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Morning Market Review for Sept. 17, 2019

Report rally cools. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trends:
Corn:
 Down 3 to 5
Soybeans:  Down 7 to 8
Wheat: Down 1 to 5
 

Market runs out of short-covering steam

Grain futures are lower across the board this morning as a short-covering rally on the heels of last week’s bullish USDA reports ran out of steam. A pullback in crude oil following yesterday’s explosive move added to selling pressure overnight.

Storms moving across Minnesota this morning will be joined by Gulf moisture from a tropical system over the next week bringing heavy rains to areas of the central Corn Belt missed by recent rains. The official 6 to 10 and 8 to 14-day forecasts out yesterday and the latest updates from the ensemble models show warm and wet conditions with no hint of frost yet.

Growers posting Feedback From The Field last week noted declining conditions with soybeans raising particular concern.

Click this link to tell us what’s happening in your area.

Monday’s 15% surge in crude oil added fresh concerns about a slowing global economy as the Federal Reserve begins a two-day meeting on monetary policy expected to result in a one-quarter of 1% increase in interest rates Wednesday. Betting on Federal Funds futures shows a 68% chance of a hike, though that’s down from nearly 95% just a week ago.

Stocks traded mostly lower in Asia following the downturn yesterday on Wall Street, though share prices in Europe overcame early selling to turn higher. U.S. indexes point to more selling on the open in New York as it could be months before the Saudi oil fields damaged by the drone attack are restored to full production.

Corn prices are lower this morning after December futures failed an attempt to break out of its downtrending July-September channel.

Corn ratings improved last week, adding a half bushel per acre to yield potential nationwide, which went up to 168.6 bp on average. Still, crops in the east and north slipped as concerns mount about lack of growing degrees days and late summer drought.

Demand concerns continue to act as a break on rallies. Export inspections of only 16.6 million bushels were less than half the rate needed to reach USDA’s forecast for the 2019 marketing year.  Corn shipments remain hamstrung by Brazilian domination of world export trade, offering buyers cheaper prices delivered, though the discount to U.S. originations is shrinking slowly.

Corn basis was mixed Monday, with many locations easing on a pickup in farmer sales following last week’s rally.

The preliminary report from the CBOT showed daily futures volume down 9% Monday to 222,202 while open interest fell 8,879 on moderately active short-covering by funds.

Options volume dropped 20% to 68,131, 55% of it puts as traders liquidated out-of-the-money December calls and added out-of-the-money put. Implied volatility in at-the-money December options slipped nearly 1% to 18.24%.

Overseas markets are lower today. January futures in China were off 5.3 cents to $6.673 on news the government may be forced to abandon its plan for an nationwide E10 mandate due to lower reserves. November Paris futures in afternoon trade are down a penny to $4.57 after adjustments for volumes and currencies. 

Bottom line: Concerns about demand are offsetting some of the fear of smaller production, making it difficult for the market to produce more than short-covering rallies until more is known about yields. For more, see my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Soybeans are lower, pulling back after November was unable to move back above $9 overnight. Concerns about lower yields shielded the market a little though supplies are far from short.

Monday progress report showed soybeans losing a half-bushel per acre of yield potential, though the average from ratings-based models was at 49.9 bpa, well above USDA’s Sept. 12 forecast.

China continues to take delivery of purchases rolled over from 2018 crop delivery, but the new crop book of outstanding sales is thing due to lack of Chinese purchases. Monday’s news of another sale to China under USDA’s daily reporting system for larger purchases is a step in the right direction, but only  baby step compared with what needs to be done.

Crush may turn out better than expected after members of the National Oilseed Processors Association reported August crush at a record 168.1 million bushels Monday.

The preliminary report from the CBOT showed daily futures volume down11% yesterday to 151,822 with light fund short covering taking 2,077 off open interest.

Options volume fell 47% to just 68,657, 53% of it puts as traders liquidated out-of-the-money November calls and added January puts. Implied volatility in November at-the-money options fell to 16.38%.

Vegetable oil markets in Asia were sharply higher today. January soybean oil futures in China gained a quarter cent to 39.507 cents per pound and November palm oil futures in Malaysia jumped nearly two-thirds of a cent to 24.41 cents.

Oilseed markets internationally are mixed. January soybean futures in China gained 8.3 cents to $13.287 but November rapeseed futures in Paris are down 3 cents to $9.665 and November Winnipeg canola overnight is off 4 cents to $7.699 after adjustments for volumes and currencies.

Bottom line: Soybean production will be sharply lower for 2019 but even the bullish report Sept. 12 may have limited impact until demand improves or yields fall in South America. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Wheat prices are following other markets lower. Winter wheat contracts ran into chart resistance though concerns about the late harvest kept Minneapolis to an inside day.

USDA Monday reported 76% of the spring wheat crop harvested, 17% behind the five-year average. Winter wheat seeding is also off to a slow start at 8%, 4% behind average.

Wheat export business remains fractured, with a lot of individual buyers taking mostly single cargoes. Monday’s inspections of 16.9 million bushels were a little below the rate needed every week to meet USDA’s forecast for the 2019 crop.

The preliminary report from the CBOT showed daily volume down 88% to 69,591 while open interest fell 2,764 on light fund short covering.

Options volume was off another 16% to just 15,245, 54% of it calls with new interest noted in the in-the-money December $5 put. Implied volatility in December at-the-money options rose to 20.27%.

Volume in HRW was up 11% to 32,994 and open interest that fell 1,062.

Overseas markets are mixed. January futures for Eastern Australian Wheat gained 3.7 cents to $6.736 despite good rains in the southeastern part of the continent. December wheat futures in Paris afternoon trade are down a penny to $5.13 after adjustments for currencies and volumes.

Bottom line: Wheat must prove export demand will offset a larger crop, which won’t be easy. But wheat is a market that loves to trend and charts are trying to turn. 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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Pivots091719.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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