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Morning Market Review for Oct. 1, 2020

Will the bulls stick around? (Comments are updated by 7:30 a.m. Central Time.)

Overnight trends:

Corn: Up 3 to 4 cents

Soybeans: Up 8 cents

Wheat: Down 1 to 2 cents

*Prices as of 6:50am CST.

 

Corn and soybeans move higher in overnight trading after a big surge Wednesday

Grain prices leapt significantly higher Wednesday on the heels of a supportive batch of ending stocks data from USDA. What will it take to keep that forward momentum rolling into Thursday? The agency will offer some more signals later this morning when it releases its weekly export sales report. But even though harvest pressure still looms, traders appear optimistic enough over supply and demand fundamentals to hand out overnight gains of almost 1% for both corn and soybeans. Yesterday’s wheat rally may have a shorter shelf life, with prices narrowly mixed heading into Thursday’s session.

The latest 72-hour precipitation map from NOAA shows mostly drier weather ahead for the Corn Belt between today and Sunday, with most areas only expected to gather 0.1” or less total accumulation. Official 6-to-10-day forecasts out yesterday strongly favor seasonally dry, warm weather for most of the U.S. between October 6 and October 10.

Overseas stock markets were narrowly mixed. In Asia, China’s Shanghai Composite closed with modest losses while Hong Kong boosted more than 0.75%. Most European markets were steady to slightly higher in midday trading. And Dow futures were up nearly 200 points ahead of Thursday’s session on hopes that a coronavirus stimulus package will soon be passed.

Energy futures overnight show signals that losses will be likely today. Crude oil was down nearly 1.5% in overnight trading, sliding back below $40 per barrel. Diesel dropped more than 1%, with gasoline down around 0.5%. The U.S. Dollar softened slightly.

On Wednesday, commodity funds were big net buyers of all major grain contracts, including corn (+55,000), soybeans (+30,000), soymeal (+11,000), soyoil (+4,000) and CBOT wheat (+25,000).

Corn

Corn prices face an interesting test as the week winds down. Will traders’ focus remain on yesterday’s semi-shocking USDA stocks report, or will harvest pressure come back to the forefront? Overnight trading signals another round of gains may be in store Thursday, with gains of nearly 1% heading into today’s session. If USDA releases a healthy dose of export data later this morning, that would help sustain the current momentum.

Yesterday, corn basis bids dropped 2 to 6 cents lower across a handful of Midwestern locations but rose 6 cents at an Iowa ethanol plant and held steady elsewhere across the central U.S.

USDA’s next weekly export report comes out later this morning. Analysts expect the agency to show corn sales ranging between 31.5 million and 55.1 million bushels for the week ending September 24.

Prices were red-hot yesterday after USDA reported September 1 old crop corn stocks were 10% lower year-over-year, falling to 1.995 billion bushels. That was below analyst estimates of 2.250 billion bushels. Disappearance of 3.02 billion bushels between August and June was slightly higher versus a year ago. Click here for more analysis on yesterday’s quarterly stocks report.

Weekly ethanol production fell to the lowest levels since Mid-June, dropping for a third consecutive week to a daily average of 881,000 barrels, per the latest data from the U.S. Energy Information Administration.

Iran was thought to have purchased between 5.5 million and 11.8 million bushels of animal feed corn, likely from Brazil and/or Ukraine, in an international tender that closed yesterday.

The preliminary report from the CBOT showed daily futures volume at 550,965, with open interest firming by 13,117. Options volume moved to 248,388 and is fairly even between calls (122,234) and puts (126,154) at this time. Implied volatility for near-the-money December contracts are at 20.1% and don’t expire for another 50 days.

Soybeans

Soybean prices face largely the same situation as corn for the remainder of the week. That is, USDA handed out supportive stocks data, and there is a fair amount of export optimism for now, but seasonal harvest pressure still looms. Overnight gains of around 0.75% suggest that yesterday’s momentum isn’t going to run out of steam today, with prices back in the $10.30s.

Basis bids were mostly steady across the central U.S. yesterday, although an Illinois river terminal tilted 6 cents higher and an Iowa processor dropped 5 cents.

Old crop soybean stocks are down significantly from a year ago, falling 42% lower between September 1, 2019 and September 1, 2020 to 523 million bushels. Analysts expected USDA to report a much higher number, with an average trade guess of 576 million bushels. USDA also noted a 333-million-bushel downgrade to its 2019 production estimates, based on assumptions of 74.9 million harvested acres with average yields at 47.4 bushels per acre.

When USDA’s next export sales report is released this morning, analysts think the agency will show soybean sales ranging between 55.1 million and 91.9 million bushels for the week ending September 24.

There were some overseas buyers of soymeal recently. Iran purchased 100,000 to 140,000 metric tons of soymeal in an international tender that closed yesterday, which is expected to be sourced from Argentina and Brazil. And Syria issued another international tender to purchase 50,000 MT of soymeal, which doesn’t close until October 26.

The preliminary report from CBOT showed daily futures volume at 394,712, with open interest firming by 9,999. Options volume is at 116,554 and moderately favors calls (74,174) over puts (42,380). Implied volatility in near-the-money November contracts are at 20.8% with 22 days to expiration.

Vegetable oil markets in Asia were wobbly today. November soybean oil futures in China trended slightly lower, to 45.66 cents, with November palm oil futures in Malaysia holding mostly steady at 31.11 cents.

Oilseed markets internationally showed a similar pattern. November soybean futures in China fell 10 cents to $17.51. But November rapeseed futures in Paris afternoon trade found some traction, at $10.31, as did Winnipeg canola contracts in overnight trading, reaching $8.92.

Wheat

Wheat prices may be vulnerable to a round of profit-taking Thursday after some contracts soared more than 6% higher Wednesday. Overnight prices indicate yesterday’s rally may be put on pause today, with prices tracking slightly lower. If USDA announces a big round of export sales later this morning, that would help, but analysts are expecting lackluster results. Still, prices received a much-needed shot in the arm Wednesday, pushing December Chicago SRW futures close to $5.80, with December Kansas City HRW futures climbing back above $5.00 and December MGEX spring wheat futures making it back to $5.40.

All-wheat stocks fell 8% year-over-year to 2.16 billion bushels. Of that, 705 million bushels are stored on the farm, with off-farm stocks at 1.45 billion bushels, according to USDA. Disappearance between June and August was 695 million bushels, trending 4% higher compared to the same period last year.

When USDA’s weekly export report comes out later this morning, analysts expect to see wheat sales ranging between 7.3 million and 18.4 million bushels for the week ending September 24.

The preliminary report from CBOT showed daily SRW volume at 203,011, with open interest firming by 7,681. Options volume was at 58,240 and moderately favors calls (34,386) over puts (23,854). Implied volatility in November near-the-money options is still relatively high, reaching 23.4% with 50 days before expiration.

Volume in HRW wheat were at 92,899, with open interest moving 3,040 higher. Options volume made it to 10,906 and heavily favors calls (8,516) versus puts (2,390) at this time.

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