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Morning Market Review for March 18, 2019

High water! (Comments are updated by 7:30 a.m. Central Time.)

Overnight trend:
: Steady
Soybeans: Down 2 to 4
Wheat: Steady to down 4

Futures wobble despite major flooding

Grain futures are mixed this morning after an attempt to extend last week’s rally mostly ran out of gas as trading shifted from Asia to Europe. Support continues to come from short covering as buyers and sellers assess the impact of floods expected to wreck havoc this spring.

Major flooding is expected early this week as far north as New Boston, Illinois with parts of the Mississippi River flooded as far south as Baton Rouge. Traffic closed due to high water near Muscatine, Iowa, over the weekend and ice is still a factor on the Upper Mississippi as the heavy snowpack melts. Lake Pepin south of the Twin Cities had 22 inches of ice reported last week, with water flows very heavy to the south.

Reduced tow sizes and limited daylight running times are further restricting traffic on the lower Mississippi. Traffic continues to clear the backlog of tows on the Ohio River, though some are still waiting a couple of days to make it through the last locks before the Mississippi.

Dry conditions over the next few days give way to another storm on the southern Plains by the end of the week, kicking off a return to more precipitation according to maps over the next week. The official 6 to 10 and 8 to 14-day forecasts out yesterday and the latest updates from the ensemble model this morning call for above normal temperatures that could melt the snowpack, with above average precipitation. Three- and four-week forecasts out Friday were also warm, with above average precipitation from the central Plains to the mid-Mississippi River Valley.

Financial markets show some caution this morning as the Federal Reserve begins a two-day meeting Tuesday that wraps up Wednesday. The central bank isn’t expected to move on interest rates, leaving investors to mull projections from officials.

Though stocks traded higher in Asia the mood began to cool a little in Europe, where concerns about growth and the ongoing Brexit soap opera limited buying. U.S. stock indexes are mixed, with the Dow again weighed by Boeing’s problems.

The dollar is a little weaker helping gold maintain its move above $1,300 an ounce. Crude oil is mostly holding last week’s gains on ideas OPEC may extend production cuts this summer.

Corn prices are narrowly mixed as the overnight session begins to wind down. May futures are battling to avoid a reversal lower following a higher open, though the trading range was limited to just three cents.

While floods in the Midwest roil the old crop market, traders are starting to focus on acreage. USDA publishes prospective plantings March 29, and Farm Futures reports results of its latest survey on Friday.

Corn basis was steady to a little stronger last week. Bids strengthened on the Mid-Mississippi as shippers tried to fill empty barges starting make it up river. But Cairo, Illinois at the confluence of the Ohio and Mississippi weakened 11 cents and the market to the south was also weaker. Ethanol plants, which depend on a steady flow of grain to keep running raised bids sharply across the Midwest.

Big speculators sold a whopping 71,301 net corn contracts in the latest week, extending their bearish bet to its most negative reading since January 2018. But funds started buying on the day the data was collected and kept it up the rest of the week, triggering a short covering rally that lifted futures out of a downtrend.

The preliminary report from the CBOT showed daily futures volume up 5% Friday to 386,671 with open interest up 7,669 despite active fund short covering, suggesting elevators may be hedging new sales from farmers on the bounce.

Options volume slipped 7% to 61,681, 71% of it calls as traders rolled up near-the-money May calls and out-of-the-money May puts. Implied volatility in at-the-money December options slipped to 19.91%

Overseas markets are higher today. May futures in China gained 2.4 cents to $7.005, and June Paris futures in midday trade are  up three-quarters of cent to $4.924 after adjustments for volumes and currencies.

Bottom line:  Flooding should provide support to new crop futures with concerns about wet conditions adding to questions about profitability. For more, see my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Soybeans retreated a bit overnight, threatening May with a bearish reversal lower as it fights to hold support at the resistance line broken through on Friday.

Lack of a deal with China on trade remains an issue as traders wonder if beans are gaining acres by default due to cash flow and weather issues farmers face this spring.

Members of the National Oilseed Processing Association Friday reported record February crush of 154.5 million bushels but that fell below trade expectations. Though year-to-date crush is up 5.3% the slowing suggests the bump in demand caused by the poor crop last year in Argentina is starting to fade.

Soybean basis firmed last week as bids on the river and from processors were mixed. Big speculators continued to sell soybeans last week, according to Friday’s Commitment of Traders but were mixed in products.

The preliminary report from the CBOT showed daily futures volume 25% higher Friday at 174,209 with modest fund short covering taking 4,304 off open interest. Options volume rose 35% to 46,390, 52% of it calls as traders added November $10 calls and $7 and $8 puts. Implied volatility in at-the-money November options rose to 16.47%.

Vegetable oil markets in Asia edged higher today. May soybean oil futures in China settled at 37.575 cents per pound and May palm oil futures in Malaysia were at 23 cents.

Oilseed markets internationally were fairly quiet. May soybean futures in China were up 3 cents to $13.889, but others were unchanged with May rapeseed futures in Paris midday trade at $9.154 and Winnipeg canola overnight at $7.912 after adjustments for currencies and volumes.

Bottom line: Fundamentals are improving but still bearish. Continue to price old crop inventory on bounces to take risk off the table because soybeans are profitable once Market Facilitation Program payments are added. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Wheat prices are steady to mostly lower today as markets try to hold on to last week’s momentum. Soft red winter wheat threatened a reversal lower after making new highs over while hard wheats tested chart supports.

Basis was mixed last week. SRW faded across the Midwest but rail bids to the Gulf and PNW supported markets on the Plains.

Overseas markets also are easing today. May futures for Eastern Australian Wheat was off a half-cent to $7.0486 and May futures in Paris midday trade are also off a half-cent at $5.84 after adjustments for volumes and currencies. Big rains swept through the Black Sea growing region over the weekend, keeping fields in good shape there.

Big speculators were mixed in the wheat market last week, though overall maintain bearish bets in all three markets. Volume in soft red winter wheat fell 15% Friday to 114,089 though modest fund short covering trimmed 3,411 off open interest. Options volume fell 28% to 34,999, 51% of it puts as traders focused on short term protection. Implied volatility in at-the-money July options fell to 26.24%.

HRW volume was off 8% to 46,789 on open interest that was up 2,708.

Bottom line: The February break to new contract lows was a very bearish sign for wheat, suggesting sales must be made on bounces to start clearing remaining inventory. 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.


 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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