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Morning Market Review for Sept. 19, 2019

Quiet markets listen for clues. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trends:
Corn:
 Down 1
Soybeans:  Down 1
Wheat: Mixed
 

Divided Fed and oil conflict keeps traders unsettled

Grain futures are narrowly mixed this morning following a quiet overnight session in ag markets that look serene compared to the chaos seen from Wall Street to the Middle East this week.

Weather continues to look favorable for crops needing extra time to mature following historically slow planting this spring.

Storms stretching from Omaha to the UP this morning will get a boost from remnants of Tropical Storm Imelda, bringing rain to most of the Midwest over the next week. Official 6 to 10 and 8 to 14-day forecasts out yesterday remain warm and wet though the latest updates from the ensemble models are a little cooler in the northwest part of the growing region.

The Vegetation Health Index dropped again this week. Though reading remain well above last year, deterioration is likely due to maturity of the crop late in the season.

Growers posting Feedback From The Field Wednesday noted concerns over conditions that were too wet, too dry, too hot and too cold depending on the location, keeping yield potential uncertain.

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

The Federal Reserve as expected cut its target for short-term interest rates by another one-quarter of 1% Wednesday noting strong household spending but weaker business fixed investment and exports. The central bank’s action was again not unanimous, with two votes in favor of steady rates and one in favor of additional cuts. The Fed remains just as divided by expectations for the rest of the year, with five voters favoring steady rates, five wanting a quarter-point hike and seven seeing another quarter-point cut, with the divisions lasting through next year.

Betting on Federal Funds futures still sees a 58% chance of a cut in December, up 14% from Tuesday.

The divisions, along with projections for slower world growth kept U.S. stocks headed for a weaker open today following mixed trade overseas. The dollar is weaker with other safe havens, including gold and Treasuries advancing.

Crude oil is up $1 a barrel, waiting for more news out of Saudi Arabia on the impact of weekend strikes against oil fields there.

Corn prices are a little softer after trading in a two-cent range overnight. December futures are trying to confirm a break out of their July-September downtrend following a reversal higher yesterday.

Export sales out this morning for last week should be noticeably higher thanks to Mexico’s purchase of 41 million bushels announced during the reporting period on a daily basis by USDA. Those purchases alone more than doubled the total business done the previous week.

Other demand news was less sanguine Wednesday. Ethanol production dropped last week as margins at plants decline, but stocks rose anything. Combined with the pullback in crude that kept biofuel prices in the doldrums. Basis weakened at Midwest ethanol plants Wednesday keeping the cash market in check.

The preliminary report from the CBOT showed daily futures volume down 5% to 216,595 while modest fund short covering took 3,463 off open interest.

Options volume fell another 13% to just 57,656, 51% of it puts with new interest noted the March $4.20 and $4.70 calls. Implied volatility in at-the-money December options edged higher to 18.10%.

Overseas markets are also quiet. January futures in China rose a half-cent to $6.706 and November Paris futures in afternoon trade held steady at $4.61 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 a little weaker, failing to hold an early rebound to push November to a test of its 100-day moving average. That support comes in around the overnight low of $8.8625 today.

Export sales out this morning for last weekly likely won’t reflect most if any of the purchases made by China recently, which totaled 26.5 million bushels. But lack of any new announcements Wednesday by USDA under its daily reporting system for large purchases helped put pressure on futures yesterday. Traders still expect sales to beat the rate needed to reach USDA’s forecast for the 2019 crop.

The preliminary report from the CBOT showed daily futures volume off a third to just 98,852 with open interest up 582 on light new fund selling.

Options volume dropped 16% to a thin 28,691, 63% of it calls as traders added November $9 and $10.20 calls. Implied volatility in at-the-money November options dropped to 15.56%

Vegetable oil markets in Asia were weaker again today. January soybean oil futures in China fell four-tenths of a cent to 39.067 cents per pound and November palm oil futures in Malaysia were off two-tenths of a cent to 23.94 cents.

Oilseed markets internationally were mostly weaker. January soybean futures in China lost 5.6 , cents to $13.316, November rapeseed futures in Paris are steady at $9.655 and November Winnipeg canola overnight edged a quarter cent lower to $7.705 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 narrowly mixed today with all three markets trying to hold a little strength on price charts. While SRW tries to break through its 50-day moving average, HRW holds near the top of its August-September range and Minneapolis ticked to a new September high.

Wheat export sales last week likely will come in lower this morning but still beat the weekly rate needed to reach USDA’s forecast for the 2019 marketing year. Business remains split with small purchases by regular customers, which the U.S. missing out on big purchases by leading importers.

Egypt filled its latest tender with 6.6 million bushels of Russian wheat at an average delivered cost of $5.75, well below the cost of originations out of the Gulf.

Overseas markets are also quiet today. January futures for Eastern Australian Wheat settled unchanged at $6.783, holding on to this week’s gains. December wheat futures in Paris afternoon trade edged a penny higher to $5.18 after adjustments for currencies and volumes.

The preliminary report from the CBOT showed daily volume up 10% to 74,412 while open interest was up 2,286 despite light fund short covering.

Options volume increased 13% to 18,691, 62% of it calls as traders liquidated out-of-the money December puts and calls. Implied volatility in December at-the-money options rose to 19.96%.

Volume in HRW was 5% higher at 40,001 on open interest that was up 87.

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.

Pivots091919.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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