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Morning Market Review for June 25, 2019

Progress report rallies futures. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trend:
Corn:  Up 5
Soybeans: Up 5 to 7
Wheat: Up 6 to 7

Rains cause more trouble for growers and shippers

Grain futures are stronger across the board this morning after Monday’s Crop Progress report from USDA raised more questions about losses from wet weather. With traders already bracing for Friday’s update on acreage and grain stocks, sellers headed for the exits as the forecast remains mixed.

Storms should focus on the upper Midwest over the next week with areas south of I-80 receiving lesser amounts as temperatures warm up. 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 over much of the country with below average temperatures also making a comeback.

Conditions vary widely according to growers reporting Feedback From The Field Monday. A grower from northeast Kansas who was 50% planted on soybeans just finished replanting 155 acres and has more to do. “Many holes in what is left and many acres that did not drown out but are stunted beyond raising a crop,” was the post.

But another producer from western Iowa farmer rated crops in good condition though they’re late. “Corn planted same date last year almost tasseling. This year only waist high,” said the farmer,

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 grain futures gained, financial markets drifted lower around the world as investors wonder what will happen at the G-20 summit at the end of the week when President Trump and President Xi of China hold face-to-face talks. Tension with Iran is making gold the safe haven of choice, with the precious metal hitting a six-year high overnight. Crude oil pulled back below $58 a barrel while the dollar weakened on expectations for the Federal Reserve to begin cutting interest rates.

Corn prices are higher, keeping futures in their uptrending channel off May lows. Uncertainty about acreage and yields ratcheted higher following Monday’s progress report.

USDA said 96% of the crop was planted after asking raters to judge seeding progress for the first time ever this late in the season. Farmers made good progress in the west but are still seriously behind from Missouri into Ohio. The report only fueled anticipation for Friday’s acreage update from USDA, which could show a 5 million acre drop from March intentions.

The percentage of the crop rated good to excellent dropped 3% last week, cutting more than a bushel per acre off my yield estimate, which slipped to around 169 bpa. While that may sound high, it’s already 7 bpa below where USDA started the season in terms of what’s a “normal” crop and 15 bpa behind last year at this time.

Corn exports remain clouded by forecasts for lower supplies and disruptions to shipping on the river system. Weekend rains raised water levels in St. Louis above the trigger needed to close the harbor, which may not reopen until the end of the month.

Export inspections last week remain well below the level needed to reach USDA/’s forecast for the 2018 crop at 24.3 million bushels. But China shipped out 2.3 million bushels. Corn should continue to play second fiddle to soybeans as end users around the world turn to South America for supplies, including Taiwan, which picked up a load out of Brazil overnight.

Corn basis firmed a penny again yesterday though it remains below average headed into first notice day Friday with 1,030 contracts registered for delivery along the Illinois River.

The preliminary report from the CBOT showed daily futures volume 20% lower Monday, falling to 513,445 while modest new fund buying added only 4,744 to open interest. Options volume dropped 47% to 84,357, 54% of it puts as traders liquidated out-of-the-money December puts and added short-dated calls for coverage through Friday’s reports. Implied volatility in at-the-money December options fell to 30.44%.

Overseas markets are narrowly mixed today. September futures in China lost a penny to $7.196 while November Paris futures in morning trade are up three-quarters of a cent to $5.158 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 my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Soybeans are stronger today, continuing to consolidate gains as traders begin to wonder if production potential could be hit enough to finally drain burdensome supplies. That story will take time to play out but in the meantime, bears are heading to the exits ahead of Friday’s grain stocks and acreage reports.

Soybean seedings continue to lag normal rates in all but two states. Though the rate nationwide improved to 85%, that’s the second slowest on record. USDA’s first ratings of the season are also below average, the worst since 2012. But these early ratings can change dramatically during the growing season.

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. I look for a modest drop in soybean acreage from the 84.6 million intentions in March to 84 million now, with further reductions possible.

Export inspections remain below the rate needed to reach USDA’s forecast for the 2018 crop, constrained by problems on the river system. China shipped out 19.5 million bushels of its 221 million in outstanding sales ahead of trade talks, though no breakthrough to end tariffs is anticipated. Exporters are using a variety of ports to originate shipments, with another boat done out of Toledo last week.

Vegetable oil markets in Asia were lower today. September soybean oil futures in China edged down to 35.605 cents per pound while July palm oil futures in Malaysia dropped a fifth of a cent to 21.25 cents on weak exports.

Oilseed markets internationally are stronger. September soybean futures in China gained a dime to $13.696, August rapeseed futures in Paris are 3.2 higher at $9.516 and July Winnipeg canola overnight went up a penny to $7.791 after adjustments for volumes and currencies.

The preliminary report from the CBOT showed futures volume down 6% Monday to 268,028 while modest fund short covering held knock 17,430 off open interest. There are 614 lots registered for delivery along the Illinois River system, with 26 contracts withdrawn yesterday ahead of first notice day.

Options volume dropped 48% to just 30,116, 56% of it calls as traders added August puts and calls ahead of Friday’s reports. Implied volatility in at-the-money November options decreased to 20.63%.

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 higher, supported by a weaker dollar and rallies in other markets and the hint of trouble in Monday’s progress report.

Winter wheat fields appear to be showing the impact of heavy rains. My yield estimate based on ratings fell around a third of a bushel per acre, with a setback seen over most of the Plains and from Illinois to Ohio. Spring wheat potential also slipped also slipped for the third straight week, also losing around a third of a bushel per acre.

Export inspections remain slow as buyers wait for new crop production to hit the market. Total inspections of 14.9 million bushels are typical for June.

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.

Volume in soft red winter wheat dropped 3% Monday to 132,814 with modest fund short covering taking 6,419 off open interest. Options volume was 32% lower at 20,449, with a few more calls trading than puts as traders added protection for Friday’s reports. Implied volatility in December options fell to 24.06%

Volume in HRW fell 4% to 65,583 on open interest that decreased 4,495.

Overseas markets are stronger today. July futures for Eastern Australian Wheat gained 7.6 cents to $6.975 and December futures in Paris midday trade are up a penny to $5.83 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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 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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