Farm Futures - Morning Call

Morning Call for December 8, 2016
Bryce Knorr, Farm Futures senior editor

Dec. 8, 2016

Overnight trade
Corn: Up 1
Soybeans: Down 4 to 5
Wheat: Up 4 to 6

Weather, Wall Street and world stage churn futures

Grain futures are mixed this morning with many markets moving in many directions around the world. While oilseeds take a break from their rally, grains are moving higher on bargain hunting and the first cold snap of winter.

Stock prices moved higher in Europe and Asia today on the heels of yesterday’s record-setting day on Wall Street, with U.S. index futures pointing to a firm open again today. That mood could change depending on comments from European Central Bank President Mario Draghi, after the agency said it would reduce its financial stimulus after April, in a move surprising the market.

Crude oil prices are trying to firm, after profit taking Wednesday’s despite a cut in U.S. supplies. The dollar is weaker, helping give gold a lift too.

Corn

Corn prices are a little higher, turning around ahead of the start to the trading day in Europe thanks to a rebound in wheat

Ethanol prices jumped Wednesday on news of strong production that added only slight to stocks. Export Sales out this morning are expected to be modest, around 33 million bushels, less than the rate forecast by USDA for the 2016 crop. USDA isn’t likely to make significant adjustments to ending stocks in Friday’s supply and demand update, with Farm Futures and other analysts expected little change.

No deliveries were made again today against December. There were no new contracts registered for delivery yesterday, with 274 still available in Utica, along the Illinois River, where cash stayed mostly above futures.

Overseas markets were mixed today. January futures on the Dalian Exchange in China fell 7 cents to $5.853 but March futures in Paris morning trade were 3.4 cents higher at $4.536 after adjustments for volumes and currencies.

The preliminary report from the CBOT showed futures volume down almost a third to 172,807 with light new fund selling adding only 1,391 to open interest. Options volume was down 34% to 50,728, 62% of it puts funds liquidated the $3.80/$3.30 bear put spread on December 2017 and again added February $3.70 calls.

Bottom line: A rising tide could lift all boats, but the huge 2016 crop should continue to provide plenty of headwinds. Lower acres in 2017 could help turn the tide, but growers should be looking for basis opportunities on old crop as the shipping season closes on northern stretches of the river system. For more, see my Weekly Corn Review. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Soybeans

Soybeans are easing but off overnight lows, keeping January futures to an inside day after another close off session highs yesterday.

Chinese demand continues to offer support, with USDA Wednesday announcing a couple deals yesterday under its daily reporting system for large purchases. Those included 2.4 million bushels of old crop to China along with 9.7 million new, and another 5 million of old crop to unknown destinations. Weekly sales are expected to run around 44 million bushels in today’s summary.

Customs data out overnight showed Chinese soybean imports in November jumped 50% from October, rising 6% above November 2015. Still, year-to-date imports are up less than 1%.

Despite the strong pace of sales so far, USDA is likely Friday to make only a modest cut to its forecast of carryout, perhaps 10 million to 20 million bushels.

Rains are moving through northern Argentina today, with Brazil’s center-west receiving good coverage too. However, today’s forecasts call for only light rain through central and southern parts of Argentina’s growing region over the next two weeks.

Oilseed and vegetable oil markets internationally were lower, led by follow-through selling in oils. January palm oil in Malaysia fell to 32.064 cents/lb while January soybean oil in China was at 46.094 cents. January soybeans in China dropped 7.5 cents to $17.114, February rapeseed for delivery in Paris were off 6.7 cents to $9.98 and March canola in Winnipeg was 3.9 cents lower at $9.141. Note: International prices are converted to bushel or pound equivalents including currency adjustments to U.S. dollars for contracts with significant volume.

The preliminary report from the CBOT showed daily futures volume 4% lower at 246,189 though open interest fell 11 contracts despite light fund buying thanks to commercial hedging of farmer sales. Options volume was off 5% to 53,833, 73% of it calls with huge trade in the November 2017 $11 and $12 calls accounting for 28,085 of the total.

Bottom line: With record yields, costs are down, lifting cash above break-evens even with weak basis. Make sure you can afford to sit on the sidelines before holding off on sales. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Wheat

Wheat prices are higher today, with bargain hunting and short covering in play as cold weather sweeps into the Plains. Temperatures are expected to plunge below zero as far south as northwest Kansas Friday morning, with several more threatening cold snaps in the forecast for the next two weeks.

Snow cover is thin in some places, with little rain in the forecast over the next seven days. Official 6- to 10 and 8- to 14-day forecasts out yesterday also look dry for the southern Plains, backed up by the latest updates this morning

Export sales out this morning are expected to run around 15 million bushels, below the rate forecast by USDA for the 2016 crop. Little change is expected in Friday’s USDA report on supply and demand.

More storms are moving through Australia, causing a few delays to late harvest there while the Black Sea

Continues to pick up light moisture for its winter wheat crop.

January futures for eastern Australian wheat fell 4 cents to $4.41 before turning back higher in after-hours trade on the rally in the U.S. December futures in Paris morning trade were up 3.5 cents to $4.789 after adjustments for volumes and currencies.

There were another 116 lots of soft red winter wheat withdrawn from registration Wednesday, taking the total to 1,049, and 35 were put out today through cash remains below futures in Toledo. Bids are historically weak In Kansas, where deliveries rose a little to 33. But there was nothing put out in Minneapolis today.

Volume in soft red winter wheat futures was up 3% Wednesday to 79,269, with light new fund selling adding 2,188 to open interest. Options volume more than tripled to 42,530, 81% of it calls as traders liquidated 8,628 July 2017 calls. Volume in hard red winter was up 32% to 43,381 on open interest that fell 148.

Bottom line: Wheat fundamentals still look limited as the market struggles in to break free of narrow trading ranges. Only a rising tide could lift all boats. For more details on the outlook, see the Weekly Wheat Review. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.


More from Farm Futures:
Weekly Corn Review
Weekly Soybean Review
Weekly Wheat Review


Morning Market Review by Bryce Knorr

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This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed as to the accuracy, and is not to be construed as representation. The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results.

 
 
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