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Morning Market Review for Sept. 23, 2019

Soybeans, spring wheat lead gains. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trends:
Corn:
 Up 2 to 3
Soybeans: Up 10 to 12
Wheat: Up 1 to 8

Grain markets bounce back as charts try for bullish turn

Grain futures are higher across the board this morning, paced by gains in soybeans and spring wheat on concerns over weather and renewed trade optimism.

After remnants of Tropical Storm Imelda brought heavy rains to parts of the Midwest, many of the same areas could be pounded by storms again over the next week. Some weather models are also starting to hint at frost in a few northern areas next week though most of the growing regions still looks safe. Official 6 to 10 and 8 to 14-day forecasts out yesterday remain warm with a drying trend from the Southwest to the East, though the latest updates from the ensemble models are wetter.

Growers posting Feedback From The Field last week reported lower yields for corn and soybeans with soybean conditions weakening noticeably. Yield expectations remain widely variable as combines start rolling.

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Stocks plunged on Friday following news a Chinese delegation cancelled visits to farms in Nebraska and Missouri. But officials later said the tours were only in the planning stage and could take place in October, when formal trade talks are set to resume in Washington. But financial markets aren’t getting much of a lift from the news today due to weak manufacturing data in Europe, with Wall Street set for a flat open so far.

The dollar, gold and Treasuries are all benefiting from safe haven buying. Crude oil is lower, dropping below $58 a barrel on reports Saudi Arabian oil production will be back to normal levels soon.

Big speculators are still short crops and livestock, just not as much as the previous week. In all hedge funds trimmed bearish bets by 49,615 contracts, around 10% of their total. Money managers jumped on the crude oil rally after the attack on Saudi fields, according to Friday’s Commitment of traders. And big speculators were also buying overall in crops and livestock, covering some of their bearish bets.

Corn prices are starting to gain a little momentum as the overnight session winds down, thanks to the rally in soybeans. December futures edged closer to the top of its September range, overcoming bearish sentiment on demand.

The next inflection point for the market comes in a week, when USDA releases Sept. 1 stocks. Weaker exports and higher imports could add 30 million bushels to the forecast the agency made of old crop ending stocks Sept. 12.

Corn basis overall eased a little last week. While stronger basis off the Pacific Northwest last week thanks to Japanese buyers helped western Corn Belt rail bids, values on much of the river system softened. Basis at ethanol plants also ease as production fell despite improved markets helped by higher prices for the biofuel after the rally in crude.

Big speculators were still selling last week, even after prices started to rise in the wake of Sept. 12 USDA reports. Hedge funds added 28,693 contracts to their net short position and investors following commodity indexes also liquidated 14,662 of their net long position.

The preliminary report from the CBOT showed daily futures volume up 12% Friday to 221,139 while open interest fell 11,057 despite more new fund selling.

Options volume was up 30% to 78,081, 56% of it calls as four in-the-money October $3.70 calls were abandoned on Friday’s expiration. Traders added more November and December puts and calls for protection through harvest. Implied volatility in at-the-money December options dropped a half of 1% to 17.18%.

Overseas markets are mixed today. January futures in China dropped 3.6 cents to $6.616 and November Paris futures in afternoon trade held steady at $4.554 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 posting double digit gains on the better trade news. November futures held a test of its 50-day moving average early, attracting steady buying as it tries to break out of a bull flag on the daily chart.

In addition to concerns about the impact on heavy rains, there could also be fewer 2018 crop soybeans on hand when the government updates inventories. USDA could report lower old crop ending stocks in a week due to stronger crush and lower production for 2018, taking the Sept. 1 inventory down 50 million bushels.

Big speculators aggressively bought soybeans and oil last week, covering shorts in beans while flipping to a long position in oil while continuing to sell meal. Crush margins are off sharply, prompting some plants to lower bids last week. Average basis was a penny or two weaker though bids firmed in the export market, helping rail basis in the western Midwest and firming the tone on the river system.

The preliminary report from the CBOT showed daily futures volume down 6% Friday to 157,592 while open interest fell 2,197 despite modest new fund selling.

Options volume was up 69% to 57,897, 60% of it calls with new interest noted in the November $9.30 call and $8.50 put. Implied volatility in at-the-money November options dropped three quarters of 1% to 14.62%.

Vegetable oil markets in Asia were weaker today on bearish demand hopes. January soybean oil futures in China settled at 38.587 cents per pound while November palm oil futures in Malaysia lost nearly a half cent to 23.35 cents.

Oilseed markets internationally are mixed. January soybean futures in China were down 8.3 cents to $13.124, November rapeseed futures in Paris held steady at $9.645 and November Winnipeg canola overnight is up 1.5 cents to $7.565 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 higher in all three markets with Minneapolis leading the charge. Spring wheat futures are trying to break out of their June-September downtrend, helping winter wheat contracts hold uptrends.

Deteriorating conditions on the northern Plains could take 20 million bushels off the size of the 2019 crop, with Sept. 1 stocks down 141 million from the previous year.

Concerns about the spring wheat crop also prompted a surge in basis from Minneapolis to the Pacific Northwest. Winter wheat did not match the improvement. Hard red winter wheat bids were steady to lower on slack export demand while soft red winter wheat weakened from the Gulf north.

Big speculators covered a little of their bearish bets in all three markets but remain short across the board. The preliminary report from the CBOT showed daily volume down 20% Friday to 57,552 while open interest fell 2,151 despite light new fund selling.

Options volume was up 11% to 16.758, 55% of it calls as traders added November puts and calls after Friday’s October expiration. Implied volatility in December at-the-money options fell more than one half of 1% to 18.29%.

Volume in HRW was 16% lower at 35,443 on open interest that was up 1,372.

Overseas markets are quietly mixed today. January futures for Eastern Australian Wheat fell 1.8 cents to $6.725 following rains in parts of the south and east last week. December wheat futures in Paris afternoon trade are up a penny to $5.131 after adjustments for currencies and volumes, with forecasts looking a little wetter after the recent dry spell.

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.

Pivots092319.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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