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Morning Market Review for Oct. 18, 2019

Mixed futures ready for weekend. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trends:
Corn:
Down 2 to 3
Soybeans: Up 1 to 2
Wheat: Down 2 to 3

Brexit vote keeps markets nervous

Grain futures are mixed this morning as a relatively quiet overnight session heads towards the morning break. A dry weekend could accelerate harvest activity as traders wait for news about exports and yields.

Rains into early next week could focus on northern and eastern fringes of the Corn Belt. 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 outside the eastern part of the growing region.

Growers posting Feedback From The Field this week reported corn yields below USDA’s Oct. 10 estimate but better results for soybeans. A central Iowa farmer 80% done with harvest was pleasantly surprised to be averaging 58 bushels per acre. “Not bad for planting June 1,” he said.

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Stocks traded mostly lower in Asia, with China reporting its weakest economic growth in nearly 30 years as U.S. tariffs bit into exports. Markets are mixed in Europe ahead of Saturday’s vote in the British Parliament on the latest Brexit plan, while U.S. index futures point to a firm open on Wall Street.

The dollar continues to weaken as other safe havens including gold and Treasuries lose traction. Crude oil moved back above $54 despite a sharp increase in inventories last week due to weaker exports and continued record production. Diesel inventories are falling on harvest demand. Fuel prices are little changed in October despite the drawdown thanks to founder crude costs.

Corn prices are lower, taking December futures to a test of yesterday’s bottom as traders mark time and try to avoid getting caught by harvest hedge pressure.

News about demand this week is mixed. Ethanol production posted a small gain last week after margins improved for plants. But stocks built and total output during the first six weeks of the 2019 marketing year are down 5% already compared to 2018.

Export sales data out this morning should be better than the weak 11.2 million bushels reported previously. Sales need to be more than three times that level to reach USDA’s forecast for the 2029 crop.

The preliminary report from the CBOT showed daily futures volume up 6% yesterday to 243,892 while open interest was up 7,624 despite modest fund short covering.

Options volume dropped 44% to 48,707, 51% of it calls as traders added near-the-money November and December strikes. Implied volatility in at-the-money December options slipped to 18.02%.

Overseas markets are mixed today. January futures in China gained 2.3 cents to $6.653 but November Paris futures are off a penny at $4.62 after adjustments for volumes and currencies as the pace of harvest progress increased this week in France.

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 on to gains after bouncing off three-week chart support again overnight. While negotiators continue to report progress drafting details of the first round trade deal reached last week, tensions between the two countries continue to percolate on other issues.

Traders expect export sales for last week, delayed due to Monday’s holiday, to be down to around 45 million bushels, which would still beat the rate forecast by USDA for the 2019 crop. USDA already confirmed the sale of 21.9 million bushels to China last week under its daily reporting system for large purchases, with another 18.8 million to unknown destinations before the preliminary trade deal was struck.

The preliminary report from the CBOT showed daily futures volume up 23% yesterday to 251,866 while open interest rose 14,139 with modest fund buying noted.

Options volume was 31% higher at 45,744, 60% of it calls as traders rolled up January calls and November puts that expire at the end of next week. Implied volatility in at-the-money November rose 1% to 16.11%.

Vegetable oil markets in Asia were higher today. January soybean oil futures in China settled at 38.654 cents per pound and November palm oil futures in Malaysia closed at 22.93 cents.

Oilseed markets internationally are mixed. January soybean futures in China gained 3 cents to $13.15, November rapeseed futures in Paris afternoon trade are down 6 cents at $9.564 and November Winnipeg canola overnight lost a penny to $7.88 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 lower in all three markets, retreating a little for this week’s highs. Concerns about spring wheat covered by snow on the northern Plains provide support while traders eye weather conditions in other exporting nations for clues.

Wheat export sales reported this morning for last week are expected to continue a pattern of being good but far from great, with the total near the 14.2 million bushels needed weekly to reach USDA’s forecast for the 2019 marketing year.

Overseas markets are mixed. January futures for Eastern Australian Wheat gained 5.6 cents to $6.595 as the continent faces a dry week. December wheat futures in Paris afternoon trade are down 2 cents to $5.457 after adjustments for currencies and volumes with farmers making better progress seeding winter wheat in France. Black Sea fields look dry again next week providing some support for now.

The preliminary report from the CBOT showed daily SRW volume 34% higher yesterday at 118,069 while open interest was up 983 after modest fund short covering.

SRW options volume more than tripled to 41,251, 51% of it calls with new interest noted in the March $5.901 call and $4.80 put. Implied volatility in December at-the-money options rose to 21.37%.

Volume in HRW wheat was 28% higher at 49,150 on open interest that was down 2,631.

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.

Pivots101819.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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