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Morning Market Review for May 23, 2019

New crop corn takes lead. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trend:
Corn: Up 2
Soybeans: Up 1
Wheat: Up 3 to 6

No one knows how much corn will be lost as deadlines loom

Grain futures are higher this morning, bucking trends in most other markets around the world thanks to high uncertainty over the fate of the U.S. corn crop. With yield potential dropping and more storms in the forecast, traders get ready for a Memorial Day weekend when many will get a first hand look at a crop that so far isn’t there.

Storms this morning stretch from Kansas City to Toledo, with more system set to pummel the central Plains and Upper Mississippi River Valley 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, with maps trending a little wetter than yesterday.

Growers posting Feedback From The Field yesterday continue to face challenges even if they have been able to get corn planted here and there. “Too many wet days for the few dry days to get everything done!” said a producer near Galesburg, Illinois who was 65% planted. “Not enough manpower, machines, or hours.”

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 battened down hatches for storms of their own. With rhetoric in the trade war between the U.S. and China moving up another notch yesterday, investors appear to be headed to the exits. Stocks tumbled in Asia and kept falling in Europe on no end in sight to the Brexit drama. U.S. index futures are posed for a sharply lower open, sending money back into the dollar on safe-haven buying. Investors are also parking cash in 10-Year Treasuries, pressing long-term rates below the short end of the yield curve as minutes of the latest meeting on monetary policy at the Federal Reserve make it clear the central bank is in no rush to raise short-term rates.

The stronger greenback and inventories that rose another 3.6 million barrels last week press crude oil lower, breaking Midwest cash diesel bench marks below $2 a gallon despite supplies in the region that tightened last week due to lower production and increased demand from farmers.

Corn futures are a little higher this morning, consolidating their recent surge higher. December led the way, moving to its highest level in almost a year.

While farmers mull decisions on corn, a new Farm Futures study shows the average grower likely can break even by taking prevent plant, though the payments likely won’t cover all economic costs. Whether they will toss in the towel, keeping planting, or switch to soybeans is a key factor in how the summer plays out.

In the meantime weather continues to make the river system a mess, with St. Louis harbor expected to close today and perhaps stay flooded into the first week of June. Buyers at terminals still able to delivery from Toledo to the Ohio River boosted bids as supplies run thin at the Gulf.

Export sales out today for last week are expected to run close to the 25 million bushels done last week, as recent business lags the pace needed to reach USDA’s forecast for the 2018 crop. Ethanol production got a boost last week, rising 19,000 barrels a day. That increased stocks but prices are higher today as President Trump is expected to approve a waver for year-round E15 usage in time for the peak summer driving season.

The preliminary report from the CBOT showed daily futures volume down 35% yesterday but still good at 606,540. Open interest fell 1,943 with more fund short covering by funds noted.

Options volume tumbled 57% to 182,050, 58% of it calls as traders liquidated July calls, with new interest noted in the December $5 and $5.50 calls. Implied volatility in at-the-money December options rose to 25.07%.

Overseas markets are mixed. September futures in China fell 2.1 cents to $7.303 but June Paris futures in morning trade are up 1.4 cents to $4.602 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 trying to hold on to modest gains, getting a lift from planting delays but bracing for more acres and bad news about the trade war.

Export sales out this morning are expected to slip below last week’s total of 24.8 million bushels, with traders watching to see if China keeps booking cargoes. USDA yesterday also announced the sale of 4.9 million bushels, most of it old crop, to unknown destination.

The preliminary report from the CBOT showed futures volume 43% lower yesterday at 203,620 while open interest rose 1,135 despite modest fund short covering.

Options volume was also up 57% to 65,652, 63% of it puts with new interest noted in the November $8 and $7.60 puts. Implied volatility in at-the-money November options dropped to 19.27%.

Vegetable oil markets in Asia were lower today. September soybean oil futures in China closed at 35.28 cents per pound and July palm oil futures in Malaysia tumbled nearly another half cent to 21.65 cents.

Oilseed markets internationally are mixed. September soybeans in China fell 4.8 cents to $14.068, but August rapeseed futures in Paris are up 1.3 cents to $9.248 and July Winnipeg canola overnight gained 2.2 cents to $7.532 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 gaining traction as the overnight session heads down the home stretch, getting a boost from heavy rains that could be posed to damage winter wheat while keeping spring wheat acres in question.

Export sales out this morning for last week are expected to be down from last week’s total near 20 million bushels as the 2018 marketing year winds down.

Volume in soft red winter wheat decreased by 38% yesterday to 106,659 while open interest was down 189 despite light new fund selling. Options volume was off 25% to 37,091, 61% of it calls as traders rolled down June calls that expire Friday. Implied volatility in at-the-money July options fell more than 1% to 32.44%

Volume in HRW dropped by 25% to 63,894 on open interest that was down 3,471,

Overseas markets are mixed. July futures for Eastern Australian Wheat gave back 4.7 cents of Wednesday’s surge, closing at $6.64 while December futures in Paris midday trade are up 2.3 cents to $5.447, after adjustments for currencies and volumes, on hopes for lower Russian export competition.

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.


 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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