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Morning Market Review for June 20, 2019

More profit-taking ahead? (Comments are updated by 7:30 a.m. Central Time.)

Overnight trend:
Corn:  Down 1 to 2
Soybeans: Down 1 to 2
Wheat: Down 3 to 4

Moderate overnight losses seen for corn, soybeans and wheat

Grain prices slumped Wednesday on a round of profit-taking, and more overnight losses may be a signal for more of the same on Thursday. Overall, grain prices have seen significant advances in the past month. Corn futures, for example, have picked up nearly $1 per bushel since mid-May. With most of the crop finally planted, farmers still could have an uphill battle depending on weather later this growing season.

Rains over the next week are centered on the central U.S. and especially the I states, which could pick up another 1” to 2” of rainfall through June 27. 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 for much of the country with wetter weather continuing to plague the Mid-South and Southeast.

According to our new survey on Feedback From The Field, farmers running out of time to plant soybeans are debating whether to take a crop insurance payment or keep going. About 60% said they are choosing prevent plant. How are you faring so far this year? Click this link to tell us what’s happening in your area and check the interactive map we update regularly.

In its monthly meeting yesterday afternoon, the Federal Reserve voted 9-1 to hold interest rates steady. However, the door is still definitely open for lower interest rates later this year, with some predicting a cut as early as July.

The likelihood of an interest rate cut had Dow futures rising 200 points in overnight trading, to 26,744. Global stock prices also saw broad gains last night, with Asian markets finishing up 1% to 2% and European markets up 0.5% to 1% in midday trading.

Tensions in Iran continue to ratchet higher after a U.S. drown was downed in the Middle East today, however, which helped drive energy prices significantly higher overnight. Crude oil gained more than 3% to clear $55 per barrel, with diesel and gasoline each up around 2% overnight. The U.S. Dollar softened moderately, while safe-haven gold ticked nearly 3% higher.

Corn prices dropped around 2% lower Wednesday and tracked slightly lower overnight as traders ready themselves for the next round of USDA export data out later this morning.

All locks on the upper Mississippi River are open again, with water levels in St. Louis expected to fall below the 38-foot trigger for clearance tomorrow. Corn basis bids were steady to firm yesterday.

Ahead of the weekly export report from USDA, out later this morning, analysts expect the agency to show corn sales totaling between 11.8 million and 35.4 million bushels for the week ending June 13.

Ethanol production for the week ending June 14 eased slightly from the prior week, with an average daily production of 1.081 million bushels but remains seasonally high. August futures dropped nearly 2.5% yesterday afternoon.

China sold another large amount of its state reserves of corn at auction today, topping 72.1 million bushels. That was 46.1% of the total available for sale.

The preliminary report from the CBOT showed daily futures volume falling again Wednesday to 514,697, although open interest moved up another 5,605.

Options volume of 248,663 narrowly favors puts (127,519) over calls (121,144). Implied volatility in near-the-money December options moved to 30.26%.

In overseas markets, September futures in China fell another two cents to $7.177 and November Paris futures in morning trade are off another penny to $5.046 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 2020. Get ready to sell remaining old crop corn after USDA’s June 28 acreage report. For more, see our Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Soybeans tilted moderately lower overnight, with losses of around 0.4%. Traders look to this morning’s USDA export report and ongoing weather forecasts for additional direction. Uncertainty remains about how many acres farmers will plant this year, with some fields switched from corn but others too wet to plant. And will yield drag emerge as a major problem later this season? Time will tell.

Ahead of this morning’s weekly export report from USDA, analysts expect the agency to show soybean sales totaling between 7.3 million and 29.4 million bushels for the week ending June 13. Analysts also expect USDA to report an additional 100,000 to 400,000 metric tons of soymeal sales last week, plus another 5,000 to 25,000 MT of soyoil sales.

South Korea issued an international tender to purchase 60,000 metric tons of soymeal form South America, which closes today. Shipment will be in September or October.

Vegetable oil markets in Asia continued to fade today. September soybean oil futures in China was treading water at 35.94 cents per pound, while July palm oil futures in Malaysia dropped 0.25 cents today to 22.02 cents.

Oilseed markets internationally are mixed, meantime. September soybean futures in China reversed 4.4 cents to $13.71, August rapeseed futures in Paris tilted down 6 cents to $9.426, and July Winnipeg canola overnight eased a penny to $7.830 after adjustments for volumes and currencies.

The preliminary report from the CBOT showed futures volume rebounding to 360,822 yesterday, with open interest getting trimmed by another 33,001.

Options volume faded to 73,637, with calls (43,784) still moderately favored over puts (29,853). Implied volatility in near-the-money November options decreased to 21.10%.

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 our Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Wheat has made major inroads this past month but is beginning to feel the pinch again from overseas competition and large domestic and global stockpiles (seemingly a constant problem). Prices faded nearly 1% overnight, and it would likely take a bullish surprise in today’s USDA export report or another bit of market-bending news to sway prices away from their current downward trajectory.

Ahead of this morning’s weekly export report from USDA, analysts expect the agency to show wheat sales totaling between 7.3 million and 18.4 million bushels for the week ending June 13.

Wet weather in the Central Plains could put a damper on wheat harvest next week – another 1” to 2” or more rainfall could arrive in large parts of Kansas, Nebraska and Oklahoma between today and next Thursday, per the latest seven-day cumulative precipitation map from NOAA.

Drier weather in Russia could negatively impact the country’s 2019/20 wheat exports, according to the IKAR consultancy, which lowered its projection to 1.341 billion bushels.

Earlier today, Japan purchased 2.3 million bushels of food-quality wheat from the U.S. in a regular tender.

Volume in soft red winter wheat moved moderately higher to 194,335 with open interest up another 4,411 on new fund selling. Options volume also rebounded to 46,366, but now favors puts (25,051) over calls (21,315). Implied volatility in July options that expire Friday dipped slightly, but remain relatively high at 41.28%

Volume in HRW moved up again, reaching 87,271 on open interest that dipped another 700. Options volume of 2,129 continue to moderately favor calls (1,362) versus puts (767).

Overseas markets dropped again today. July futures for Eastern Australian Wheat fell to $6.933 and December futures in Paris midday trade eased 2 cents lower to $5.598 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.

06-20 pivot chart.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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