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Farm Futures - Morning Call

 

Morning Market Review for December 15, 2017


Light buying gives markets a little lift. (Comments are updated by 7:30 a.m. Central Time.)

Opening Calls:
Corn:
 Steady
Soybeans: Up 3
Wheat: Steady to up 3

Soybeans post gains despite better rains in Argentina

Grain futures are steady to a little higher this morning, attempting to end a trying week with a small rebound. Outside markets could help that endeavor.

U.S. stock index futures pointed to a higher open on Wall Street today. Share prices sold off in Europe and Asia following yesterday’s downturn in the U.S. as the push to enact a tax bill hit a few speed bumps. Still, investors are seeking a little safety, buying dollars and gold. 

The news wasn’t all positive for growers. Fertilizer prices moved higher Thursday as the global rebound gained steam. Urea swaps at the Gulf for January edged close to $250 a ton, with DAP up $5 for December to $356.

 

Corn prices are steady after trading in a range of a penny or less overnight. March futures kept to an inside day, hemmed in between this week’s contract low and resistance at the old support line drawn off November lows.

December went off the board yesterday at $3.3625, a downside target for March if it can’t hold. The new nearby is testing the top of the market’s fall downtrend, so a push today would be bullish for chart traders. 

A South Korean feed maker stepped in for its second purchase of the week, buying a cargo each of feed wheat and corn. But total exports sales last week edged a little lower to 34.1 million bushels, below trade guesses but above the weekly rate needed to reach USDA’s forecast for the 2017 crop. While USDA projects a 17% decline in exports this year, shipments are down 37% with total commitments 28% lower.

Overseas markets were quietly mixed today. January futures on the Dalian Exchange in China gained a half cent to $6.60 and March futures in Paris edged three-quarters of a penny lower at $4.725 after adjustments for volumes and currencies.

The preliminary report from the CBOT showed volume up 4% yesterday at 161,251 with open interest up 1,248 on light new fund selling. Options traders opened nearly twice as many calls as puts yesterday. While new puts focused on March, call traders were still getting into January strikes that expire at the end of next week. Implied volatility edged higher to 12.26.

Bottom line: Anything more than a short covering rally is unlikely now, though cash market basis should continue to firm. USDA’s Jan. 12 reports are the market’s next milestone unless Argentina rains fall through. For more, see my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Soybeans are posting modest gains, surviving a selloff into the close of trade in Asia to reverse higher. January futures try to get back above resistance at the support line violated yesterday, which comes in around $9.70 today.

Questions about demand continue to hang over the market. Export sales last week fell to 57.5 million bushels, below trade guesses but easily doubling the rate needed weekly to reach USDA’s forecast for the 2017 crop. Total shipments for the marketing year are down 13% with commitments 17% lower while USDA forecast a 5% increase.

Members of the National Oilseed Processors Association report how many soybeans they crushed in November, with the total likely to top last year’s reading of 160.6 million bushels. Crush margins remain decent despite weakness in vegetable oil.

After a steep slide this fall, January futures for palm oil in Malaysia jumped three-quarters of a penny today to 27.491 cents per pound, when the government lowered taxes to encourage exports. January soybean oil futures in China continue to ease, however, losing a quarter cent to 38.45 cents. 

Oilseed prices internationally were mixed. January soybean futures in China lost 4.1 cents to $14.278, February rapeseed futures in Paris were up 4.7 cents to $9.621, and January canola futures in Winnipeg edge a penny lower to $7.779. Note: International prices are converted to bushel or pound equivalents after conversions for currencies.

The preliminary report from the CBOT showed daily futures volume up 12% yesterday to 262,950, with open interest up 6,848 on fairly active new fund selling. Traders opened 1,504 new January $9.80 calls that expire at the end of next week for a cheap bet on a rally. Implied volatility in options rose 3.65% to 11.94.

Bottom line: Soybeans face seasonal pressure in December without help from South American weather and Chinese demand. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Wheat prices are steady to a little higher this morning. Winter wheat futures are trying to make new highs for another bad week, while Minneapolis attempts to break above a downtend line from November.

Export sales last week improved to 22 million bushels, nearly doubling the previous week and easily beating trade estimates and the rate forecast by USDA for the 2017 crop. Total shipments and commitments are running close to levels suggested by USDA, which lowered its forecast in Tuesday’s monthly supply and demand report. 

Maps for the next week bring a little more rain into the Plains, part of a shift towards wetter weather in official 6- to 10 and 8- to 14-day forecasts out yesterday that was confirmed by the latest updates this morning.

Overseas markets were mixed. January futures for Eastern Australian Wheat lost another 6.3 cents to $5.321, as most areas in the eastern part of the continent stayed dry for harvest. March futures in Paris morning trade gained a penny to $5.152 after adjustments for volumes and currencies despite abundant moisture in France and the key Black Sea growing region.

Preliminary volume in soft red winter wheat dropped 2% yesterday to 87,323 with open interest down 785 on light fund short covering. New interest was noted in the July $4.90 and $5.90 calls as implied volatility rose 2% to 18.60.

Volume in hard red winter wheat dropped 14% to 34,613 on open interest that was up 1,019. 

Bottom line: Wheat is struggling to generate rallies, so risk should be limited to new crop now. 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.

 

Explanation of pivot points. 

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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.