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Morning Market Review for June 18, 2019

Planting rally pauses. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trend:
Corn:  Down 6 to 8
Soybeans: Down 2 to 3
Wheat: Down 5 to 11

Traders have 10 days to wait for USDA verdict on acreage

Grain futures are lower across the board this morning, consolidating recent gains after USDA confirmed slow planting of corn and soybeans in Monday’s Crop Progress update. While traders debate how many acres will be diverted to prevent plant, USDA won’t weigh in on the subject until its June 28 report, an eon for traders holding positions in nervous markets.

Two more storms are lined up to move through the Plains and Midwest over the next week bringing heavy rain from the eastern Plains through the Corn Belt. Official 6 to 10 and 8 to 14-day forecasts out yesterday and the latest updates from the ensemble model this morning show warmer emerging with normal to below normal rainfall only in the South.

Some growers with unplanted soybeans are taking prevent plant as crop insurance deadlines pass, according to our new survey on Feedback From The Field. But others are still going.

“After 2 inches rain last week gave up on planting any more corn with only 10% in,” said a southeastern Michigan farmer with 70% of the soybeans still in the bag. “Still hoping to plant more beans.”

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.

While gloom about the impact of trade disputes appears to be spreading through financial markets, that’s not hampering investors from buying stocks, with share prices rallying in Asia and Europe and U.S. index futures pointing to a higher open on Wall Street. Money managers expect lower interest rates will keep stocks an attractive risk as the Federal Reserve starts a two-day meeting on monetary policy today. Betting on Federal Funds futures shows a 25% chance of a cut tomorrow, though that action is more likely to come at the central bank’s next meeting in the end of July.

Despite the rally in stocks, safe havens like the dollar, gold and Treasuries are all higher, while crude oil drifts below $52 a barrel.

Corn prices are lower on profit taking following their big June rally.

Corn planting progress set another record last week with just 92% of the crop in the ground. Emergence is also slow at 79%. Normally this is USDA’s last corn planting report for the season, but a footnote to this week’s release that said progress will be surveyed again next week. Today’s numbers suggest that more than 7 million acres were unplanted as of Sunday, which would match what farmers are told us on Feedback From The Field. Most of that will wind up as prevent plant or not harvested for grain.

Monday’s crop ratings overall eased slightly, knocking a third of a bush off yield production, but remain better than expected given corn’s troubles this year.

Export inspections last week slipped to 25.7 million bushels as corn takes a back seat to soybeans due to demand and shipping capacity limited by the closure of the river system north of St. Louis for most of the spring. The slow pace in corn shipment also likely reflects rationing by foreign buyers due to higher prices and ideas new crop availability will be limited.

All but two locks on the upper Mississippi River have reopened, with water levels in St. Louis expected to fall below the 38-foot trigger for clearance on Friday. Barge rates are bid for next week in St. Louis, a sign the market expects the system to start moving again. Corn basis firmed Monday with better bids noted at ports and on river terminals.

The preliminary report from the CBOT showed daily futures volume down 11% Monday to 779,785 while open interest was 4,794 higher on light new fund buying.

Options volume fell 45% to 203,793, 68% of it calls as traders rolled up July calls and added July puts that expire Friday. Implied volatility in at-the-money December options rose to 31.69%.

Overseas markets are mixed today. September futures in China rose 1.4 cents to $7.159 and November Paris futures in morning trade are down four cents to $5.008 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 down a little this morning, trying to avoid a reversal lower after trading higher earlier in the overnight session on acreage concerns.

Soybean planting reported Monday of 77% was the third slowest for the week with South Dakota and the eastern Midwest lagging seriously behind.

Export inspections of 24.8 million bushels fell below the rate needed to reach USDA’s forecast for the 2018 crop. Still, despite bottlenecks on the river system, Chinese buyers took delivery of 10.1 million bushels and still have more than 220 million bushels still on the books, part of a record level out outstanding soybean sales to all customers.

Members of the National Oilseed Processors Association crushed 154.8 million bushels in May, well below estimates. Year-to-date NOPA crush is still up 2.6% while USDA last week forecast a 2.2% increase.

Vegetable oil markets in Asia were mixed today. September soybean oil futures in China edged higher to 36.052 cents per pound but July palm oil futures in Malaysia reversed lower to lose a fifth of a cent at 21.75 cents.

Oilseed markets internationally are lower. September soybean futures in China lost 3.2 cents to $13.646, August rapeseed futures in Paris is off 3 cents at $9.419 and July Winnipeg canola overnight gave back a penny to $7.775 after adjustments for volumes and currencies.

The preliminary report from the CBOT showed futures volume up 15% Monday to 363,113 while open interest fell only 1,640 despite active fund short covering.

Options volume increased 29% to 100,086, 68% of it calls as traders added July options that expire Friday and liquidated out-of-the-money November puts. Implied volatility in at-the-money November options increased to 22.59%.

Bottom line: Soybeans will take a back seat to corn this year, but 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 lower as the market looks forward to harvest despite forecasts for more heavy rains from the eastern Plains to the Midwest.

Winter wheat production potential slipped slightly this week as harvest is slow with just 8% of the crop cut. Some states in each growing region gained and lost, evening out the impact on a class basis. Spring wheat conditions declined again this week, cutting about three-quarters of a bushel off yield potential, but overall remain above normal. Dry conditions spilling over from the Canadian Prairies don’t appear to be a series issue yet.

Export inspections of 13.8 million bushels don’t mean much at this point as end users wait to judge the quantity and quality of the class of wheat they’re buying.

Volume in soft red winter wheat dropped 14% yesterday to 172,523 while open interest was up 7,667 on light new fund selling. Options volume was 34% lower at 36,757, with a few more calls trading than puts as traders liquidated July calls but added puts.

Implied volatility in July options jumped to 39.93% ahead of expiration Friday.

Volume in HRW fell 23% to 64,471 on open interest that was up 498.

Overseas markets were mixed. July futures for Eastern Australian Wheat settled unchanged at $6.61 while December futures in Paris midday trade are down four cents to $6.626 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.

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Pivots061819.jpg

 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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