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Morning Market Review for Feb. 24, 2017

USDA 2017 forecast doesn’t move markets. (Comments are updated by 7:30 a.m. Central Time.)

Feb. 24, 2017

Overnight trade
Corn: Steady
Soybeans: Up 2 to 3
Wheat: Down 1 to 3

Agency's updated estimates show burdensome stocks finally starting to turn

Grain futures are mixed this morning after a fairly quiet overnight session as the market digests the latest breaking news from the USDA Forum.

Outside markets are more negative, with mixed stock trade in Asia giving way to broader-based selling in Europe. U.S. stock indexes are lower after Thursday’s move to new records by the Dow and S&P. while the dollar is weaker, too. That’s only helping gold; crude oil is softer but holding $54 a barrel.

USDA Thursday also released county yield data for corn and soybeans, allowing us to make preliminary projections of potential 2016 ARC-County payments. Look for your county’s details on our interactive maps

March options expire after the close today, which could also affect trading on the last day of a hectic week.

 

Corn prices are trying to reverse higher this morning after breaking below the 200-day moving average on the March contract Thursday. The nearby so far has stayed above the support line from February, which comes in around $3.6425 today.

USDA forecast 2017 plantings of 90 million acres, unchanged from its November estimate, with ending stocks falling a little to 2.215 billion bushels. That was above trade guesses and our Farm Futures projection however.

Export sales out this morning are expected to top 50 million bushels of net old and new crop bookings, up from last week. Ethanol production slipped last week but still remains above year ago levels, with the total for the 2016 crop running ahead of the increase forecast by USDA.

The preliminary report from the CBOT showed futures volume up 15% on Thursday to 422,168 with active fund liquidation helping to take 28,285 off open interest as traders continue to dump March ahead of first notice day next week. Option volume rose 50% to 115,460, 54% of it puts, with the September $3.90 straddle in play again for a total premium value of almost 60 cents.

Overseas markets are lower. May futures on the Dalian Exchange in China lost 3.3 cents to $5.886 though government data showed China still keeping imports at a minimum in January. March futures in Paris morning trade were off 2 cents to $4.628 after adjustments for volumes and currencies.

Bottom line: Corn appears to be following a more bullish pattern, which could provide higher prices into March and April. For more, see my Weekly Corn Review. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Soybeans reversed higher after a lower open Thursday night, posting modest gains into the end of trading in Europe before stabilizing.

USDA confirmed farmers ready to plant more acres this spring, but the agency’s estimate of 2017 ending stocks showed them unchanged at 420 million bushels. That was lower than both our forecast and the average guess from the trade. 

Export sales are starting to taper off seasonally, though Chinese customs data show U.S. originations still dominating imports in January. Today’s export sales could fall to between 30 million and 35 million bushels of net new crop bookings.

Rains were fairly light in South America yesterday, with storms focusing on the southern half of the growing region in Argentina according to forecasts for next week. Forecasts for big production increases out of Argentina and Brazil helped sink the market yesterday.

Vegetable oil prices in Asia were mixed after a losing week. March futures for palm oil in Malaysia gained a third of a cent to 30.429 cents/lb but May soybean oil on the Dalian Exchange in China was another quarter cent lower at 43.445. May soybean futures in China plunged 29 cents to $16.375, May rapeseed for delivery in Paris were a half cent lower at $9.93 and March canola in Winnipeg firmed to $8.881. 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 up 57% to 386,830 with active fund liquidation helping take 23,381 off open interest ahead of first notice day. Options volume jumped 84% to 84,174, 57% of it puts as traders added out-of-the-money November puts. 

Bottom line: Soybeans face a crucial time as demand for old crop shifts to South America. Fears of a huge increase in U.S. plantings this spring could hold back rallies, especially in new crop. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Wheat prices are a little lower this morning with all three markets trying to consolidate. USDA put all wheat acreage for 2017 at 46 million, in line with our estimate, and said ending stocks would fall to 905 million, well below our estimate and trade guesses, on falling production and good demand. The market so far, however, isn’t impressed.

Export sales could slip below 20 million bushels this week for net old and new crop bookings as the U.S. continues to sell mostly to its regular customers.

While only 20% of the winter wheat crop is in a drought area, maps for the next week continue to show the western Plains dry. Official 6- to 10 and 8- to 14-day forecasts out yesterday also show a drying trend, and the latest updates this morning remains even more aggressive with that outlook.

Overseas markets were mixed today. March futures for Eastern Australian Wheat were down 4.2 cents today to $4.599 while March futures in Paris morning trade gained a half-cent to $4.974 after adjustments for volumes and currencies.

Volume in soft red winter wheat futures fell 15% to 121,358 with light fund selling helping take 2,010 off open interest. Option volume rose 25% to 44,530 56% of it puts with traders adding out-of-the-money May calls and puts. Volume in hard red winter wheat jumped 33% to 70,773 on open interest that was down 2,737.

Bottom line: the 10% drop in seedings could give new crop futures potential into March, but it’s time to complete sales of 2016 inventory and get a little more protection on new crop. 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

 

 

 

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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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