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Morning Market Review for June 19, 2019

Markets falter again. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trend:
Corn:  Down 4 to 5
Soybeans: Down 5
Wheat: Down 5 to 10

Traders wonder if U.S.-China meeting will produce breakthrough

Grain futures are lower again this morning, continuing to pullback from their recent rally. While traders wait for more news about U.S.-China trade talks and USDA’s acreage report next week, more storms are headed to already saturated farm fields.

Rains over the next week could bring above normal totals from the eastern Plains through the Corn Belt, though some areas on today’s map look a little lighter. 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 emerging with normal to below normal rainfall on the central and southern Plains.

According to our new survey on Feedback From The Field growers running out of time to plant soybeans are split over whether to take a crop insurance payment or keep going About 60% said they are choosing prevent plant.

Meanwhile those done planting corn and beans are watching a waiting. “Corn is now growing good in our area of east central Illinois,” said a producer there. “Most got planted between May 15-30. It is late. Beans are growing slowly and are mostly just emerging to 3-4 inches high. Heavy rain on some fields over the weekend has left us with some water standing. This crop has a long way to go.”

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.

Investors betting on Federal Funds futures suggest around a one in five chance the Fed will cut interest rates at the end of its two-day meeting this afternoon and instead pull the trigger at the end of July. U.S. index futures are little changed after yesterday’s surge higher, while the dollar is also a little weaker.

News that officials from China and the U.S. will meet at the G-20 summit next week buoyed markets yesterday with hopes for improving demand sending crude oil back above $54 a barrel. This morning’s update in inventories could show a decline on falling imports, but crude is a little weaker so far today.

Corn prices are down again, beset by profit taking as new-found bulls try to assess just how much production has been lost. Our current best guess is for a crop of around 13.1 billion bushels, 500 million below USDA’s last estimate, but weather will determine the final number.

Still, there were a few signs the floods of 2019 are slowing ending. The CME Group yesterday said the force majeure at corn and soybean shipping stations on the Illinois and Mississippi rivers has been lifted, as water levels recede.

All 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. Corn basis firmed again yesterday with terminals on the Illinois River boosting bids as the system gears up.

Some ethanol plants also strengthened their basis yesterday as prices of the biofuel are at their highest level in two years. This morning’s report on ethanol production will show how plants responded to rising corn feedstock costs last week. Also in the mix this morning is a report China said its penalties on U.S. DDGSs would remain in effect, despite renewed hopes for a trade deal.

The preliminary report from the CBOT showed daily futures volume 25% lower on Tuesday, falling to 584,626 with open interest down 11,722 on active fund short covering.

Options volume dropped 5% to 193,218, 58% of it calls with heavy liquidation of July calls that expire Friday though traders also added near-the-money July puts. Implied volatility in at-the-money December options fell to 30.84%.

Overseas markets are lower today. September futures in China were 3.3 cents lower at $7.149 and November Paris futures in morning trade are off a penny to $5.051 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 pulled back overnight after narrowly avoiding a reversal lower yesterday. News that President Trump and President Xi of China will meet at the G-20 summit at the end of next week renewed hopes that trade talks could finally get going – and more importantly, make some progress.

Uncertainty remains about how many acres farmers will plant this year, with some fields switched from corn and others too wet to plant. Yield drag could also be an issue that’s even harder to assess.

Vegetable oil markets in Asia ended mixed today. September soybean oil futures in China fell a quarter cent to 35.894 cents per pound but July palm oil futures in Malaysia rose a fifth of a cent to 22.02 cents.

Oilseed markets internationally are lower. September soybean futures in China dropped 13.3 cents to $13.577, August rapeseed futures in Paris are down 3 cents to $9.419 and July Winnipeg canola overnight dropped 3 cents to $7.772 after adjustments for volumes and currencies.

The preliminary report from the CBOT showed futures volume 11% lower at 324,169 yesterday with light fund short covering helping to take 13,784 off open interest.

Options volume was down 1% at 99,102, 64% of it calls with new interest noted in the November $7.60 put. Implied volatility in at-the-money November options decreased to 22.05%.

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 down again today, with winter wheat contract suffering double digit declines. Harvest pressure and uncertain demand continue to make the path of least resistance lower, especially with corn losing ground.

U.S. originations still don’t look competitive for Egypt’s second tender of the season due today. The first was split between Russia and Romania. U.S. wheat out of the Gulf looks $1.50 or more too expensive.

Drier weather emerging next week should also be good for the hard red winter wheat harvest though fields in the Midwest will suffer more rain.

Volume in soft red winter wheat dropped 11% yesterday to 153,089 with open interest up 2,684 on new fund selling. Options volume was also down 11% to 32,688, 51% of it calls as traders added the December $6.50 call and the $5.10 and $4.70 puts. Implied volatility in July options that expire Friday rose more than 1% to 41.82%

Volume in HRW was 18% higher at 75,945 on open interest that fell 3,055.

Overseas markets were also lower today. July futures for Eastern Australian Wheat settled down 7.5 cents at $6.956 and December futures in Paris midday trade are off 3 cents to $5.593 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.

Pivots061919.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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