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Morning Market Review for May 22, 2019

Corn cools off overnight. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trend:
Corn: Down 3 to 5
Soybeans: Mixed
Wheat: Down 2 to 9

Market waits for confirmation of USDA aid as trade rhetoric ramps up

Grain futures are mostly lower this morning as the late-planting rally takes a breather. Some position-squaring could also be seen ahead of the Memorial Day weekend, with traders waiting for official confirmation from USDA on its next round of tariff compensation.

Reports the package could include $2 a bushel for soybeans but only 4 cents for corn drove markets yesterday. The U.S.-China dispute showed no signs of easing, either. While the U.S. threatened to ban another Chinese technology company on security concerns, Chinese officials promised more stimulus for companies struggling with potential loss of exports to the U.S.

Amid it all, weather continues to wreak havoc with #plant19. Storms from the northern Plains to the eastern Corn Belt are part of a series of systems expected to sweep though the center of the U.S. over the next week. 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 parts of the Southeast and northern Plains could trend drier.

Growers posting Feedback From The Field Tuesday continued to report progress planting in fits and starts. Those in the eastern Corn Belt faced the biggest hurdles as more rain sweeps through the region. “Lot of the corn that's planted was planted into ground that was opened up wet and then planted, still muck underneath,” reported a farmer in western Illinois who had 65% of his fieds in. Only 10% was emerged.

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.

Stocks traded mixed in Asia on the trade dispute and markets in Europe failed to hold on to most of their gains as well. Another attempt to resolve Brexit appears doomed, which could push British Prime Minister Theresa May from the stage sooner rather than later. U.S. index futures drifted lower, pointing to a setback on Wall Street today following Tuesday’s rebound.

The dollar is a little weaker despite all the angst, but that’s not helping commodities much. Crude oil futures lost their bid to move back above $63 a barrel overnight. Traders are unsure about the direction of crude oil inventories, when the government updates data from last week this morning at 9:30 CST. But diesel stocks are expected to show a decline as farmers struggle to plant 2019 crops.

Corn futures are posting modest losses, digesting gains from the mid-May planting rally. While loss of corn acres appears assured due to record slow planting progress, USDA won’t update its figures until the end of June, when the market should be focused on weather forecasts into pollination.

This week’s rally appears to be bringing a few bushels to town, weakening basis in western areas where planting is going a little better. Bids remained firm in the eastern Midwest, where farmers faced the most struggles making headway.

Rains caused more locks on the Upper Mississippi River to close again this week. St Louis could be shut by Thursday, with the river there expected to move back above major flood stage over the weekend.

The preliminary report from the CBOT showed daily futures volume up 24% yesterday to a very heavy 932,519. Open interest rose 18,371 despite aggressive fund short covering, suggesting elevators are hedging corn bought from farmers.

Options volume jumped 48% to 420,466, 68% of it calls as traders again aggressively rolled up in-the-money July calls while adding July puts with new interest also seen in the December $4.30 call and $3.80 put. Implied volatility in at-the-money December options eased to 24.88%.

Overseas markets are weaker today. September futures in China fell 2.3 cents to $7.328 and June Paris futures in morning trade are off 2.8 cents to $4.601 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 fighting to hold on to a modest rebound, after the market was hammered Tuesday by ideas a large USDA aid package could move more ground into soybeans. While USDA officials told farmers to plant for the market – not for the compensation – that advice could fall on deaf ears from growers penciling out the details.

In the meantime, trading was very active yesterday as futures reversed lower. The preliminary report from the CBOT showed futures volume nearly doubling to 360,167 with moderate new fund selling adding 9,986 to open interest.

Options volume more than doubled to 114,391, 51% of it calls as traders added November puts, including the deep out-of-the-money $6.60 strike. Implied volatility in at-the-money November options increased to 19.30%.

Vegetable oil markets in Asia were sharply lower again today. September soybean oil futures in China settled at 35.67 cents per pound while July palm oil futures in Malaysia lost nearly a half cent to 22.21 cents.

Oilseed markets internationally are mixed. September soybeans in China lost 5.3 cents to $14.121, August rapeseed futures in Paris are down 3.8 cents to $9.203 but July Winnipeg canola overnight edged higher to $7.504 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 lower, forcing winter wheat contacts to a test of their uptrend for the last two weeks. Spring wheat is also lower as traders ponder whether USDA aid will be enough to push farmers to plant.

Volume in soft red winter wheat was 24% higher yesterday at 173,282 while open interest fell 11,690 on only light fund short covering.

Options volume was 13% higher at 49,427, 63% of it calls as traders added the March $5 call and July $5.20 put. Implied volatility in at-the-money July options rose more than 1% to 34.51%

Volume in HRW was 8% higher yesterday at 84,973 on open interest that dropped 8,168.

Overseas markets are mixed today. July futures for Eastern Australian Wheat jumped to settle 25.3 cents higher at $6.369 as forecasts turn hot and dry again on the continent. December futures in Paris midday trade are off 5.2 cents to $5.378 after adjustments for currencies and volumes, following good rains across Ukraine and south Russia.

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.

Pivots052219.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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