Corn: Down 2 to 3
Wheat: Down 1
Cautious tone keeps buyers sidelined
Grain futures are mostly steady to a little lower this morning, reflecting crop ratings out Tuesday that failed to confirm big losses from last week’s blizzard and cold snap. With trade talks between China and the U.S. also mired in neutral, the path of least resistance so far is lower.
Gale force winds are rocking Lake Michigan this morning as last week’s big system continues to move through the U.S. Drier conditions should be seen in most parts of the growing region before more rain moves in early next week. 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 a wet start to the period turning drier over most of the country.
Growers posting Feedback From The Field so far this week reported lower corn yields but beans were steady to higher. Wide variations remain the rule, especially with crops in parts of North Dakota under 30 inches of snow. Corn yields ranged from 90 to 240 bushels per acre, with soybeans running 25 to 70 bpa.
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While the U.S. and China continue snipping over Hong Kong and what their trade talks accomplished last week, worries about collapse of Brexit negotiations between the EU and Britain also weighed on sentiment overnight. Stocks mostly rallied in Asia – outside of China – but turned lower in Europe, with U.S. index futures pointing to a lower open on Wall Street as investors wait for news on corporate earnings.
Safe havens, including the dollar and Treasuries are higher, though gold is flat after losses Tuesday. Crude oil is trying to move back above $53.
Corn prices gapped lower at the start of trading overnight and haven’t dug their way out of that hole yet. Concerns about demand weren’t offset by crop ratings that didn’t show a serious downturn last week
Fields in North Dakota, Minnesota and Wisconsin suffered the most from the cold snap but losses nationwide were small. Even though our yield model based on condition reports showed North Dakota potential down nearly 4 bushels per acre, nationwide wide yields slipped only around a half bushel per acre, with our average at 168.3 bpa, a tenth of a bushel below USDA’s Oct. 10 estimate. Of course, assessing conditions in a field covered by a couple feet of snow is likely to be difficult, at best.
USDA said 73% of the crop is mature, up 15% from last week but 19 behind average. Just 42% of North Dakota was safe before last week’s cold snap. Nationwide USDA put harvest at 22%, compared to 36% on average.
Corn inspections last week remained weak at 18.5 million bushels, less than half the rate forecast by USDA. Even our regular customers are buying from Brazil as they wait for news about how much U.S. corn will be available – and with what quality.
The preliminary report from the CBOT showed daily futures volume down 12% Tuesday at 231,686 while open interest fell 14,685 despite modest new fund selling.
Options volume was off 14% at 73,670, 54% of it calls with new interest noted in the December 2020 $4.60 call. Implied volatility in at-the-money December options fell to 18.26%.
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 hold following two-sided trade overnight. Lack of damage nationwide to the crop from last week’s storm put the market on the defensive with no confirmation yet of new Chinese buying.
Soybean ratings actually improved, at least according to USDA’s nationwide rating. Our state-by-state assessment was steady, but both projections based on condition reports remain well above USDA’s Oct. 10 estimate. Soybean yields appear to be holding their own, at the least. But two more weeks of wet weather could keep harvest slow, raising concerns about quality and perhaps bushels too.
USDA said 26% of the crop is harvested, 23% behind average.
Soybean export inspections remain good at 35.1 million bushels last week, reaching USDA’s forecast for the 2019 crop. But that estimate came out the day before China and the U.S. ended their first serious trade talks since July with what appeared to be a deal to buy more U.S. farm products. Reports from China since then walked back that commitment and so far there’s little hard evidence that China is aggressively buying. Just 5 million bushels of previous purchases were inspected last week through Thursday, putting China third on the list of leading destinations. USDA, which was closed Monday for Columbus Day, announced the sale of 5.2 million bushels Tuesday under its daily reporting system for large purchases, but the destination was listed as “unknown.”
September crush by members of the National Oilseed Processors Association was also weak as I warned, coming in at a disappointing 152.6 million bushels after processor margins fell. The total was down 5% from last year, while USDA last week forecast crush would be up 1.3% year-on-year.
The preliminary report from the CBOT showed daily futures volume down 10% yesterday to 254,452 while open interest fell 177 on light fund liquidation.
Options volume was 22% lower at 48,660, 64% of it calls as traders added out-of-the-money December calls and November puts. Implied volatility in at-the-money November dropped more than 2% to 16.23%.
Vegetable oil markets in Asia were sharply higher today. January soybean oil futures in China were a quarter-cent higher at 38.174 cents per pound while November palm oil futures in Malaysia gapped higher to close a half-cent higher at 23.67 cents.
Oilseed markets internationally are mixed. January soybean futures in China lost 7.3 cents to $13.109, November rapeseed futures in Paris afternoon trade are unchanged at $9.594 and November Winnipeg canola overnight gained 1.2 cents to 7.935 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 mostly a little lower as the market continues to search for direction.
USDA is done rating spring wheat but said 7% of North Dakota fields are unharvested. Combined with uncut fields in Minnesota, some 37 million bushels of hard red spring wheat production could be affected by last week’s blizzard.
Winter wheat seeding, meanwhile remains on track, hitting 65%, in line with the five-year average with emergence of 41% ahead of normal by 1%
Wheat inspections lagged of 17 million bushels the rate forecast by USDA a little, but the year-to-date total remains higher than forecast by USDA. China showed up on the list of wheat destinations, but like most customers took just a single cargo. Japan will split its regular weekly tender between the U.S., Canada and Australia.
Overseas markets are higher today. January futures for Eastern Australian Wheat gained 3.7 cents to settle at $6.406 and December wheat futures in Paris afternoon trade are up 1.4 cents to $5.37 after adjustments for currencies and volumes. French wheat looks competitive in today’s tender from Egypt as fields in the Black Sea region are starting to dry out.
The preliminary report from the CBOT showed daily SRW volume down 65% yesterday to 60,160 on open interest that rose 807 on light new fund selling.
SRW options volume fell 40% to 17,673, 54% of it puts with new interest noted in the July $5.90 call.
Implied volatility in December at-the-money options held steady at 21.55%.
Volume in HRW wheat dropped 5% to 41,939 on open interest that decreased 3,524.
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.