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Morning Market Review for May 20, 2019

New storms threaten crops. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trend:
Corn: Up 5 to 6
Soybeans: Up 9
Wheat: Up 9 to 14

Market jumps as more rain stalls planting

Grain futures are higher across the board this morning, getting a boost from more worries about planting delays that are sending speculators running for cover to get out of bearish bets.

Storms moving across the Plains this morning are part of a wave of rain over the next week that could bring heavy totals from the Upper Mississippi River Valley to the Rockies. 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 precipitation over much of the country except the Southeast and Pacific Northwest.

Farmers posting Feedback From The Field over the weekend made some progress before rains returned, but many growers remain well behind normal or even completely stalled. Their reports suggest USDA’s planting progress for corn may barely top 50%, compared to the 85% benchmark for week 20 the trade accepts as normal. Soybean progress could advance to 17%, compared to the five-year average of 44%.

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.

Big speculators jacked their overall net short position in crops and livestock to an all-time bearish level this week. Buying in grains was offset by heavy selling in contracts with exposure to China, including soybeans, cotton and hogs.

Money managers sold crude oil last week but futures are firm this morning. Ministers from OPEC and its allies meeting over the weekend delayed any changes to production cuts until the group’s June meeting, amid simmering tensions with Iran.

Stock markets in Europe are also lower, following mixed trade in Europe. U.S. index futures point to a lower open on Wall street this morning, weighed down by rhetoric in the U.S.-China trade war.

Corn futures took aim at two-month highs overnight. December moved back above $4 while July gapped through its 200-day moving average, testing the March high at $3.8975.

This afternoon’s Crop Progress report will be closely watched by traders. Slow planting progress could be taking more than a billion bushels off yield potential due to lower yields and acreage and increased abandonment. While that doesn’t rule out another good crop if the summer is cool, it does make it harder to achieve.

Corn basis was steady on average last week but varied widely. Bids weakened from Memphis to Minneapolis on the Mississippi River, while weaker margins forced ethanol plants to drop basis. Some strength was noted in western areas feeding the Pacific Northwest. Traffic is moving again on the river system though tow sizes remain reduced and this week’s rains could force new closings.

Big speculators bought back a little of their record bearish bet on corn for the second week in a row, liquidating more shorts later in the week. Hedge fund managers trimmed 9,424 off their net short position as of Tuesday, buying more aggressively the rest of the week.

The preliminary report from the CBOT showed daily futures volume up 30% Friday to 668,951 while open interest was up 26,421 despite heavy fund short covering.

Options volume was 22% higher at 260,351, 66% of it calls as traders added out-of-the-money July calls along with the December $5 call and the June $3.80 put that expires Friday. Implied volatility in at-the-money December options rose to 23.85%.

Overseas markets are higher today. September futures in China rose another 7.9 cents to $7.365, hitting six-month highs on fears army work outbreaks could hurt production. June Paris futures in morning trade are up 3.5 cents to $4.626 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 so keep pricing regularly on this rally. For more, see my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Soybeans are higher after holding another test of their recent uptrend off contract lows overnight. While planting delays could mean more soybean acres, flooding could also hit bean ground if it continues.

Soybean basis strengthened four to six cents last week, with processors boosting bids thanks to good margins and shippers in the market as the river system begins to move again.

Big speculators sold across the soy complex last week, extending their bet record bearish against soybeans by another 9,054 contracts. That’s providing plenty of fuel for a short covering rally.

The preliminary report from the CBOT showed futures volume 3% higher Friday at 195,034 while open interest rose only 882 despite moderately active new fund selling.

Options volume was also up 3% to 64,912, 51% of it puts as traders added November $7 and $8 puts. Implied volatility in at-the-money November options increased to 18.04%.

Vegetable oil markets in Asia were slight lower today. September soybean oil futures in China settled at 35.84 cents per pound and July palm oil futures in Malaysia were at 22.59 cents.

Oilseed markets internationally are steady to higher. September soybeans in China were up 14.9 cents to $14.071, August rapeseed futures in Paris gained 1.9 cents to $9.187 and July Winnipeg canola overnight was unchanged at $7.477 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 in all three markets today, with short-covering gaining momentum from slow spring wheat planting and potential damage to winter wheat from heavy storms on the Plains.

Wheat basis was mixed last week, with weaker bids in the soft red winter wheat growing region offset by strength on the Plains for HRW.

Big speculators and large traders covered a little of their net short positions in wheat at all three markets last week but remain overall bearish.

Volume in soft red winter wheat rose 7% to 125,754 while open interest fell 9,762 despite light new fund selling. Options volume was down 26% at 42,721, 53% of it calls as traders liquidated out-of-the-money July calls. Implied volatility in at-the-money July options rose more than 1% to 31.08%

Volume in HRW was off 5% to 58,258 on open interest that fell 787.

Overseas markets are steady to higher. July futures for Eastern Australian Wheat closed unchanged at $6.398 as weekend rains offset a dry forecast this week. December futures in Paris midday trade are up3.3 cents to $5.444 after adjustments for currencies and volumes after rains last week missed much of Western Europe.

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.

Pivots052019.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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