Corn: Down 2
Soybeans: Down 4 to 6
Wheat: Down 2 to 5
Futures sell off in most markets overnight
Grain futures are lower across the board this morning, joining a global parade of selling. USDA’s latest production, supply and demand estimates didn’t produce much fodder for bulls to chew on, leaving bears in control as anxieties returned to markets around the world.
Snow is moving cross the I-80 corridor from Wyoming to Toledo this morning though the next week should be fairly dry after the system moves by. Official 6 to 10 and 8 to 14-day forecasts out yesterday show a return to above normal temperatures and precipitation, with the latest updates from the ensemble model even more aggressive on the warming trend.
Growers posting Feedback From The Field are reporting yields fairly close those reported by USDA Friday. The average corn yield over the past month is right at 167 bushels per acre, the same as USDA. Soybeans are at 48.3 bpa, 1.4 bushels higher than USDA, which made no change for November.
More recently, corn yields are trending higher in November, with the average for the month up to 168.5. Yields on soybeans, which are mostly harvested, are steady.
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Stock markets traded mostly lower in Asia and Europe today on worries about violence in Hong Kong and second thoughts about progress reported in U.S.-China trade talks last week. U.S. index futures point to a lower open on Wall Street as share prices retreat from record highs.
The dollar is weaker but other safe havens are in play, including gold and Treasuries. Crude oil slipped back below $57 a barrel on the gloomy mood. Money managers were modest buyers of crude last week, according to Friday’s Commitment of traders, and investors gaining exposure to commodities through funds that track indexes were also buyers, extending their net long position to its second highest level of the year.
But big speculators sold into the USDA reports, adding 57,194 net short positions back to their bearish bets against crops and livestock.
U.S. markets are open today though federal government offices, including USDA, close for Veterans Day.
Corn prices are lower, giving back Friday’s modest gains. December futures fought to hold to an inside day overnight, continuing to test support at the bottom of the downtrend from October.
USDA cut its estimate of the 2019 crop less than expected on Friday, trimming production by only 118 million bushels. And projected ending stocks fell just 10 million, as weaker demand for feed usage, ethanol and exports offset the lost bushels.
USDA did have a little good news before the reports came out Friday, announcing the sale of another 8.6 million bushels to unknown destinations under the daily reporting system for large purchases. Still, corn basis mainly firmed last week as strength in the export pipeline leeched into other areas.
The preliminary report from the CBOT showed daily futures volume up 51% to a heavy 661,885 but 122,160 of that was done in the December-March spread on the day Goldman roll, when traders following the index move positions out of the nearby. Index traders were buying last week, according to the CFTC report. Open interest rose 11,302 despite active fund short covering. Those big speculators were selling into the USDA report, adding another 22,8358 contracts to bearish bets.
Options volume was 35% higher at 190,239, 56% of it calls as traders added out-of-the-money December puts and the December 2020 $4.50 and $6 calls. Implied volatility in at-the-money December options dropped 2.6% to 17.75%.
Bottom line: Friday’s USDA reports are the last chance in two months for an injection of bullish news. But strong basis in many areas is a marketing opportunity, because buyers are scrambling. For more, see my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.
Soybeans are losing more ground this morning, with bearish thoughts about trade and fallout from USDA’s reports pressuring January to new lows for the month.
The government made no change to its estimate of 2019 production and cut its forecast of crush to raise projected ending stocks 15 million. While that was only 5 million more than I expected, the trade was looking for bullish news and didn’t get it.
USDA Friday reported the sale of 9.9 million bushels to unknown destinations under the daily reporting system for large purchases. But lack of new big buying news from China kept traders on their back feet.
Soybean basis, meanwhile, has made a dramatic recovery from the very weak levels seen in the dog days of the trade war. That helped bids easily beat the roll to January as November went into delivery. The best indication of that was the November-January spread, which tightened more than six cents from its low on first position day. Some processors even strengthened cash better than the roll to attract inventory in a highly competitive market, with the rally in soybean oil keeping margins decent.
Big speculators sold soybeans and meal last week but bought oil, as that market continues to gain a larger share of margins.
The preliminary report from the CBOT showed daily futures volume up 17% on Friday to 238,022 while open interest was up 12,063 on likely new selling from funds starting to flip bearish.
Deliveries against November jumped back to 855 contracts today after a couple days when nothing was put out. Another 200 lots were registered Friday in Chicago and put out, with the rest coming along the Illinois River following bull spreading in the November-January that took more than six cents off carry last week.
Options volume was 35% higher at 56,593, 55% of it calls as traders added near-the-money December puts and liquidated out-of-the-money December calls. Implied volatility in at-the-money January options fell more than 1% to 11.72%.
Vegetable oil markets in Asia were sharply higher today, helping U.S. futures gain as well. January soybean oil futures in China gained nearly a half-cent to 41.689 cents per pound and January palm oil futures in Malaysia were up six-tenths to 28.76 after production in October fell unexpectedly.
Oilseed markets internationally are also higher. January soybean futures in China gained 9.3 cents to $13.255, February rapeseed futures in Paris afternoon trade is up 3.8 cents to $9.791 and January Winnipeg canola overnight gained nearly 4 cents to $7.944 after adjustments for currencies and volumes.
Bottom line: The full extent of Chinese demand is still unknown, making supply the best hope for rallies. But more news about that won’t be coming until January, which could leave the market drifting. 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, following the tone in other markets on follow-through selling. While winter wheat contracts fought to hold Friday’s lows, Minneapolis slipped near two-month lows.
USDA cut its forecast of spring wheat production Friday by 42 million bushels, helping trim 29 million bushels off projected 2019 crop carryout. But that wasn’t enough to generate much enthusiasm in a world market still flush with supply.
Wheat demand hasn’t been great, but it’s good enough to force buyers to up their game too. Export markets off the Pacific Northwest and Texas and Louisiana Gulf strengthened, with bids steady to higher at most locations. The best markets remain from the northern Plains to the PNW.
Big speculators and large traders sold ahead of Friday’s USDA report and kept selling Friday. The preliminary report from the CBOT showed SRW volume up 52% to 163,288 but 28,833 of that done in the December-March on the Goldman roll. Open interest fell 2,130 on that liquidation despite modest fund selling.
SRW options volume rose 9% to 25,016, with a couple more calls trading than puts as traders liquidated calls and added puts. Implied volatility in December at-the-money options slipped 1.65% to 17.40%.
Volume in HRW wheat was up 5% to 108,209 with 23,992 done in the December-March. Open interest fell 710.
Overseas markets are mixed today. January futures for Eastern Australian Wheat settled unchanged at $6.339 and December wheat futures in Paris afternoon trade are down 2 cents to $5.331 after adjustments for currencies and volumes.
Bottom line: Look for opportunities in the cash market, because futures should stay sluggish until exports pick up. 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.