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Morning Market Review for May 17, 2019

Corn hits $4 overnight. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trend:
Corn: Up 2 to 4
Soybeans: Down 3 to 4
Wheat: Up 5 to 12

What matters most: Wet spring or wet summer?

Grain futures are mixed this morning as the market faces a key inflection point. Monday’s Crop Progress report should show far less corn planted than normal.

At the same time, there’s been even less progress this week in solving the trade dispute between the U.S. and China. Rhetoric from China ratcheted higher overnight, sending stocks and soybeans lower.

Storms spread from Montana to Maryland kick off what could be a wet two weeks for much of the country. Heavy rains from the northern Plains of Texas to the Great Lakes could stall planting over the next week look impressive from the southern Plains into the upper Midwest with many areas picking up three inches or more. Official 6 to 10 and 8 to 14-day forecasts out yesterday call for above normal precipitation over the Plains and Midwest, though the latest updates from the ensemble model this morning show a few more pockets of drier weather.

Adding to the mix: The 90-day outlook out Thursday called for a wet summer across most of the country with below normal temperatures over most of the Plains and Midwest, with heat only west of the Rockies and from Ohio east.

While farmers posting Feedback From The Field Thursday noted some planting progress, the spring of 2019 remains a challenge for most. Iowa saw 90-degree heat but a farmer near Fargo reported some frost still in the ground Thursday, hampering field work, while producers in the eastern Corn Belt struggle with wet fields. But believe it or not some areas need rain. Said a producer who was 100% planted: “Eastern Colorado is dry...too dry.”

Farm Futures wants to know what farmers are experiencing as the spring of 2019 unfolds. Click this link to tell us what’s happening in your area and we’ll publish regular updates featuring first-hand accounts from growers with an interactive map of conditions. Grower reports this spring have been an accurate predictor of what USDA reports in its Crop Progress updates weekly.

The latest trade talk out of China sent stock prices mostly lower in Asia, with the mood bearish across Europe as well. U.S. index futures gave up some of yesterday’s gains, while the dollar continues to firm. Crude oil solidified its move back above $63 a barrel. Tensions between the U.S. and Iran showed no signs of letting up, keeping the energy market nervous.

Corn prices are higher, taking July futures above the 100-day moving average overnight. New crop December tested $4 for the first time since April.

Rains over the weekend make it unlikely farmers will come anywhere near the 85% planted that’s considered normal. While that doesn’t assure a smaller crop, it does decrease production potential. The summer forecast could cut both ways: Cool and wet could be good for yields unless it’s too cool and too rainy, delaying growth and producing a wet crop with lower yields and quality.

This week’s drier pattern has traffic moving through locks on much of the upper Mississippi River, though the Illinois River remains a sticking point south of Peoria, with more rain in the forecast.

While South Korean feed makers were buying late last week, their purchases can be sourced from anywhere in the world. Brazilian fields are in good shape, though the next two weeks continue the drying trend seen in May.

Export sales last week of 25 million bushels were better than expectations, but the old crop total continues to fall below the rate needed to reach USDA’s forecast for the 2018 marketing years.

The preliminary report from the CBOT showed daily futures volume 20% lower Thursday but still decent at 516,474. Open interest was up 13,067 despite heavy short covering from funds scrambling to get out of bearish bets.

Options volume was 29% lower at 213,028, 75% of it calls as traders rolled up June, July and December calls on the rally. New interest was also seen in the March $4.10 straddle. Implied volatility in at-the-money December options rose to 23.71%.

Overseas markets are a little higher today. September futures in China were gained nearly a penny to $7.294 and June Paris futures in morning trade are up 2.1 cents to $4.634 after adjustments for volumes and currencies.

Bottom line: Farmers who can’t plant all their 2019 intentions still have a lot of old crop to sell. Locking in some basis now on hedges and flat pricing corn in the bin in increments is one way to cut risk. How much corn growers plant in the next week could be the key to setting up summer rallies. For more, see my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Soybeans are lower, continuing to pull back after testing resistance at old chart support on Wednesday. The negative mood for trade talks with China cast a pall on the market, as traders also contemplate farmers planting more soybeans than March intentions due to weather problems with other crops.

Prospects from another round of tariff compensation from USDA could also figure into those planting decisions. With those payments figured in, along with support from the traditional farm programs, soybeans look profitable, while farmers taking prevent plant on corn aren’t assured of any tariff aide yet.

Export sales of 24.8 million bushels of old and new crop bookings were in line with trade guesses but total old crop commitments are far below the level needed to reach USDA’s lowered forecast for the 2018 crop. Soybean numbers remain under pressure from lack of new Chinese interest – the world’s largest importer added less than 200,000 bushels of net new purchases. China still has 265 million bushels of unshipped sales, which likely will wind up elsewhere if a trade deal isn’t cobbled together this summer.

The preliminary report from the CBOT showed futures volume 38% lower at 188,765 while open interest was up 6,599 despite light fund short covering. Options volume fell 42% to 63,048, 57% of it calls as traders added deep out-of-the-money July $7.20 puts. Implied volatility in at-the-money November options increased to 17.95%.

Vegetable oil markets in Asia were narrowly mixed today. September soybean oil futures in China edged higher to 35.944 cents per pound and July palm oil futures in Malaysia slipped to 22.59 cents.

Oilseed markets internationally are weaker. September soybeans in China were off 11.1 cents to $13.933, August rapeseed futures in Paris fell 1.9 cents to $9.201 and overnight July Winnipeg canola is down 2.5 cents to $7.491 after adjustments for currencies and volumes.

Bottom line: Soybean fundamentals are bearish but the crop could still be profitable with government aid. Crunch the numbers now to see where your bottom line stands. Though no decision is needed on the farm program yet, ARC may wind up better again for most growers though PLC could also work. 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, paced by strength in Minneapolis as a wet forecast could trim acreage this spring. A late season pick up in demand from foreign buyers is also raising hopes that supplies left over when the marketing year ends May 31 will be in line with USDA’s forecast.

Export sales of 19.6 million bushels were mostly for new crop as the 2018 marketing year winds down, with old crop sales and shipments both in line to reach USDA’s reduced expectations.

Overseas markets are also higher today. July futures for Eastern Australian Wheat gained 2.8 cents to $6.361, with forecasts dry for the next week on the continent. December futures in Paris midday trade are up 2.3 cents to $5.43, after adjustments for currencies and volumes, though conditions in France remain stable.

Volume in soft red winter wheat dropped 20% Thursday to 116,986 while open interest was off 4,054 on fairly active fund short covering. Options volume increased by 30% to 58,060, two-thirds of it calls as traders liquidated July $4.50 and $5 calls. Implied volatility in at-the-money July options rose more than 1% to 29.69%

Volume in HRW was down by 15% to 61,203 on open interest that was up 2,612.

Bottom line: Too much rain is the biggest threat to the crop now, though problems won’t show up for a while. 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.

Pivots051719.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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