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Morning Market Review for Oct. 21, 2019

Futures try to keep rally going. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trends:
Corn:
Up 1
Soybeans: Up 4 to 5
Wheat: Up 1 to 2

Markets bounce back from lower open overnight

Grain futures are mostly higher across the board, overcoming lower opens to post modest gains as they try to extend last week’s rally.

A big storm stretching across the middle of the U.S. could slow harvest in the Mississippi River valley while bringing more foul weather to parts of the northern Plains hammered by a blizzard earlier in the month. But after the system moves through many areas could turn drier over the 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 return to drier conditions outside the eastern part of the growing region.

Growers posting Feedback From The Field last week reported weaker yields and conditions, though the percent of rated good or excellent and poor or very poor both increased. Corn yields ranged from 90 to 240 bushels per acre, with soybeans from 25 to 70 bpa.

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While the Brexit drama continues to play out in the British Parliament, hopes for the first phase of a trade deal with China gave markets around the world some lift overnight, pointing U.S. index futures towards a rebound on Wall Street this morning.

The dollar is weaker again so far, slipping to a three-month low. That’s not helping out crude oil, which is struggling again to hold above $53 a barrel. Money managers sold crude again last week according to Friday’s Commitment of Traders even after they aggressively bought crops and livestock futures.

Corn prices are trying to hold onto gains after bouncing off the support line from September and October lows.

Export sales last week again were poor at just 14.5 million bushels, less than half the amount needed every week to reach USDA’s forecast for the marketing year. Nonetheless, a big drop in barge freight rates give shippers more leeway to boost bids in the export pipeline and the cash market at ethanol plants strengthened too, though that pressured average operating margins after four weeks of improvement.

Still, fairly light rains last week added hedge pressure from elevators, weakening basis in some of the states with big production, like Iowa.

The preliminary report from the CBOT showed daily futures volume down 12% to a relatively thin 214,135 while open interest was up 14,622 on active new fund selling.

Big speculators were only light buyers of corn last week, trimming just 1,879 contracts off their bearish bets following USDA reports that disappointed bulls. The hedge funds are still net short 118,516 contracts – nearly 600 million bushels – providing plenty of fuel for short-covering rally if bullish news emerges.

Options volume slipped 11% to just 43,340, 61% of it calls as traders added near out-of-the-money December calls and puts. Implied volatility in at-the-money December options slipped to 17.42%.

Overseas markets are weaker. January futures in China dropped a half cent to $6.651, and November Paris futures are down a penny at $4.685 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 higher, rejecting a lower open to continue consolation after bullish USDA reports. With the government’s next production estimate still three weeks away, hopes for a trade truce with China remain the main driver of sentiment.

Export sales of 58.8 million bushels last week were better than expected and that demand helped firm average basis more than four cents a bushel.

Big speculators turned bullish on soybeans for the first time since June 2018, when the first salvos in the trade war were fired. Hedge funds bought a net 40,324 contracts to move to a modest net long position of 21,309 contracts following the trade deal and back-to-back bullish USDA reports.

The preliminary report from the CBOT showed daily futures volume down 2% to 245,925 on open interest that was up 10,618 on modest new fund buying.

Options volume was off 43% to just 25,936, 57% of it calls with new buying in January out-of-the-money calls. Implied volatility in at-the-money November options that expire Friday was down nearly 1% to 15.89%.

Vegetable oil markets in Asia ended higher today. January soybean oil futures in China gained a quarter cent to 38.905 cents per pound and November palm oil futures in Malaysia settled at 24.03 cents.

Oilseed markets internationally are also posting gains. January soybean futures in China gained nearly two cents to $13.172, November rapeseed futures in Paris afternoon trade are 1.9 cents higher at $9.584 and November Winnipeg canola overnight edged up a penny to $7.863 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 in all three markets today, gaining favor from short covering and strength on charts. Winter wheat contracts posted new highs for their rallies while Minneapolis recovered from a test of its 100-day moving average.

Wheat export sales of 14.5 million bushels last week were enough to keep bids steady to a little stronger for winter wheat at Gulf Ports with the crop locked up tight in the strong hands of commercials. The cash market for spring wheat continues to strengthen with up to 50 million bushels affected by the October blizzard on the northern Plains that stretched into parts of the Canadian Prairies as well.

Big speculators and larger traders bought back bearish bets in wheat last week, with short covering pressure helping support prices.

The preliminary report from the CBOT showed daily SRW 18% lower at 97,091 with open interest up 1,809 despite light fund short covering.

SRW options volume dropped 22% to 32,212, 59% of it puts as traders liquidated out-of-the-money December calls and added December puts. Implied volatility in December at-the-money options rose to 21.28%.

Volume in HRW wheat increased 2% to 50,214 on open interest that was off 5,466.

Overseas markets are higher. January futures for Eastern Australian Wheat ended up 1.9 cents to $6.625 with another dry week forecast for the drought-plagued continent’s crops. December wheat futures in Paris afternoon trade gained 1.4 cents to $5.532 adjustments for currencies and volumes. While good rains over the week fell across France, South Russian and Ukraine look to remain dry again this week.

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.

Pivots102119.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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