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Morning Market Review for May 21, 2019

Corn gaps higher again overnight. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trend:
Corn: Up 5 to 7
Soybeans: Up 7
Wheat: Up 5 to 8

New storms sweep through grain market

Grain futures are higher across the board again this morning, paced by a surging corn market driven by record slow planting. With tractors parked, especially in the eastern Midwest, growers face forecasts for two more weeks of wet weather.

Storms stretch from central Texas to central Illinois this morning, part of three systems due over the next week that could bring heavy totals north and west of I-55 in the Midwest and Plains. 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, though the Southeast and northern Plains could trend drier.

Farmers posting Feedback From The Field Monday reported a little more progress over the weekend, but the going remains slow in the eastern and upper Midwest. Growers continue to talk about taking prevent plant or replanting corn, with final planting dates for corn approaching in many states that will start to reduce crop insurance coverage.

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.

Other markets are also mostly buoyant. Stocks traded mixed in Asia before turning higher in Europe, pointing U.S. index futures towards a stronger open on Wall Street. Moves by Washington on trade eased fears a bit, though rhetoric from China remains fairly belligerent after talks broke down earlier this month.

The dollar is stronger, with the U.S. still favored by global investors. Commodity prices are on the move nonetheless, with crude point solidifying its move back above $63 a barrel. Ideas OPEC and its allies won’t cut production soon, coupled with ongoing tensions with Iran, continue to drive the energy market, keeping Midwest wholesale diesel benchmarks close to spring highs.

Corn futures gapped higher overnight, posting new spring highs after USDA reported record slow planting progress Monday. While the gap on the overbought July short could signal formation of a short-term top, the breakaway gap on the December chart overnight projects eventually to $4.4725.

USDA said farmers have planted just 49% of their corn, up 19% from last week but the lowest total for week 20 of the year on record. The five-year average for the week is 80%. Farmers in the eastern Corn Belt continue to lag dangerously behind average, with Illinois only 24% planted – an amazing 65% behind average.

The slow pace doesn’t doom the 2019 crop. But Farm Futures analysis shows it does cut production potential by 1.3 billion bushels, making good conditions this summer crucial.

Export inspections fell to 32.3 million bushels last week, well below the rate needed to reach USDA’s forecast for the 2018 crop. Corn movement may begin to pick up now that the river system is reopening to traffic but a brisk pace will be needed throughout the summer. One potential customer could be the Philippines, which is in the market for 11.8 million bushels after El Nino conditions hurt production there.

The preliminary report from the CBOT showed daily futures volume up 12% to an active 751,903. Open interest rose 49,782 despite more heavy fund short covering, suggesting elevators are hedging corn bought from farmers. Basis was mostly firm nonetheless at terminals yesterday, though it remains weak at ethanol plants.

Options volume was 9% higher Monday at 283,811, 65% of it calls as traders aggressively rolled up in-the-money July calls while adding June puts that expire Friday. Implied volatility in at-the-money December options eased to 23.59%.

Overseas markets are mixed. September futures in China lost 2.5 cents to $7.345, consolidating Monday’s gains, but June Paris futures in morning trade followed the U.S. higher, gaining 2.8 cents to $4.634 after adjustments for volumes and currencies.

Bottom line: Keep pricing old crop inventory while penciling out decisions on replanting, prevent plant or switching to soybeans. December futures have potential to hit profitable levels this summer, so hold off on pricing new crop.  For more, see my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Soybeans are higher, getting a lift from slow planting and a few signs of easing trade tensions. July futures held its weeklong uptrend off contract lows, despite prospects for growers to plant more soybeans than March intentions.

Soybean planting progress this week of 19% is the lowest since 1996 and compares to the five-year average of 47%. North Carolina was the only major state with above average readings.

Export inspections last week slipped to 18.3 million bushels. Chinese buyers loaded out three more soybean cargoes out of the Gulf in the past week, totaling 7.6 million bushels, but still have around 255 million bushels of outstanding sales. The total for the week remains well behind the rate forecast by USDA for the 2018 marketing year, and what happens to that unshipped book will be decisive in whether or not the government’s estimate is met. Other buyers likely would be willing to take those bushels because prices out of Brazil are trading at a 6.5% premium to new originations out of the Gulf.

The preliminary report from the CBOT showed futures volume down 6% to 182,733 on open interest that was up 4,413 despite modest short covering from funds getting out of their record bearish bets.

Options volume fell by a third to 43,783. 52% of it calls with a little new interest seen in the November $11.20 call and $8 put. Implied volatility in at-the-money November options increased one-half of 1% to 18.66%.

Vegetable oil markets in Asia ended mixed today. September soybean oil futures in China ended higher at 35.95 cents per pound while July palm oil futures in Malaysia broke nearly a half-cent to 22.21 cents.

Oilseed markets internationally followed Chicago higher. September soybeans in China gained 8.5 cents to $14.163, August rapeseed futures in Paris gained 3.8 cent to $9.24 and July Winnipeg canola overnight is up 7.1 cents at $7.568 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, boosted by the rally in corn and improving export news. Soft red winter wheat took out its March high overnight while HRW and Minneapolis are also targeting the next round of upside targets.

The wheat market got mixed news from USDA’s progress report Monday. Winter wheat conditions improved, adding around a quarter bushel per acre to yield potential according to our yield models, despite heavy rains that could cause trouble down the road. Spring wheat seedings improved to 70%, 10% behind average but up 25% from last week.

Wheat inspections continue to be good as the marketing year winds down. Some buyers may be getting nervous about potential for a late harvest, and perhaps questions about quality due to excessive rains this spring. Japan will fill most of its regular weekly tender with U.S. originations, with Taiwan also buying U.S. wheat overnight.

Volume in soft red winter wheat was 11% higher yesterday at 139,975 while open interest fell 4,222 on modest fund short covering. Options volume was up 3% to 43,907, with a few more calls trading than puts as traders liquidated more out-of-the-money July calls and added July puts. Implied volatility in at-the-money July options rose more than 1% to 31.31%

Volume in HRW rose 35% to 78,733 on open interest that decreased by 393.

Overseas markets are firm this morning. July futures for Eastern Australian Wheat ended unchanged at 6.358 and December futures in Paris midday trade are up around a penny to $5.469 after adjustments for currencies and volumes

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.


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Pivots052119.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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