plains.
Growers posting Feedback From The Field last week noted deteriorating conditions for both corn and soybeans due to extreme heat, with both crops rated below average.
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Both hedge funds and index traders bought small amounts of agricultural futures and options last week. Big speculators trimmed 13,922 contracts off bearish bets in crops and livestock, while those buying commodities through indexes added 14,950 to their net long position.
Money managers mostly sold holdings in crude oil over the past three months. But they bought this week, adding $2.4 billion in futures and options.
Crude oil futures bounced higher overnight on mounting tensions with Iran, but U.S. stock indexes posted gains, pointing to a higher open on Wall Street this morning.
While retail fertilizer offer sheets reset lower last week after spring increases, wholesale nitrogen prices moved higher in some areas. Black Sea ammonia edged around $5 higher with Gulf urea gaining $4.
Corn prices are lower on the break in heat, sending December to a test of last week’s $4.28 low.
Corn ratings on Feedback dropped below average for the first time in a month. The percentage rated good/excellent increased a little while poor/very poor also was higher.
Corn basis weakened around a half cent last week on signs of wavering demand, especially in the export market. Ethanol plants also faded bids despite margins that improved but remain in the red.
Big speculators bought corn into early this week, adding 10,081 contracts to their bullish bets before the market retreated.
The preliminary report from the CBOT showed daily futures volume down 27% at 311,107 while open interest was down 2,548 despite fairly active new fund buying.
Options volume dropped 46% to 103,090, 51% of it calls as traders added August calls and liquidated August puts that expire at the end of the week. Implied volatility in at-the-money December options rose to 28.82%.
Overseas markets are lower. September futures in China dropped 5.8 cents to $7.066 and November Paris futures in morning trade are off a penny to $5.09 after adjustments for volumes and currencies despite forecasts for very hot weather over the next week.
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 trying to work off overnight lows as the morning break nears. November traded between its 50- and 200-day moving averages Friday, pulling back to an inside day so far today.
Soybeans ratings from farmers posting Feedback comments dropped for the second week in row, staying below average and moving closer to the poor assessment. Percentages rated good to excellent fell while the bottom categories of poor/very poor increased.
Soybeans found a little support from reports Chinese buyers are making inquiries about purchasing U.S. farm goods, though no details emerged yet. USDA’s Crop Progress report this afternoon is also likely to show deterioration from last week’s heat.
Chinese buyers still have 193 million bushels of old crop deals on the books that may be rolled over past the Sept. 1 start to the new crop marketing year.
Soybean basis improved by nearly three cents a bushel last week thanks to robust shipments from a record book of outstanding sales. Processors were also bidding more aggressively, despite news of disappointing crush in June from members of the National Oilseed Processors Association.
Vegetable oil markets in Asia edged higher today. September soybean oil futures in China 35.64 cents per pound and September palm oil futures in Malaysia settled at 21.52 cents.
Oilseed markets internationally were mixed. September soybean futures in China gained a half cent to $13.382, August rapeseed futures in Paris dropped a penny to $9.492 and November Winnipeg canola was also off a penny at $7.795 after adjustments for volumes and currencies.
Big speculators remain bearish on the soy complex but were mixed in trading last week, buying soybean and selling products. The preliminary report from the CBOT showed futures volume 38% higher at 234,817 while open interest was up only 530 following modest fund short covering.
Options volume rose 87% to 91,708, 57% of it calls as traders rolled up August calls and added September puts. Implied volatility in November at-the-money options increased rose to 18.27%.
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 but trying to firm after failing to hold Friday’s spike high. Winter wheat harvest and good conditions on the northern Plains continue to provide pressure to a complex still seeking some export demand.
Still, wheat basis was firm overall last week. Rail markets to the Pacific Northwest and Texas Gulf showed strength, though soft red winter wheat basis weakened at the Gulf due to weak demand. Some improvement was also seen in spring wheat.
Funds were mixed on wheat last week, selling SRW and Minneapolis while covering a little of their bearish bet on HRW.
Volume in soft red winter wheat increased by 14% Friday to 104,675 while open interest was up 1,550 despite light fund short covering. Options volume slipped 2% to 37,171, 52% of it puts as traders rolled up August calls and added August puts that expire Friday. Implied volatility in December at-the-money options rose to 24.13%.
Volume in HRW was 12% higher at 40,739 on open interest that was up 2,722.
Overseas markets are mixed. January futures for Eastern Australian Wheat jumped 9.6 cents today to $6.31 after a dry weekend on the continent. December futures in Paris midday trade are down 2 cents to $5.497 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.