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Morning Market Review for June 26, 2019

Traders turn cautious. (Comments are updated by 7:30 a.m. Central Time.)

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

Markets retreat on better weather and tariff news

Grain futures are lower across the board this morning, but losses are modest as selling focuses on liquidation of July contracts ahead of first notice day Friday.

Storms moving across the eastern Plains this morning highlight an outlook that keeps heaviest accumulations north of I-80 in the northern tier of states over the next week. Official 6 to 10 and 8 to 14-day forecasts out yesterday show warm and wet conditions over much of the country though the latest updates from the ensemble model this morning with have cooler temperatures making a comeback.

Most growers are wrapping up soybean planting according to reports yesterday on Feedback From The Field. While worries about conditions remain, some producers are still optimistic.

“For the most part corn looks good except for wet spots,” said a farmer from northwest Illinois. “Some later planted corn looks excellent but will take perfect fall to mature. Beans looking better every day.”

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 ag traders wait for USDA’s reports on grain stocks and acreage due Friday, trade talks between the U.S. and China at the end of the week also made headlines today. More upbeat comments by U.S. officials helped financial markets turn around after losses in Asia, with U.S. index futures pointing to a rebound on Wall Street.

Investors dumped gold and bought dollars on the bullish tone, with crude oil gaining $1 a barrel. Traders expect crude oil stocks fell this week despite slowing exports, as refineries appear to be cutting production of product. Diesel supplies may be increasing seasonally as planting limps to an end in a difficult season.

Corn prices are lower this morning, with the break sending December futures below the support line off May and June lows. That’s a warning sign for chart traders in case Friday’s acreage reports disappoint.

While final acreage could be sharply lower, Friday’s estimate may only show a reduction to 87 million, 2.8 million less than USDA lowered its forecast to earlier this month.

Today’s report on ethanol production will show how plants responded to margins that improved last week thanks to higher revenues from fuel and byproducts.

St. Louis harbor reopened to traffic yesterday after a brief closure, though traffic was limited to daylight hours only for northbound tows. High water levels could continue to disrupt movement into next week as water levels slowly recede.

Corn basis strengthened again yesterday, buoyed by gains in the export pipeline. Bids from ethanol plants were also mostly stronger.

The preliminary report from the CBOT showed daily futures volume up 4% yesterday to 533,098. Open interest went up 2,684 despite light fund profit taking and active liquidation of July contracts ahead of first notice day Friday with 1,030 contracts registered for delivery along the Illinois River.

Options volume was 39% higher at 117,069, 54% of it puts. In addition to adding short-dated options for coverage through Friday’s reports, new interest was noted in December $5 and $5.70 calls and $4.60 and $3.50 puts. Implied volatility in at-the-money December options rose to 30.64%.

Overseas markets are weaker today. September futures in China dropped a penny and a half to $7.182 and November Paris futures in morning trade are off three cents to $5.107 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 a little lower as the overnight session winds down, sending November through the 200-day moving average. Hopes for trade talks limited losses, though U.S. officials said any deal with China could take until the end of the year to work out.

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 in October and January.

Vegetable oil markets in Asia were weaker today. September soybean oil futures in China dropped to 35.495 cents per pound while weak export ideas sent July palm oil futures in Malaysia down another third of a cent to 20.90 cents.

Oilseed markets internationally are also down. September soybean futures in China lost 5.8 cents to $13.629, August rapeseed futures in Paris is off 3 cents to $9.409 and July Winnipeg canola overnight tumbled 6 cents to $7.628 after adjustments for volumes and currencies.

The preliminary report from the CBOT showed futures volume up 45% Tuesday to 389,033 while modest new fund selling and July liquidation cut 19,266 off open interest. There are 614 lots registered for delivery along the Illinois River system ahead of first notice day.

Options volume rose 60% yesterday to 48,118, 59% of it calls with new interest noted in August puts and calls ahead of Friday’s reports. Implied volatility in at-the-money November options decreased to 19.69%.

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 followed other grain markets lower overnight, with follow-through selling noted in SRW after a bearish reversal lower Tuesday.

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.

Only 9 lots are registered in Toledo with 5 ready for delivery in Kansas. Volume in soft red winter wheat went up 6% yesterday to 140,882 while open interest fell 17,579 on July liquidation despite light new fund selling.

Options volume was 61% higher to 32,993, 61% of it puts as traders added December puts. Implied volatility in December options fell to 23.75%

Volume in HRW was up 11% to 73,110 on open interest that fell 4,663.

Overseas markets are mixed. July futures for Eastern Australian Wheat jumped to settle 18 cents higher at $6.988 as showers fell apart before reaching fields there. December futures in Paris midday trade are off 2 cents to $5.748 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.

 

 

Pivots062619.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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