Morning Market Review for March 16, 2018
Soybeans look for second wind. (Comments are updated by 7:30 a.m. Central Time.
Corn: Down 1
Soybeans: Up 4 to 5
Argentine drought spurs U.S. exports and crush
Grain futures are mixed this morning, with traders juggling a slew of demand and weather news. Soybeans are again the leader following a choppy week that saw corn and wheat fade.
Outside markets are struggling to end the week on a more positive note. Stocks traded mixed in Asia following the pattern on Wall Street yesterday, but markets turned higher in Asia. U.S. stock index futures pointing towards another mixed open this morning.
The dollar is a little weaker, helping support commodities. Gold and crude oil both posted modest gains overseas.
Corn prices are a little lower today after trading in a range of less than two cents overnight. May futures held to an inside day following yesterday’s drop to a new low for the week.
Futures came under pressure yesterday despite a stellar report on exports. Sales topped 100 million bushels last week and shipments should be strong this spring thanks to a record book of unshipped sales for this time of year. Basis faded in the export pipeline last week, ignoring a sharp drop in freight costs as shippers get caught up loading barges as the river system gets back to normal following floods. For more, see my Basis Outlook and interactive maps.
Corn business is getting a boost from the drought in Argentina. The Rosario Grain Exchange yesterday slashed its estimate of Argentine production by nearly 120 million bushels and is more than 150 million bushel USDA’s March 8 forecast. The Buenos Aires exchange is around 75 million below USDA, in line with last week’s Vegetative Health Index maps. Uncertainty remains about the size of Brazil’s crop, but exporters there are focusing on moving soybeans, keeping corn inventory in storage.
The preliminary report from the CBOT showed daily futures volume 19% lower Thursday at 334,300 with open interest up 18,235 despite modest fund liquidation. Options volume dropped 21% to 91,047, 63% of it calls as traders liquidated May and September $4 calls. Implied volatility fell another 1% Thursday to 17.70.
Bottom line: Smaller crops in South America and declining U.S. acreage are extending the rally and could keep prices steady to higher in March. This is a selling opportunity to lighten up on old crop inventory but hold off on new crop sales until futures reach profitable levels. 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, finding support from demand news and price charts. May futures are trying to break out their downtrend for March while November held support yesterday and reversed higher, attracting some follow-through buying overnight.
Export sales of 49.5 million bushels included nearly 19 million to China, which started buying U.S. soybeans a little more aggressively in recent weeks. Soybean basis followed the pattern in corn this week, fading on the river system. Bids elsewhere firmed with mixed basis noted at processors. Soybean crush for February reported by members of the National Oilseed Processors Association set a record for the month at 153 million bushels.
Argentine was dry again this week, and a slightly wetter forecast for the next two weeks likely comes too late to change conditions much. The Rosario Grain Exchange cut its forecast of soybean production in Argentina more than 250 million bushels below USDA’s last forecast, while the Buenos Aires burse is nearly 185 million below USDA.
Oilseed prices internationally were mostly stronger. May futures on the Dalian Exchange in China jumped 26.2 cents to $15.876 as uncertain over retaliation against U.S. tariffs remains an issue. May rapeseed futures in Paris were up 1.4 cents to $9.757 and May canola futures in Winnipeg held steady at $9.148. Note: International prices are converted to bushel or pound equivalents after conversions for currencies.
The preliminary report from the CBOT showed daily futures volume down 23% yesterday to 209,217 while open interest rose 9,376 on modest fund buying. Options volume dropped 40% to 57,292, 63% of it calls as traders continue to add out-of-the money November calls. Implied volatility in options fell another 2% to 15.14.
Bottom line: Soybeans appear ready for consolidation after making a seasonal top in February, but how long that may last is unclear. The market is on high alert for an increase in production. We’ll report results of our latest survey March 23. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.
Wheat prices are mixed this morning, with only Minneapolis eking out a small gain. Hard red winter wheat futures made new lows for the month overnight as forecasts turned wetter for the next two weeks.
A few storms are moving across Kansas today and fields north of I-70 are expected to pick up decent totals over the next week. The second week of the maps also is wetter, though 90-day outlooks out yesterday called for above average temperatures and below average precipitation for the southwest Plains. The Drought Monitor put 40% of the winter wheat crop in drought areas.
Export news also weighed on prices. Total new bookings last week were just 8.1 million bushels including new crop. Russia and Romania split Egypt’s latest tender for 8.8 million bushels, while fields in the Black Sea region show good moisture levels for spring.
Overseas markets were lifeless as a result. May futures for Eastern Australian Wheat held steady at $5.811 and May futures in Paris morning trade were down a penny at $5.533 after adjustments for volumes and currencies.
Preliminary volume in soft red winter wheat was 12% higher at 115,060 though modest new fund selling added only 1,457 to open interest. Options volume more than doubled to 37,469, 66% of it calls as traders rolled down out-of-the-money May calls to the $5 strike. Implied volatility rose 2% to 25.42.
Volume in hard red winter 45,442 increased by 17% to 294,080 on open interest that was up 1,240.
Bottom line: Winter wheat is fading its rally seasonally, waiting for news about production. 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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