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Morning Market Review for September 22, 2017

Weather and exports drive soybean short covering. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trade:
Corn:
 Up 1 to 2
Soybeans: Up 6 to 8
Wheat: Up 1 to 2

Bears jump ship after huge week of export sales

Grain futures are higher across the board this morning, with buying once again paced by soybeans. While traders debate the size of the crop amid signs of better export demand, attention is also turning to quarterly grain stocks data due out a week from today.

Farmers reporting Feedback From The Field this week raised yield forecasts but remain well below USDA’s Sept. 12 estimates. Let us know what your yield estimates are by clicking the link.

Outside markets reflect a more somber mood. Gold and Treasuries gained on safe haven buying ahead of Sunday’s elections in Germany and more tension with North Korea. While U.S. stock index futures point to more profit-taking from this week’s records, share prices rose in Europe after trading mostly lower in Asia.

Crude oil prices are down a little but holding the move above $50. OPEC officials meeting today aren’t expected to make a decision on extending production cuts

 

Corn prices rebounded from a lower open overnight to attract slow but steady buying. December futures is close to short- and long-term trendlines around $3.525 today. 

Next Friday’s Sept. 1 corn stocks report from USDA could see a 10 to 15 million bushel drop in carryout for the 2016 crop, but big changes are not expected. However, summer feed usage is hard to predict, which could lead to either bullish or bearish surprises. 

Export sales of only 20.7 million bushels were below both trade estimates and the weekly rate needed to reach USDA’s forecast for the 2017 crop. Basis weakened this week in the export pipeline after barge rates jumped 10 to 15 cents a bushel on low water and lack of empties making upstream. For more, see my Basis Outlook

Storms working through the Plains and western Corn Belt in maps for the next week show potential for heavy rains, though the central and eastern Midwest won’t see much moisture. Official 6- to 10 and 8- to 14-day forecasts out yesterday extend the drier pattern outside the southern Plains with cooler weather but the latest updates this morning show a sift warmer eventually.

The preliminary report from the CBOT had futures volume down 3% Thursday to 160,199 with light fund short covering cutting 1,899 off open interest. Options volume fell 18% to 55,595, 53% of it calls with active new interest noted in the December 2018 $4.80 call. Implied volatility fell another 3.5% Thursday to 16.98.

Overseas markets were mixed. January futures on the Dalian Exchange in China gained a nickel to $6.613 but November futures in Paris dropped 3 cents to $4.68 adjustments for volumes and currencies, as harvest got going this week.

Bottom line: Corn supplies look to remain burdensome for another year. The first test for the market will be to hold Aug. 31 lows. After that, a post-harvest bounce could provide a few hedging opportunities while waiting for basis to tighten. For more, see my Weekly Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Soybeans are higher, jumping early in the overnight session and holding on to gains. November futures rallied to six-week highs while breaking out of a wedge on its chart, with resistance first around $9.84.

A few showers worked through parts of Brazil’s northern and center-west growing regions over the past 24 hours, but rains still look spotty over the next two weeks. Farmers can start planting Sept. 15 but the rain season normally doesn’t begin until mid-October. 

Next Friday’s grain stocks report could whittle away at soybean carryout for the 2017 crop, and perhaps show whether the 2016 crop was bigger or smaller than previous estimates. Residual usage in the summer is always a potential wild card in these reports.

Export sales surged to 85.9 million bushels, well above trade estimates and the weekly rate forecast by USDA as total commitments are slowly catching up with last year’s level. USDA also announced the sale of another 4.85 million bushels to China yesterday under its separate system for large daily purchases.

While soybean oil futures bounced back from yesterday’s losses overnight, vegetable oil markets in Asia were sharply lower today. January soybean oil futures on the Dalian Exchange in China dropped more than a half cent per pound to 42.889 cents and November futures for palm oil in Malaysia were off more than a third of a cent to 29.531.

Oilseed prices internationally were higher. January soybean futures in China gained 6.2 cents to $15.807, November rapeseed futures in Paris were up 5.4 cents to $10.015 and November canola in Winnipeg gained 4.6 cents to $9.142. 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 nearly 50% to 183,941 as light fund short covering helped take 5,295 off open interest. Options volume rose slightly to 46,698, 54% of it puts as traders liquidated October options that expire today. Implied volatility eased slightly to 16.43.

Bottom line:  Soybeans have held a series of lows but need a move above $9.885 to confirm a higher trend. The best chances for rallies in the short term come from weather in Brazil, where conditions are dry, holding back early planting for at least another week. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Wheat prices are following soybeans higher, finding chart strength of their own. Winter wheat contracts moved to new one-month highs while spring wheat continues to rebound after holding a test of its June gap this week.

While rain from the Rio Grande to International Falls will improve moisture for seeding hard red winter wheat, some areas could see delays or flooded fields from heavy totals.

Export sales eased to 11.3 million bushels last week, below trade guesses and the weekly rate forecast by USDA for the rest of the marketing year. 

Rains mostly missed Australia’s growing region this week with that pattern continuing in forecasts for the next two week. January futures for Eastern Australian Wheat surged another 18.4 cents today to $6.322 while December futures in Paris morning trade were steady at $5.367 after adjustments for volumes and currencies. 

Volume in soft red winter wheat was up 6% to 88,479 with light fund short covering taking open interest 1,375 lower. Options volume was 19% higher at 27,135, 53% of it puts with new interest noted in the December 2018 $5.70 put and May $5 call. Implied volatility fell 2.75% to 22.51. 

Volume in hard red winter wheat was 18% lower at 20,394 on open interest that was up 1,995. 

Bottom line: Large global supplies frustrated wheat’s attempt for a last summer rebound. 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.

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.
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