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Morning Market Review for July 23, 2019

Markets try to hold rebound bid. (Comments are updated by 7:30 a.m. Central Time.)

Opening Calls:
Corn: Up 2
Soybeans:  Up 1
Wheat: Up 4 to 5

Corn mostly holds up to the heat

Grain futures are trying to hold on to modest gains from an overnight rebound rally, after a crop progress report showed fields mostly holding up to last week’s heat without significant damage.

While parts of the growing region will be dry  over the next week, storms return over the weekend. Official 6 to 10 and 8 to 14-day forecasts out yesterday and the latest updates from the ensemble model this morning call for rains to persist, though they differ on temperatures.

Growers posting Feedback From The Field Monday reported a wide range of yield expectations, with the median of their earlier estimates 150 bushels per acre for corn and 40 bpa soybeans. Those estimates a significantly below projections from USDA’s crop ratings.

Click this link to tell us what’s happening in your area and check the interactive map we update regularly.

Stocks moved higher around the world today, while U.S. index futures point to more gains on Wall Street as investors cheer the debt ceiling deal, good corporate earnings and an expected cut in interest rates next week by the Federal Reserve. Trading in Federal Funds futures shows an 80% chance for a reduction of one-quarter of 1%.

The dollar continues to strengthen because other central banks are also cutting interest rates. Gold and crude pulled back on the greenback’s move, with crude slipping back below $56 a barrel as Iran tensions eased a little.

Corn prices are a little higher after fading part of their early bounce overnight. That’s keeping December futures to an inside day after Monday’s break.

Monday’s crop ratings provided a little support. Corn showed some signs of stress from the heat with 35% of the crop silking, according to USDA. National ratings for corn slipped around a bushel per acre on our model for yield potential to 170.2 bpa. But gains in key states like Iowa kept the model based on state-by-state ratings steady at 168.9 bushels per acre.

The ratings drop held offset some of the impact of weak demand news yesterday. Export inspections slipped to 17.2 million bushels, less than half the rate needed though August to reach USDA’s forecast for the 2018 marketing year. Corn basis was steady yesterday with tight farmer holding offsetting weakness in the export market.

The preliminary report from the CBOT showed daily futures volume down 4% yesterday to 298,116, while heavy fund liquidation took only 4,703 off open interest.

Options volume was 2% lower at 101,008, 58% of it calls as traders liquidated August strikes that expire at the end of the week while also dumping out-of-the-money September calls. Implied volatility in at-the-money December options rose to 28.05%.

Overseas markets are slightly higher today. September futures in China edged a half-cent higher to $7.071 and November Paris futures in morning trade were up three-quarters of a cent to $5.082 after adjustments for volumes and currencies. Temperatures are expected to top 100 degrees through Thursday before storms break the heat wave at the end of the week.

Bottom line: Markets must wait until Aug. 12 to learn more about acreage, which should create uncertain markets trading weekly Crop Progress reports and weather forecasts. While the story of 2019 will take time to play out, add to new crop sales cautiously due to potential for lower yields to raise the cost of production per bushel. In the meantime, sell remaining old crop. 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 higher, as November tries to hold above the 100-day moving average. That support comes in around $9.07 today, just above the overnight low.

Soybeans appeared to take the heat a little better than corn last week. Losses focused on areas that received heavy rains from Hurricane Barry like parts of the Delta and Ohio River Valley. Our estimate of yield based on the national rating was steady at 50.4 bpa, and the state-by-state reading actually improved a tenth of a bushel to 49.6 bpa. Still, development remains significantly slower than normal. Just 7% of the crop is setting pods, compared to 28% on average.

Export inspections last week fell to 20.6 million bushels. Chinese buyers loaded out 11.7 million of the 193 million bushels of outstanding sales they have on the books. Still, that means China must take delivery on 30 million bushels a week, something that may be difficult to do, so some of those purchases may be rolled to new crop. News on potential trade talks and purchases of U.S. farm goods was scarce overnight.

Vegetable oil markets in Asia ended stronger today. September soybean oil futures in China rose to 35.858 cents per pound and September palm oil futures in Malaysia jumped nearly a quarter-cent to 21.71 cents.

Oilseed markets internationally were also stronger. September soybean futures in China gained 6.6 cents to $13.448, August rapeseed futures in Paris is up 2.5 cents to $9.511 and November Winnipeg canola is three-quarters of a cent higher at $7.721 after adjustments for volumes and currencies.

The preliminary report from the CBOT showed futures volume off 32% yesterday to 158,595 while open interest fell 11,609 despite modest new selling from funds.

Options volume dropped 55% to 41,643, 51% of it calls as traders rolled down November calls and added out-of-the-money November puts. Implied volatility in November at-the-money options increased fell to 17.42%.

Bottom line: Soybeans face lost acres and lower yields that could make for an interesting market. Hold off on new crop sales for now. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Wheat prices are holding on to more of their overnight gains than soybeans or corn, trying to avoid a more serious break on the charts.

December soft red winter wheat is testing the 100-day moving average around $5 after falling through the 50% retracement of its May-June rally to form a potential head-and-shoulders top. Hard wheat contracts are trying to recover after slipping to new summer lows yesterday.

Improvement in the North Dakota spring wheat crop noted by USDA Monday helped boost production estimates on the northern Plains. State-by-state yield projections added a tenth of a bushel per acre to 51.2 with USDA’s nationwide ratings boost suggesting a three-tenths of a bushel gain to 52.2 bpa.

Winter wheat harvest increased to 69%, still 10% slower than average.

Export news is mixed. Japan will fill all its regular weekly tender out of the U.S., with Taiwan also bidding for U.S. wheat overnight. Year-to-date wheat inspections are above last year’s total but remain fairly lackluster, with the weekly total reported Monday improving to 15.9 million bushels. Buyers still aren’t committing to big volumes yet, waiting to see how harvest turns out from Europe into the Black Sea.

Volume in soft red winter wheat was up 7% yesterday to 112,389 while open interest fell 286 despite modest new fund selling. Options volume was 6% higher at 39,549, 62% of it calls with new interest noted in the July 2020 $5.90 call. Implied volatility in December at-the-money options rose to 24.18%.

Volume in HRW was 17% higher at 47,860 on open interest that increased 1,464.

Overseas markets are steady today. January futures for Eastern Australian Wheat held to $6.293 and December futures in Paris midday trade are at $5.457 after adjustments for currencies and volumes.

Bottom line: Wheat is trying to prove harvest lows but still faces harvest on the northern Plains. 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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Pivots072319.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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