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Farm Futures - Morning Call


Morning Market Review for June 22, 2018

Buyers cautious despite futures fire sale. (Comments are updated by 7:30 a.m. Central Time.)

Overnight Trends:
Steady to down 1
Soybeans: Up 5 to 7
Wheat: Mixed

Tepid exports and plenty of rain hold back rally bid

Grain futures are mixed this morning as a punishing week for prices comes to a close. While investors around the world appear ready to take a little more risk, money isn’t flooding back into the grain market. One source of turmoil today could be expiration of heavily traded July options at the CBOT.

Stock markets traded mixed in Asia following heavy losses yesterday on Wall Street caused by lingering concern over the trade dispute between the U.S. and just about everybody else in the world. Markets did turn higher in Europe, and U.S. index futures point towards a stronger open today as well.

The dollar is weaker after reversing lower Thursday from a new 11-month high. The easing greenback is a sign that risk takers are crawling out of their bunkers, buying both stocks and commodities. Crude oil moved back above $66 despite apparent agreement between OPEC and its allies to increase production – a nod by Saudi Arabia to President Trump to keep prices under control. ULSD futures gained 2 cents overnight after Midwest cash benchmark prices fell to the lowest level since planting began on waning ag demand.

Corn prices are fading an attempt to rally overnight, leaving futures in a range of barely two cents ahead of the morning break.

Export sales last week totaled a disappointing 19.9 million bushels, including just 6.5 million old crop. While South Korean feed makers were heavy buyers in just, most of those deals were on an optional origin basis and haven’t been sourced yet.

Storms so far this week brought 1 inch or better rains to most of the growing region this week and totals over the next week could add to those levels. Official 6 to 10 and 8 to 14-day forecasts out yesterday and the latest morning updates continue the warm and wet outlook outside the southern Plains. Warm temperatures remain in the outlook for July out yesterday, which calls for normal precipitation.

Farmers reporting Feedback From The Field yesterday from Iowa to the east continue to worry about excess rain in some areas. “85% corn planted 65% beans planted. 3 inches of rain yesterday, more coming,” said a Michigan grower. “The planting season that never ends.“

What’s happening in your fields? Let us know by clicking this link to enter your data and comments and check out the latest reports by scrolling down to our updated interactive map.

Overseas markets were mixed today. September futures in China lost 2.6 cents to $6.902 after another government auction brought out fewer buyers for reserves. August futures in Paris gained 1.5 cents today to $4.895 after adjustments for currencies and volumes

The preliminary report from the CBOT showed daily futures volume down another 10% yesterday to 443,098 while open interest was up 1,739 on modest new fund buying. Options volume was down 9% to 144,103, two thirds of it calls with heavy new interest noted in December $4 calls as traders sit on nearly 150,000 in-the-money July puts ahead of expiration today. Implied volatility in the at-the-money December options edged slightly higher 24.99.

Bottom line: Aggressive sellers used the break to pick up call options insurance to protect sales if the market can muster a rally on weather. So far, however, rallies look doubtful. 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 today, attracting a little bargain hunting and short covering. Still, July futures is holding to its third inside day in a row after Tuesday’s death dive.

Trade tensions with China remain a front burner issue though no new salvos were fired in the war of words so far today. Chinese buyers last week cancelled a load of previous purchases though they took delivery on another. Total export sales of 19.5 million bushels were down from the prior week and trade estimates.

Vegetable oil markets in Asia ended mixed today. September soybean oil in China edged lower to 38.337 cents per pound but July palm oil futures in  Malaysia jumped back a third of a cent to 25.901 cents.

Oilseed markets internationally were also mixed. September futures in China dropped 16.9 cents to $15.071 after making a new contract low. August rapeseed futures in Paris edged less than a penny higher to $9.338 and July canola futures in Winnipeg lost around a penny to $8.96 after adjustments for volumes and currencies.

The preliminary report from the CBOT showed daily futures volume down 16% yesterday to 265,750 while open interest was down 2,396 despite active new fund selling as traders liquidated July ahead of options expiration and first notice day next week. Options volume was a third lower at 71,743, 62% of it calls. Traders continued to liquidate November $13 and $11 calls but added the $10 strike. Implied volatility in November at-the-money options rose a little to 22.02.

Bottom line: Batten down the hatches until the market settles down. Rallies may not really pop up until later in the growing season. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Wheat prices are mostly lower this morning after an attempt to rally fell apart after failing to break through chart resistance at key moving averages on winter wheat charts.

Export sales reported yesterday for last week were a pleasant surprise at 17 million bushels, beating the weekly rate forecast by USDA for the 2018 marketing year. Concerns remain in play about production around the world, though the only severe problems are being noted in Australia.

Overseas markets were mixed today. January futures for Eastern Australian Wheat gained 4 cents to $6.607 after rains fell apart in the eastern part of the continent. December futures in Paris were unchaged at $5.71 after adjustments for volumes and currencies

Preliminary volume in soft red winter wheat fell 5% yesterday to 187,803 on open interest that fell 470 on light fund short covering. Options volume was 25% lower at 34,688, 62% of it calls as traders liquidated more July options that expire after the close today. Implied volatility in at-the-money July options fell 1% to 44.95.

Volume in HRW was 7% lower yesterday at 63,183 on open interest that was off 2,474,

Bottom line: Wheat is being swamped by weakness in broader markets and the strong dollar. That’s disrupted the narrative for a long-term bottom. 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.