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Morning Market Review for Oct. 15, 2019

Trade doubts dent rally. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trends:
Corn:
Down 3 to 4
Soybeans: Down 3 to 4
Wheat: Down 3 to 5

Futures digest last week’s gains

Grain futures are posting modest losses this morning, a retreat that gained momentum on reports China may want a reduction in U.S. tariffs to follow through on commitments to purchase large amounts of U.S. farm products. That news followed suggestions over the weekend that China needs more negotiations before signing a deal in November.

Concerns about damage to crops from last week’s blizzard and frost continue to provide support. Forecasts suggest the next threat of frost to crops in the central and eastern Corn Belt may not come until the end of next week.

Much of the growing region will be dry over the next week until the next system gathers force over the weekend. Official 6 to 10 and 8 to 14-day forecasts out yesterday and the latest updates from the ensemble models call for below normal temperatures with above normal precipitation in the eastern half of the country.

Growers posting Feedback From The Field Monday reported highly variable yields as they harvest crops, with corn running from 90 to 220 bushels per acre.

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Concerns about the trade deal didn’t impact stock futures much, with index holding gains after mostly higher trade in Asia and Europe. Investors are turning their focus to earnings as third quarter results come out. Still, safe haven buying is also in play ahead of Brexit negotiations and an EU summit, with gold, treasurers and the dollar all gaining.

Crude oil is fighting to hold above $53 a barrel, hit by a lack of new tension out of the Middle East.

Corn prices are lower, holding December futures to an inside day after they failed to break through the 200-day moving average Monday.

With much of the crop in the northwest Corn Belt still immature before last week’s cold snap, traders are waiting for this afternoon’s process report for the first assessment of damage. Basis was steady to a little higher Monday with gains noted on the river system as barge freight costs continue to ease.

The preliminary report from the CBOT showed daily futures volume down 43% yesterday to 263,210 while open interest plunged 24,660 despite light new fund selling.

Options volume was off 60% to 85,620, 57% of it calls as traders liquidated November options. implied volatility in at-the-money December options fell nearly 2% to 19.23%.

Overseas markets are a little lower today. January futures in China lost a quarter cent to $6.607 and November Paris futures are down a penny at $4.591 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 trying to limit losses this morning as questions about the trade deal with China continue to reverberate.

Bulls will be waiting for USDA offices to reopen after the Columbus Day holiday to see if the agency provides more bullish news. In addition to large purchases by China on the government’s 8 a.m. CDT daily wire, condition reports out this afternoon could offer the first assessment on how cold weather and snow affected crops last week.

In between those bookends, at 11 a.m. CDT traders expect members of the National Oilseed Processors Association to report they crushed around 164 million bushels of soybeans in September, which would be a record for the month. That hope may be too optimistic after margins fell sharply on higher soybean input costs.

The preliminary report from the CBOT showed daily futures volume down 29% Monday to 281,188 while open interest rose 559 on modest fund buying.

Options volume was 41% lower at 62,063, 65% of it calls as traders rolled up January and March calls and liquidated November puts. Implied volatility in at-the-money November dropped to 18.72%.

Vegetable oil markets in Asia were mixed today. January soybean oil futures in China lost nearly another third of a cent to 37.907 cents per pound but November palm oil futures in Malaysia reversed higher to close a quarter-cent higher at 23.16 cents.

Oilseed markets internationally are mixed. January soybean futures in China gained a penny to $13.182, November rapeseed futures in Paris afternoon trade is unchanged at $9.543 and November Winnipeg canola overnight lost a penny to $7.871 after adjustments for currencies and volumes.

Bottom line: Smaller production and stronger demand could take carryout below 400 million bushels in the year ahead, fueling gains into November. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Wheat prices are following other markets lower as the market waits for news about damage to spring wheat from last week’s blizzard on the northern Plains into Canada. The Black Sea region also appears to be turning drier as farmers there seed the 2020 crop.

Otherwise, export news so far this week is limit with no big tenders hitting the wires yet as U.S. prices retreat from multi-month highs.

Overseas markets are weaker. January futures for Eastern Australian Wheat tumbled 9.7 cents to $6.486 despite only limited rains in the forecast. December wheat futures in Paris afternoon trade are off 2 cents to $5.36 after adjustments for currencies and volumes with France expecting better conditions for seeding.

The preliminary report from the CBOT showed daily SRW volume down 32% at 92,261 while open interest was up 2,579 despite light fund short covering yesterday.

SRW options volume dropped 14% to 29,668, 53% of it puts as traders added November calls. Implied volatility in December at-the-money options rose 1.5% to 21.68%.

Volume in HRW wheat was off 38% to 44,116 on open interest that fell 1,250.

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.

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Investopedia says a pivot point is a technical analysis indicator, or calculations, used to determine the overall trend of the market over different time frames. The pivot point itself is simply the average of the high, low and closing prices rom the previous trading day. On the subsequent day, trading above the pivot point is thought to indicate ongoing bullish sentiment, while trading below the pivot point indicates bearish sentiment.
Senior Editor Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Advisor. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Call on www.FarmFutures.com he writes weekly reviews for corn, soybeans, and wheat that include selling price targets, charts and seasonal trends. His other weekly reviews on basis, energy, fertilizer and financial markets and feature price forecasts for key crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association. And you can follow Farm Futures throughout the day on Twitter at www.twitter.com/farmfutures, and be sure to like or follow the new Farm Futures Facebook page.
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