Farm Futures - Morning Call
Morning Call for September 28, 2016
Bryce Knorr, Farm Futures senior editor
Sept. 27, 2016
Soybeans: Up 2 to 3
Wheat: Up 2
Slow harvest and floods feeding river system keep sellers sidelined
Grain futures are steady to a little higher this morning, marching to the beat of their own drummer as other markets are hit with worries. A rally on international stock markets during the U.S. presidential debate held up until trading in Europe got underway, when gains evaporated on concerns in Germany and more forecasts for slowing world economic growth. The dollar again emerged as a safe haven, reinforcing losses in crude oil, which broke after foreign oil-producing countries were unable to agree on ways to curb supplies.
Corn prices are steady and trying to turn higher, after trading in a narrow range of less than two cents overnight following Monday’s break below multiple levels of chart support. Strong demand and weather concerns helped December futures hold yesterday’s lows.
Monday’s Crop Progress report showed no change at the national level, leaving projected yields at 174.1 bpa. But our model of state-by-state conditions eased .4% to 172 bpa, with most states steady to lower as states with surplus soil moisture rose 4%.
USDA also reported that harvest advanced 6% last week, with 15% of the crop in, compared to the five-year average of 19%, despite maturity running 9% ahead of average at 73%.
Export Inspections totaled 52.6 million bushels last week, beating trade guesses and well above the rate forecast by USDA for the rest for the marketing year.
Maps over the next seven days show rains hanging around the far eastern Great Lakes but much of the growing region should get a break from storm. Official 6- to 10 and 8- to 14-day forecasts out yesterday show above average precipitation returned to the western Corn Belt and upper Mississippi River Valley, a trend confirmed by the latest updates this morning
Runoff from recent rains should bring parts of the Mid-Mississippi to major flood stage later this week, closing several locks in southern Iowa and northern Missouri, according to the U.S. Army Corps of Engineers. Barge freight rates were up nearly a nickel Monday as a result.
Growers reporting Feedback From The Field last week noted lower average corn yields though soybeans are coming in good, with concerns about weather damage noted for both crops. What are your expected yields? Use this link to provide your own reports.
International prices were mixed today. January futures on the Dalian Exchange in China were down another 3.8 cents to $5.347 after the government failed to sell any grain at its latest auction of reserves. November futures in Paris morning trade were up three-quarters of a cent to $4.586 after adjustments for volumes and currencies.
The preliminary report from the CBOT showed futures volume down 5% at 226,310 with fairly active fund selling taking only 365 off open interest, suggesting stubborn longs were finally abandoning their positions. Option volume was off 13% at only 48,043, 54% of it puts, with active buying traded noted in November puts for short-term protection.
Bottom line: USDA should make little change to its estimate of Sept. 1 stocks on Friday. But hedge pressure may be enough for now to take prices lower again. Supplies are large, limiting rally potential unless soybeans can help. For more, see my Weekly Corn Review. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.
Soybeans are a little higher, hanging on to most of their gains during a quiet overnight session that mostly ignored what was happening on trading screens around the world.
USDA Monday held its nationwide rating of soybean conditions steady, leaving our yield model at 50.3 bpa. State-by-state ratings improved, adding 1 bpa to yield potential, which increased to 48.5 in our model. While some declines were noted in the upper Midwest after recent heavy rains, most states were steady or improved. USDA also said 10% of the crop was harvested, down 3% from the five-year average.
Part of yesterday’s selloff hinged on hints of weaker demand. Export Inspections plunged to 14.1 million bushels last week, barely a third of the rate needed weekly to meet USDA’s forecast for the marketing year. However, USDA also reported the sale of 8.8 million bushels to unknown destination under its daily report system for large purchases.
Brazil’s growing region was dry yesterday but forecasts for the next two weeks continue to call for good coverage as planting gets underway.
The preliminary report from the CBOT showed daily futures volume down 23% at 163,448 with modest fund liquidation taking 6,260 off open interest. Options volume dropped 44% to 50,778, two-thirds of its puts as traders rolled down in-the-money November puts while liquidated out-of-the-money calls.
International markets were weaker today. November palm oil in Malaysia slipped to 29.97 cents/lb and January soybean oil in China was down to 43.417 cents. January soybeans in China fell 15.5 cents to $15.053, November rapeseed for delivery in Paris was off around a half cent to $9.508 and November canola in Winnipeg was around a penny lower near $8.
Note: International prices are converted to bushel or pound equivalents including currency adjustments to U.S. dollars for contracts with significant volume.
Bottom line: Friday’s stocks report could raise supplies left over on Sept. 1 slightly, unless USDA changes its estimate of 2015 production. If you made good sales at profitable levels, it’s time to wait and see how the answers to that question develop. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.
Wheat prices are posting light gains today, helped by worries about international weather and better export demand that are keeping the market from making new lows.
USDA said 30% of the winter wheat crop was planted, with 8% emerged, both in line with the five-year average. Rains this week should be fairly light for seeding hard red winter wheat, with above average moisture expected to return next week.
Export Inspections soared to 32.2 million bushels last week, nearly doubling the rate forecast by USDA for the rest of the marketing year. Japan will fill most of its regular weekly tender with U.S. originations, too. Concerns also emerged about too much rain in southeastern Australia, which is forecast to receive heavy coverage in some areas over the next week.
Argentina’s growing region could receive scattered coverage over the next two weeks, while the Black Sea growing region gets more fairly widespread coverage from southern Ukraine into South Russia. Field in Europe look to turn dry again next week after getting some much needed precipitation.
Daily volume in soft red winter wheat was 17% higher Monday at 70,582, as fairly light new fund selling added 3,294 to open interest. Options volume more than doubled to 28,207, 59% of it calls, with a fund actively spreading the May $4.80 and $5.40 calls. Volume in hard red winter was 23% lower at 16,444 on open interest that fell 138.
Bottom line: Wheat fundamentals still look limited as the market struggles in 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.
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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.