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Morning Market Review for Oct. 17, 2019

Futures jump on Brexit deal. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trends:
Corn:
Up 2 to 3
Soybeans: Up 4 to 6
Wheat: Up 3 to 8

One worry for market removed, others remain

Grain futures are higher this morning, joining the rally in financial markets on news of a Brexit deal between Britain and the EU. While both sides must still ratify the agreement for the separation to be final Oct. 31, the pact removed a major uncertainty that clouded optimism on world markets.

The news helped traders focus back on the impact of a difficult growing season for U.S. crops. USDA Wednesday said it would resurvey harvested corn and soybean acres in North Dakota and Minnesota impacted by last week’s blizzard, in addition to updates announced last month for spring wheat and other small grains affected by the slow harvest on the northern Plains and Pacific Northwest.

Growers elsewhere can look forward to mostly dry conditions until the next system arrives early next week. Rains from that storm look modest compared to some recent events, but could still slow harvest. 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 return to drier conditions over most of the country.

Growers posting Feedback From The Field so far this week reported lower corn yields but beans are continuing to hold up. Wide variations remain the rule with corn ranging from 90 to 240 bushels per acre, and soybeans running 25 to 70 bpa.

“Yields are variable,” said a Nebraska producer. “Soybeans are very good on dry land but the same soybeans on irrigated are maybe a little off. Same with corn.”

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Stock markets were mixed in Asia today with prices in Europe turning higher after news of the Brexit deal broke around 4:30 CDT. The dollar is sharply lower as investors buy pounds and flee safe havents.

Crude oil is struggling to stay above $53 a barrel. Strong crude oil production and imports are expected to swell U.S. stockpiles when the government updates petroleum inventory data at 10 a.m. CDT today. Diesel supplies likely continued to tighten as farmers slog through harvest.

Corn prices are posting modest gains, following the rally in other markets. December futures remains within sight of $4 as the market waits for more details on how many acres may be abandoned this fall.

Demand news remains fairly thin. The latest update on ethanol production for last week out this morning will show if plants stepped up the pace of corn usage thanks to margins that rose sharply as the industry looks forward to better usage.

Export demand remains limited to regular customers, amid reports Argentine farmers are pushing sales ahead of elections later this month likely to usher in a new government. USDA yesterday announced the sale of 9 million more bushels of 2019 and 2020 corn to Mexico under its daily reporting system for large purchases.

The preliminary report from the CBOT showed daily futures volume 1% lower Wednesday at 229,632 while open interest rose 5,842 on light new selling from funds.

Options volume was 18% higher at 86,961, 57% of it calls as traders liquidated December $4 and $5 calls and rolled down December puts. Implied volatility in at-the-money December options rose to 17.90%.

Overseas markets are higher today. January futures in China gained 1.3 cents to $6.632 and November Paris futures are up 2.1 cents to $4.659 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 consolidating overnight gains after reversing higher off two-week support on the Brexit bounce. With no fresh news about yields and a China trade deal still a month away, buyers aren’t yet climbing out of the woodwork to go long.

Indeed, stories out of both China and the U.S. continue to suggest tension on matters unrelated directly to trade. News China detained two Americans recently broke hours after the U.S. told Chinese diplomats they needed to report visits with U.S. state and local officials. No new sales have hit USDA’s daily wire for large purchases either.

The preliminary report from the CBOT showed daily futures volume down 20% yesterday at 204,183 while open interest rose 5,538 on light new fund selling.

Options volume fell 28% to 34,913, 53% of it calls as traders focus on November options that expire at the end of next week. Implied volatility in at-the-money November dropped more than 1% to 15.16%.

Vegetable oil markets in Asia were stronger today. January soybean oil futures in China jumped four-tenths of a cent to 38.611 cents per pound, and November palm oil futures in Malaysia closed slightly higher at 23.73 cents.

Oilseed markets internationally are weaker. January soybean futures in China dropped a penny to $13.111, November rapeseed futures in Paris afternoon trade are down 7 cents to $9.58 and November Winnipeg canola overnight lost 2 cents to $7.906 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 higher today in all three markets, getting a lift from a weaker dollar and concerns about lost spring wheat production.

While up to 50 million bushels of spring wheat may still be left in the field, prices likely hinge on demand, which so far is decent, but not great. The U.S. mains largely shut out of lucrative markets in the Mediterranean, including Egypt, which bought some 15 million bushels from Russia, Ukraine and France at its latest tender yesterday. U.S. originations of winter wheat out of the Texas and Louisiana Gulf are priced at least 60 cents out of that market on a delivered basis.

The U.S. is likely to get at least some of the business from the latest purchase by Saudi Arabia of 21.9 million bushels announced today.

Overseas markets are mixed. January futures for Eastern Australian Wheat lost 7.4 cents to $6.52 after rains in the southeastern part of the continent. December wheat futures in Paris afternoon trade are up 2.3 cents to $5.48 after adjustments for currencies and volumes.

The preliminary report from the CBOT showed daily SRW volume up 46% yesterday to 88,052 while open interest rose 4,859 despite light fund short covering.

SRW options volume fell 24% to just 13,504, 53% of it puts with new interest noted in November calls and the July $5.50 call. Implied volatility in December at-the-money options eased to 20.73%.

Volume in HRW wheat dropped 8% to 38,457 on open interest that decreased by 2,147.

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.

Pivots101719.jpg

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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