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Morning Market Review for June 17, 2019

Prevent plant fears spur buying. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trend:
Corn:  Up 6 to 7
Soybeans: Up 15
Wheat: Up 6 to 9 

More wet weather headed towards already wet Midwest

Grain futures shot higher overnight with wet forecasts triggering more fears farmers will be unable to plant millions of acres as the time for seeding fields ends.

Storms will linger over much of the Plains and Midwest over the next week with only the southwest Plains looking drier. Official 6 to 10 and 8 to 14-day forecasts out yesterday and the latest updates from the ensemble model this morning show warmer temperatures from the Southwest to the East but only the South may see normal to below normal precipitation.

Though most concerns from farmers this spring focused on wet condition, there are a few areas that need rain. Dry weather on the Canadian Prairies extends across the border into the northern Plains.

“The north half of North Dakota is extremely dry,” wrote a producer on Feedback From The Field, who rated crops in only “fair” condition.

How is your farm faring this year? Click this link to tell us what’s happening in your area and check the interactive map we update regularly.

Money managers this week sold more crude oil than at any other time this year, dumping nearly $2.9 billion worth of paper.

Big speculators were small sellers of agriculture as well, adding 7,378 positions to their bearish bets against agriculture, dumping cotton and beef and even some crops before buying later in the week.

Financial markets remain jittery, with trade tensions convincing some investors the Federal Reserve could cut interest rates at the end of its two-day meeting Wednesday. That would be unusual, since the central bank normally shifts monetary policy and its quarterly meetings when economic projections are released. Traders in Federal Funds futures see an 80% chance of that happening next month.

Despite the uncertainty, safe havens are lower, including gold, Treasuries and the dollar. Crude oil is also trading back below $52 a barrel on forecasts for slower demand growth.

Corn prices posted solid gains overnight with old and new crop futures gapping to new contract highs. While moving average crossovers are bullish, divergence with overbought momentum indicators are a warning sign.

Based on reports on Feedback From The Field, it appears prevent plant could claim 5 million to 7 million acres. Such a high number also would increase potential for acres to be less than USDA reports June 28 from the survey it concluded last week, perhaps cutting the number another 2 million based on historical tendencies. Look for this afternoon’s progress update to show 90% of those fields planted.

USDA June 10 said 59% of the crop was in good to excellent shape. Farmers posting Feedback last week noted better conditions overall, though they percentage they rated good to excellent fell.

Corn basis held firm Friday despite the surge to new contract highs, but overall last week it was steady to a little weaker on the rally. Ethanol plants raised bids despite weaker margins as production rose and stocks fell. Basis also firmed at rail terminals headed to the PNW with river bids also firming as the system gets ready to reopen. But basis was weaker in much of the western Corn Belt where corn must compete with a big wheat crop in livestock rations.

Big speculators added only 1,948 contracts to their new net long position as of Tuesday according to the Commitments report. That changed in a hurry in the last three days of the week when they were heavy buyers.

The preliminary report from the CBOT showed daily futures volume down 12% Friday but still very strong at 875,036 with open interest down 9,021 despite heavy new fund buying as traders liquidated July ahead of the start to deliveries at the end of the month.

Options volume was two-thirds higher at 373,531, 67% of it calls as traders rolled up August calls and added out-of-the-money July puts and the December $4 put. Implied volatility in at-the-money December options rose to 30.65%.

Taiwan tendered for a little U.S. corn overnight and USDA Friday announced the sale of 4.9 million bushels of new crop to unknown destinations under its daily reporting system for large purchases.

Overseas markets are mixed. September futures in China fell 2.5 cents to $7.146 and November Paris futures in morning trade gained 8.6 cents to $5.098 after adjustments for volumes and currencies.

Bottom line: The combination of lower acres and yields suggest potential for a futures rally from $5 to $5.50 But prices are at profitable levels even for producers with late planted corn. Start adding to new crop sales cautiously and protect basis with bear spreads on December 2019/July 202. Get ready to sell remaining old crop corn after USDA’s June 28 acreage report. For more, see my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Soybeans are leading the market, with July and November both gapping through 200-day moving averages overnight higher.

Concerns about lost acreage and lower yields from late-planted fields added to short-covering. Farmers said they made good progress planting soybeans last week according to Feedback From The Field and rated those fields better than corn. USDA is not expected to report soybean conditions today, however.

Average soybean basis firmed round two cents last week, though it remains much weaker than average headed into July delivery. But bids were widely varied. Buyers on the river system searched for beans to fill the rush of cargoes needed to fill a record book of unshipped sales once traffic starts moving. But much of the western part of the growing region saw steady to weaker basis as western processors eased. Plants pushed bids sharply in the eastern Midwest, where farmers face more delays planting soybeans, raising concerns about lower acreage and yields. Members of the National Oilseed Processors Association report May crush today with the total likely to come in around 163 million bushels.

USDA Friday reported buyers in China made one purchase and cancelled another, while 4.8 million bushels were sold to “unknown destinations.”

Vegetable oil markets in Asia were stronger to today. September soybean oil futures in China edged higher to 35.95 cents per pound while July palm oil futures in Malaysia gained a fifth of a cent to 21.98 cents.

Oilseed markets internationally are mixed. September soybean futures in China fell  less than a penny to 1.2 cents to $13.682, August rapeseed futures in Paris are up 5.1 cents to $9.451 and July Winnipeg canola overnight gained 14.7 cents to $7.742 after adjustments for volumes and currencies.

Big speculators covered some of their bearish bets in soybeans and meal while adding shorts in oil as of Tuesday according to the Commitments report.

The preliminary report from the CBOT showed futures volume up 15% Friday at 315,032 while open interest rose 8,609 despite light fund short covering. Options volume was 10% higher at 77,288, 58% of it calls as traders added November $10 calls and the August $8 and $8.50 puts. Implied volatility in at-the-money November options increased to 21.71%.

Bottom line: Soybeans will take a back seat to corn this year, with lost acres and lower yields could make for an interesting market. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Wheat prices are following corn and soybeans higher. Rains continue to pose a threat to the winter wheat harvest as combines start rolling.

With a big HRW crop coming, basis for that class was generally weaker last week, though hard wheat bids generally were stronger in areas headed to the PNW export market. Soft red winter wheat cash continues to firm with production estimates falling due to wet conditions in the eastern Midwest.

Big speculators and large traders covered bearish bets last week in all three markets. Volume in soft red winter wheat was up 10% to 199,692 while open interest was up 3,532 despite more light fund short covering. Options volume rose 16% to 55,624, 54% of it calls as traders liquidated July options that expire Friday. Implied volatility in July options eased to 34.39%

Volume in HRW was 12% higher at 83,332 on open interest that was off 9,390.

Overseas markets are mixed. July futures for Eastern Australian Wheat settled 6.5 cents lower after rains last week. December futures in Paris midday trade are up 5.1 cents to $5.722  after adjustments for currencies and volumes

Bottom line: Too much rain is the biggest threat to the crop now, with problems starting to show up. 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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