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Morning Market Review for June 24, 2019

Futures bounce back. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trend:
Corn:  Up 3 to 4
Soybeans: Up 5 to 6
Wheat: Up 2 to 5

Selling dries up as acreage debate heats up

Grain futures are higher across the board this morning, rejecting a lower open overnight when follow-through selling failed to materialize from Friday’s downturn. Look for a nervous week of trading as the market waits for today’s plantings update ahead of USDA’s big report on acreage and stocks at the end of the week.

Storms moving through the upper and lower ends of the Mississippi River system this morning will be followed by more of the same over the next week but many areas will receive normal to below normal rainfall. Official 6 to 10 and 8 to 14-day forecasts out yesterday and the latest updates from the ensemble model this morning show a return to wetter conditions with below average temperatures also making a comeback.

While growers reporting Feedback From The Field last week planted a few final corn acres they continue to report a crop under stress from too much rain with fertilizer a key concern from leeching or lack of applications.

“The crop is behind, starting to worry about nitrogen loss with the wet soil,” commented a farmer from western Iowa. “Drown out is starting to show.”

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.

Big speculators held a record bearish bet against agriculture just five weeks ago. But the latest CFTC tally showed they’ve covered most of those short positions to move closer to neutral, buying a net 103,994 contracts. These hedge funds added most crops but sold the protein space.

After selling nearly $11 billion worth of crude oil futures and options this spring, money managers went the other way this week, just in time for a big rally. In all these fund traders added $934 million to their net long position.

Crude added to gains overnight as tensions with Iran remain. Stocks rallied in Asia before turning lower in Europe but U.S. indexes point to a higher open on Wall Street this morning with anticipation rising ahead of the meeting between President Trump and President Xi of China at the G-20 summit later this week. The dollar continues to ease as investors anticipate lower interest rates from the Federal Reserve, giving a boost to Treasuries and gold, which moved above $1,400 an ounce today.

Corn prices are posting modest gains, with both old and new crop contracts reversing higher after a lower start overnight. December futures held another test of the trendline off May lows, keeping the bullish chart intact.

USDA updates its estimate of acreage June 28, in a widely anticipated report that could shape summer markets. Based on historical tendencies we expect corn acreage to fall to 87 million acres. The government cut its estimate earlier this month from March intentions by 3 million to 89.8 million. And final acreage could fall to 85 million depending on how many acres of prevent plant farmers took on corn.

Farmers reporting Feedback From The Field last week made only incremental progress, raising their estimates to 94%. USDA extended its survey window for planting by an extra week after last week’s total came in at a record low 93%. Growers rated corn mostly steady compared to last week, but their assessment remains far below those from USDA’s weekly crop progress conditions.

Corn basis on average strengthened a nickel last week as buyers bought supplies to make sure they could fill the flotilla of barges expected to run down the river system this summer. While tows moved mostly upstream over the weekend as the Upper Mississippi River reopened, rains could force the harbor in St. Louis to close again this week if water levels rise as expected.

Corn basis also got a helping hand from ethanol plants able to firm bids thanks to margins that improved on stronger prices for fuel and DDGSs

Big speculators added 32,573 contracts to their bullish bets in corn over the past week, though some took profits later in the week.

The preliminary report from the CBOT showed daily futures volume up 20% on Friday to 638,241  while open interest fell 39,734 on active fund liquidation.

Options volume was 6% higher at 157,546, 57% of it calls with new interest noted in September call spreads. Implied volatility in at-the-money December options fell to 29.95%.

Overseas markets are stronger today. September futures in China edged a quart cent higher to $7.21 and November Paris futures in morning trade are up 5.1 cents to $5.15 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 my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Soybeans are also posting modest gains after a weaker start overnight that helped November futures reverse higher off the 200-day moving average overnight.

USDA’s survey for Friday’s reports was done in the first two weeks of June, which can lead to large revisions in soybeans later. We look for a modest drop in soybean acreage from the 84.6 million intentions in March to 84 million now, with further reductions possible.

Rains last week came in close to forecasts, with some eastern areas drier and western fields wetter than expectations. Growers posting Feedback From The Field last week said they made some headway with soybean planting. Based on their comments, look for USDA’s estimate of that this afternoon to advance from 77% to 86% complete. If that projection holds it would be the second slowest since 1980, with only 1996 at 84% further behind.

Soybean basis also firmed last week about a penny and a half on average. Gains were seen along much of the river system including the Ohio River, as shippers scramble to fulfill a record book of outstanding export sales this summer. Bids from soybean processors were steady to weaker in the west but improved in the east, where production is threatened by late planting.

Vegetable oil markets in Asia were lower today. September soybean oil futures in China lost nearly a quarter cent to 35.59 cents per pound and July palm oil futures in Malaysia were off more than a third of a cent to 21.55 cents.

Oilseed markets internationally are lower. September soybean futures in China lost 12.2 cents to $13.586, August rapeseed futures in Paris dropped 2 cents to 9.506 and July Winnipeg canola overnight is down 3 cents to $7.775 after adjustments for volumes and currencies.

Big speculators covered bearish bets in soybeans last week, buying back 47,050 contracts and also trimmed oil shorts but sold meal as crush margins weakened.

The preliminary report from the CBOT showed futures volume down 9% Friday to 286,012 while open interest fell 29,779 despite modest new fund selling.

Options volume was 26% lower at $58,100, 66% of it calls with new interest noted in the November $11 call and $9.20 put. Implied volatility in at-the-money November options decreased to 20.26%.

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 advancing with all three markets reversing higher. While wheat remains a follower to corn, concerns about weather impact on the crop are also limiting selling.

Big changes aren’t expected from Friday’s reports for wheat. June 1 stocks are the final carryout from the 2018 crop, which should run around 1.1 billion bushels. Acreage could be down a little depending on spring wheat seedings, which were slowed by weather.

Wheat basis also firmed last week, helped by weather. Rain is hurting soft red winter wheat production and also slowing the hard red winter wheat harvest, making the known quantity of remaining 2018 crop supplies a better bet for buyers. Only 9 lots are registered for delivery in Toledo with 5 available in Kansas ahead of first notice day at the end of the week.

Big speculators and large traders covered short positions in the wheat complex last week though their actions mirrored what happened to futures. While the funds were buying SRW and Minneapolis fairly aggressively, they were less willing to trim HRW.

Volume in soft red winter wheat was 1% higher Friday at 136,435 while open interest fell 17,546 on July liquidation despite a little new fund selling.

Options volume was 8% lower at 30,022, 52% of it puts as traders added August puts and calls after expiration of July options Friday. Implied volatility in December options fell to 23.94%

Volume in HRW was11% lower at 67,992 on open interest that fell 6,194.

Overseas markets are firm today. July futures for Eastern Australian Wheat settled unchanged at $6.96 and December futures in Paris midday trade are up 2.8 cents to $5.766 after adjustments for currencies and volumes. While crops in Western Australia benefited from rain over the weekend, hot temperatures in much of Europe are being watched as crops advance.

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.

Pivots062419.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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