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Morning Market Review for June 21, 2019

Grain markets still occupied with weather. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trend:
Corn:  Steady to up 1
Soybeans: Down 3 to 4
Wheat: Mixed

Mixed performances overnight heading into Friday’s session

It has been a bumpy ride for grain markets this week – but one that has moved prices relatively higher, on the balance. Traders continue to consider the latest round of wet weather forecasts and how adverse they could be for grain production. Overnight, corn and wheat firmed slightly, with soybeans taking small declines. With no big overseas news last night, and with no big USDA reports out today, is anything more than a round of minor technical maneuvering in store for Friday?

Rains over the next week should see the largest totals in parts of Oklahoma, Kansas, Missouri, Iowa and Illinois through June 28. Official 6 to 10 and 8 to 14-day forecasts out yesterday and the latest updates from the ensemble model this morning show much warmer temperatures on the horizon, with drier conditions likely to develop across the Central Plains by the end of the month.

According to our latest responses 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. A small majority are leaning toward prevent plant. How are you doing so far this year? Click this link to tell us what’s happening in your area and review the interactive map that is updated regularly.

What is happening in Iran? Tensions are definitely escalating there with the U.S. after an American spy drone was shot down earlier this week. Last night, President Donald Trump approved military strikes but “abruptly pulled back,” according to reporting from the New York Times. Trump has yet to make official comments about the latest developments overseas but did note that “Iran made a big mistake!” in a tweet Thursday.

The latest tensions applied some light pressure to Dow futures, which fell 23 points in overnight trading to 26,751. Overseas markets were mixed. China’s stock market firmed by around 0.5%, with Japan’s Nikkei index closing down nearly 1%. European markets were narrowly mixed but slightly higher in midday trading.

The latest U.S.-Iran conflict continues to pump up energy prices, with crude up nearly 1% overnight to clear $57 per barrel. Gasoline raced 3% higher last night, with diesel up another 2%. The U.S. Dollar softened fractionally.

Corn prices shrugged off a bad round of export data yesterday to pick up significant gains on fresh weather worries, with plenty of rainfall coming to key production regions in the Corn Belt this coming week. Overnight, prices continued to firm slightly, ticking around 0.2% higher ahead of Friday’s session.

Yesterday, USDA reported just 15.6 million bushels of corn exports for the week ending June 13, which was on the low end of trade guesses that ranged between 11.8 million and 35.4 million bushels. Corn export shipments saw a marketing-year low last week at 15.9 million bushels.

After flooding emerged as the dominant weather threat this spring, drought has all but disappeared across the central U.S. Click here to read the latest updates from the U.S. Drought Monitor.

French consultancy FranceAgriMer noted a small decline in the country’s corn crop quality, moving from 82% in good-to-excellent condition down to 81% for the week ending June 17.

Commodity funds have been net sellers of corn futures contracts so far this week, with a net of -21,000 from June 17-20.

The preliminary report from the CBOT showed daily futures volume rebounding slightly on Thursday to 530,223, with open interest also climbing 14,671.

Options volume dropped to 149,245 and is more heavily favoring calls (90,077) versus puts (59,168). Implied volatility in near-the-money December options moved higher, to 30.63%.

In overseas markets, September futures in China firmed by nearly 5 cents to $7.217 and November Paris futures in morning trade are holding steady at $5.075 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 threatened to move lower Thursday but rebounded throughout the session to capture double-digit gains. Now prices are again pointed about 0.5% lower overnight heading into Friday’s session. Is a round of profit-taking in store, or will weather worries keep them buoyant moving forward?

Soybean export sales picked up 21.0 million bushels in old crop sales plus another 7.4 million bushels in new crop sales last week, for a total of 28.4 million bushels. “U.S. soybean bookings were strong because U.S. originations out of the Gulf are 6% cheaper than Brazil before freight,” according to Farm Futures senior grain market analyst Bryce Knorr. “The record old crop bean book will stress the river system as the Upper Mississippi reopens. But new crop bookings are minimal for soybeans due to uncertainty over the U.S.-China trade war.”

Vegetable oil markets in Asia continued to fade as this week concludes. September soybean oil futures in China eased to 35.75 cents per pound, while July palm oil futures in Malaysia dropped another 0.07 cents today to 21.84 cents.

Oilseed markets internationally are also tilted lower. September soybean futures in China fell 5 cents to $13.62, August rapeseed futures in Paris slipped 3 cents lower to $9.459, and July Winnipeg canola overnight held mostly steady at $7.835 after adjustments for volumes and currencies.

The preliminary report from the CBOT showed futures volume reversed lower to 313,828 yesterday, with open interest getting trimmed by another 4,536.

Options volume firmed to 78,398, now heavily favoring calls (54,984) to puts (23,414) by a more than 2:1 margin. Implied volatility in near-the-money November options moved higher, to 21.40%.

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 earned some spillover strength Thursday and were still pointed fractionally higher overnight. Prices very well could be primed for a round of technical maneuvering heading into the weekend, with the potential for some profit-taking still looming.

Wheat found 6.9 million bushels of new sales for delivery this marketing year. Alge-ria was the No. 1 destination, with 2.2 million bushels. The total fell below expectations, however, as analysts thought USDA would report between 7.3 million and 18.4 million bushels.

Wheat export inspections reached 15.8 million bushels last week. Indonesia was the No. 1 destination, with 3.1 million bushels.

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 the eastern half of Kansas, Nebraska and Oklahoma through June 28, per the latest seven-day cumulative precipitation map from NOAA. The Northern Plains and Southern Plains will see much less precipitation this coming week, in contrast.

French consultancy FranceAgriMer estimates the country’s soft wheat crop condition held steady this past week, with 80% of the crop was in good-to-excellent condition.

Volume in soft red winter wheat dropped to 134,510 with open interest firming by 3,300 on new fund selling. Options volume fell moderately to 32,548, with a moderate tilt toward calls (18,964) versus puts (13,584). Implied volatility in July options that expire later today dropped to 33.78%.

Volume in HRW fell to 76,068 on open interest that also dropped by 4,513. Options volume of 2,145 continue to heavily favor calls (1,457) versus puts (688).

Overseas markets were mixed today. July futures for Eastern Australian Wheat fell to $6.915 and December futures in Paris midday trade were up fractionally to $5.680 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.

06-21 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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