Corn: Up 3
Soybeans: Up 6 to 8
Wheat: Up 1 to 4
Markets eye weather and trade following USDA reports
Grain futures are higher across the board this morning, led by follow-through buying in soybeans on the heels of Thursday’s surprising USDA reports. Traders are already moving past those numbers on what could be a crucial day for markets getting ready for a barrage of new headlines.
Weather is certainly on the mind of farmers, especially those in the western Corn Belt where an early blast of winter is ending the growing season. Temperatures are already in the mid-20s as far south as the Texas Panhandle. The freeze will work east Saturday morning with warnings posted into northwest Illinois.
Plenty of moisture is ahead of the cold front, with storms from the Rio Grande to the Canadian border. Crops in North Dakota are being flattened by heavy snow as well.
Dry weather is expected behind the cold front over the next week. Official 6 to 10 and 8 to 14-day forecasts out yesterday and the latest updates from the ensemble models show a return to above normal temperatures and precipitation.
Growers posting Feedback From The Field this week report corn yields around average with soybean potential lower than normal as wet conditions and immature crops face the next weather test.
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Hopes for at least a temporarily truce in the trade war with China are giving markets a lift too as negotiators begin a second day of talks in Washington. Buying of ag products and a freeze on new tariffs could be part of the deal.
Stocks moved higher in Europe and Asia on the news, with progress also reported as Britain tries to avoid a hard exit from the European Union at the end of the month. Safe havens, including the dollar, Treasuries and gold are all lower as investors belly up to the bar and take on more risk.
Crude oil moved back above $54, aided by reports that missiles damaged an Iranian tanker today in the latest outbreak of violence in the troubled region.
Corn prices are higher, rebounding from Thursday’s pummeling after holding support at the 50-day moving average.
Bullish news was hard to find for corn yesterday, at least in the numbers. As I expected USDA made only a small adjustment to its estimate of production, cutting projected carryout far less than bullish traders anticipated due to weaker demand for exports and ethanol usage. Export sales last week totaled just 11.2 million bushels as end users buy Brazilian corn while waiting to find out how much the U.S. will have for sale this year.
Still, potential losses from this week’s freeze should provide support until hard evidence rolls off the combine.
The preliminary report from the CBOT showed daily futures volume more than doubling yesterday to 525,716 while open interest increased 10,333 on heavy new selling by funds.
Options volume was 80% higher at 237,036, 55% of it calls as traders dumped near-the-money December calls and added November puts for short-term protection. Implied volatility in at-the-money December options dropped by more than 3% to 16.40%.
Overseas markets are higher today. January futures in China gained 3.4 cents to $6.585 and November Paris futures are up three-quarters of a cent to $4.595 after adjustments for volumes and currencies.
Bottom line: Corn will rise or fall based on the extent of damage from weather in this unusual growing season because demand remains sluggish. For more, see my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.
Soybeans are adding to yesterday’s gains though fading overnight highs a little as the morning break nears. A hard freeze, bullish USDA estimates and positive spin from trade talks keeps bulls in charge unless the negotiations in Washington fall apart.
USDA provided a double-dose of bullish news Thursday, cutting its estimate of production by 83 million bushels and chopping 180 million off projected carryout.
Before the reports, news on exports was also positive. China continues to book U.S. soybean cargoes with total commitments for 2019 soybeans rising to 191 million bushels. While that’s an impressive total compared to last year, during the height of the trade war, total sales and shipments to all customers are at a 10-year low.
The preliminary report from the CBOT showed daily futures volume down 1% yesterday to 341,900 while open interest was up 22,550 on only modest fund buying.
Options volume was 55% higher at 113,733, 61% of it calls as traders added January and March calls along with November puts. Implied volatility in at-the-money November options slipped to 16.29%.
Vegetable oil markets in Asia ended mixed today. January soybean oil futures in China were up a quarter cent to 38.408 cents per pound while November palm oil futures in Malaysia slipped to 23.29 cents.
Oilseed markets internationally posted gains. January soybean futures in China were 9.7 cents higher at $13.106, November rapeseed futures in Paris afternoon trade are up 1.3 cents to $9.623 and November Winnipeg canola overnight gained 5.3 cents to $7.898 after adjustments for currencies and volumes.
Bottom line: Bullish USDA production and carryout estimate should provide support to the market unless this week’s trade talks end on a sour note. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.
Wheat prices are posting a modest rebound following yesterday’s selloff. Futures at all three markets were able to hold support despite a bearish USDA report that raised carryout by 29 million bushels due to sluggish exports.
Sales last week were decent at 19.2 million bushels, but most of the business is to regular customers continuing to buy hand-to-mouth. That complacency won’t end unless weather threatens global production.
Overseas markets are mixed today. January futures for Eastern Australian Wheat slipped 3.7 cents to $6.587, getting caught up with the selloff in the U.S. December wheat futures in Paris afternoon trade are up 1.4 cents to $5.344 after adjustments for currencies and volumes on news of slow seeding in France.
The preliminary report from the CBOT showed daily SRW volume up 41% to 110,508 while open interest was down 2,013 with modest selling by funds reported.
SRW options volume was 67% higher at 27,871, 56% of it calls with new interest noted in the July $5.60 call and $4.80 put. Implied volatility in December at-the-money options fell 1% to 18.34%.
Volume in HRW wheat increased 18% to 65,821 on open interest than rose 1,819.
Bottom line: Protein could be at a premium this year as snow flattens part of the crop in North Dakota and the Canadian Prairies. But wheat must prove export demand, which won’t be easy. 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.