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Morning Market Review for March 20, 2019

Traders wary of China hopes. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trend:
Corn
: Steady
Soybeans: Down 2 to 3
Wheat: Mixed

Mixed news about negotiations keeps markets choppy

Grain futures are mixed this morning, as the push and pull between weather, trade and economics kept markets rangebound overnight.

A small system is moving through flood-ravaged areas with a larger storm due over the weekend as forecasts turn wetter into the end of the month. High water shut locks on the Mississippi River as far south as Saverton, Missouri with major flooding expected to last at least until the middle of next week.

Trade talks between the U.S. and China are also producing mixed currents. Negotiators will meet again in China next week though thorny issues unrelated to agriculture remain before a deal can be signed

Caution is also noted in financial markets today as stock markets in Asia and Europe were mostly lower. The Federal Reserve updates monetary policy at 1 p.m. CDT, when participants in this week’s two-day meeting release the “dots” – projections for inflation, unemployment, GDP growth and interest rates. While economists expect the central bank to scale back its timetable for rate hikes to just one this year, betting on Federal Funds futures, however, sees a 25% chance of lower rates in the next 12 months.

The dollar is firm ahead of the Fed news, weighing on gold and crude oil ahead of today’s report on petroleum inventories. Drillers cut the number of rigs in service again last week to the lowest level in nearly 11 months, but there were mixed ideas about whether stocks may have built anyway. Diesel inventories likely fell, supporting wholesale prices as farmers start filling tanks for spring.

Corn prices are mostly steady as a quiet overnight session winds down. May futures held to an inside day so far, maintaining the uptrend for the past two weeks.

This morning’s report on ethanol production for last week due out at 9:30 CDT will show how plants responded to margins that firmed last week despite higher corn costs thanks to a surge in values for the biofuel that shot sharply higher. Ethanol still enjoys a 35% discount to gasoline, enough to encourage blending.

The preliminary report from the CBOT showed daily futures volume off 9% at 301,714 while open interest was up 9,324 on modest new fund selling. Options volume was 39% higher at 101,891, 75% of it calls as traders added the July $3.90 call along with the September $4 and $4.20 calls and March puts.

Implied volatility in at-the-money December options rose to 20.16%

Overseas markets are lower. May futures in China were down 4.1 cents to $6.969 and June Paris futures in midday trade dropped 2.2 cents to $4.891 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 are a little lower, unable to rebound so far after slipped below their two-week uptrend yesterday.

Conflicting news about China trade talks and lack new buying announcement is one reason for cautious trade. Wet conditions could also force some corn ground into soybeans the market doesn’t need right now.

The preliminary report from the CBOT showed daily futures volume up 29% yesterday to 141,809 while light new fund selling added 3,740 to open interest. Options volume was 71% higher at 35,543, 58% of it puts as traders again added November puts. Implied volatility in at-the-money November options slipped to 16.52%.

Vegetable oil markets in Asia were higher today. May soybean oil futures in China rose to 37.498 cents per pound and May palm oil futures in Malaysia jumped four-tenths of a cent to 23.74 cents.

Oilseed markets internationally were mixed. May soybean futures in China lost 1.7 cents to $13.719, but May rapeseed futures in Paris midday trade gained 5.8 cents to $9.23 and Winnipeg canola overnight rose a penny to $7.911 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 mixed, with strength noted in some hard wheat contracts due to flooding concerns on the Plains. Minneapolis May surged through its 50-day moving average yesterday with HRW holding to its narrow trading range.

Taiwan was in the market for wheat overnight but otherwise export news is limited. Overseas markets are mixed. May futures for Eastern Australian Wheat settled 3.9 cents higher at $7.339 and May futures in Paris midday trade were down a penny at $5.835 after adjustments for volumes and currencies.

Volume in soft red winter wheat slipped 3% yesterday to 88,323 with light new fund selling adding 777 to open interest. Options volume was 20% higher at 24,466, 60% of it calls as traders added May strikes. Implied volatility in at-the-money July options fell to 24.93%.

HRW volume was 31% lower at 41,848 on open interest that increased 3,521.

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.

032019Pivots770.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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