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Morning Market Review for Oct. 22, 2019

Futures try to bounce back. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trends:
Corn:
Up 3 to 4
Soybeans: Up 9 to 11
Wheat: Up 4 to 7

Soybeans post double digit gains after rejecting break

Grain futures are higher across the board this morning, bouncing back from disappointing trade on Monday.

While the pace of harvest remains slower than average, growers in much of the Midwest should enjoy drier conditions over the next week. Official 6 to 10 and 8 to 14-day forecasts out yesterday and the latest updates from the ensemble models disagree on whether storms return but both call for below normal temperatures in the second week of the outlook.

Growers posting Feedback From The Field Monday reported more consistent yields, especially for soybeans, though results are not as good as the last year or two. Wet corn is also slowing harvest as producers focus on soybeans.

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Stocks traded higher in Europe and Asia on the heels of yesterday’s gains on Wall Street, shrugging off uncertainty over Brexit. Hopes for good corporate earnings this week have U.S. index futures pointing to more gains, though safe havens, including the dollar, gold and Treasuries, are all seeing gains as well, with crude also a little stronger.

Corn prices are trying to reverse higher and reject a move below the support line off September and October lows. Sluggish demand and the slow pace of harvest are keeping the market gyrating.

Farmers cut another 8% of the crop last week, but only 30% of the nation’s fields are harvested, down 17% from average. Corn ratings improved as the pace slowly picked up, adding nearly a bushel per acre to yield potential according to our production models, which show average yields edging above 169 bushels per acre. Improvement was noted across the entire length of the I-80 corridor from Nebraska to Pennsylvania. Wisconsin and Minnesota also improved but other states in the path of the winter blast earlier this month declined. That included the Dakotas and Colorado, with conditions in Michigan also moving lower. States to the south, where harvest is more advanced, were unchanged.

Export inspections improved to 20.9 million bushels but that barely half the amount needed weekly to reach USDA’s forecast for the 2019 crop. Only eight destinations were listed and two of those countries, Mexico and Columbia, accounted for more than 75% of the total as regular Asian customers continue to buy from South America.

The preliminary report from the CBOT showed daily futures volume up 13% yesterday to 241,770 while open interest was up 4,650 on hedge pressure and active new fund selling.

Options volume rose 42% to 61,495, 69% of it puts as traders liquidated out-of-the-money December puts and November calls that expire Friday. Implied volatility in at-the-money December options was up nearly 1% to 17.78%.

Overseas markets are softer today. January futures in China were unchanged at $6.649, and November Paris futures are down a penny at $4.668 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 hang on to double digit gains after rejecting any attempt to break below their trading band since the bullish Oct. 10 USDA report.

Soybean conditions overall showed no ill effects from weather overall last week. While USDA’s U.S. rating was unchanged, our state-by-state analysis improved two-tenths of a bushel. Yield estimates from condition ratings remain 2 bpa or more above USDA’s last estimate.

Still, conditions varied widely from region to region. The northern tier of states, including South Dakota, saw steady to weaker conditions after the blizzard. The only state outside that region noting a decline was North Carolina, which was rocked by drought and floods this year. States in the Delta, where harvest is wrapping up, were unchanged, but a wide swatch of the middle of the growing region noted improvement.

Farmers harvested 20% more of the crop but at 46% done are still 18% behind the five-year average.

Export inspections improved to 47.6 million bushels. Even though Chinese buyers have 169 million bushels of unshipped sales on the books, they loaded out just 2.6 million bushels of those on a ship out of Puget Sound. Other customers weren’t shy about taking delivery. In all, 17 other countries were listed on this week’s destinations, and seven of them took more soybeans than China.

The preliminary report from the CBOT showed daily futures volume up 3% Monday to 253,441 while open interest was up 2,170 despite light fund liquidation.

Options volume rose 49% but was still relatively light at 38,609, 52% of it puts as traders added November $9.30 puts that expire Friday. Implied volatility in at-the-money November rose nearly 2% to 17.16%.

Vegetable oil markets in Asia were mixed today. January soybean oil futures in China slipped to 38.725 cents per pound but November palm oil futures in Malaysia were up nearly a quarter cent to 24.22 cents.

Oilseed markets internationally are also mixed. January soybean futures in China lost 2.8 cents to $13.14, but November rapeseed futures in Paris afternoon trade are up 1.3 cents to $9.484 and November Winnipeg canola overnight gained 1.2 cents to $7.822 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 trying to reverse higher at all three markets today after running into trouble on price charts Monday.

USDA said growers harvested 2% more of their spring wheat fields last week following the blizzard on the northern Plains earlier this month but still have 4% to go. Winter wheat seedings remain on track with this week’s 77% reading 2% ahead of the five-year average.

Export inspections last week improved to 20.8 million bushels ahead of the rate forecast by USDA for the rest of the marketing year.

The preliminary report from the CBOT showed daily SRW volume down 7% at 90,742 while open interest rose 211 on light new fund selling.

SRW options volume dropped 32% to 21,993, 51% of it puts with new interest noted in the December $5.30 and $4.70 puts. Implied volatility in December at-the-money options fell to 21.06%.

Volume in HRW wheat was up 43% to 71,661 on open interest that was down 8,000.

Overseas markets are mixed. January futures for Eastern Australian Wheat dropped 13.1 cents to $6.492 despite forecasts for two more weeks of dry weather. December wheat futures in Paris afternoon trade are up 2.3 cents to $5.515 adjustments for currencies and volumes, with dry weather reducing seeding in Ukraine this fall.

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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