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Morning Market Review for July 21, 2017

Wet forecast sends traders to sidelines. (Comments are updated by 7:30 a.m. Central Time.)

July 21, 2017

Overnight trade:
Corn:
 Down 5
Soybeans: Down 5 to 7
Wheat: Stead to down 1

Markets assess whether crop damage is enough to keep rally going

Grain futures are mostly lower this morning, with quiet trade in wheat offset by selling in corn and soybeans.

Farmers posting Feedback From The Field this week point to stress from hot, dry conditions in some areas with crops delayed in development. Let us know what’s happening in your fields. 

Outside markets are also cautious. U.S. stocks look ready to open lower again this morning following a pullback from record highs that spurred selling in Asia and Europe.

Crude oil futures are holding above $47, supported by a dollar valued at the lowest level in more than a year. The weak greenback lends support to gold, which is trying to claw back to $1,250 an ounce.

 

Corn prices are lower but holding to an inside day after retreating from Thursday’s gains. Today’s weather maps have something for both bulls and bears. Temperatures will again top 100 degrees from South Dakota to St. Louis, but a long line of storms is to the north of that path as well.

Another system tracking the same trajectory is due next week, keeping the heaviest accumulations in maps for the next week in southern Minnesota and Wisconsin. 

Official 6- to 10 and 8- to 14-day forecasts out yesterday shifted wetter in the 6-to-10 though most areas outside the eastern Corn Belt were warm and dry in the 8-to14. The latest updates this morning cooled off noticeably outside the Dakotas as well.

Export sales of 26.7 million bushels last week reported Thursday exceeded expectations, though shipments remain a little behind the rate needed to reach USDA’s forecast for the 2016 crop. Still, basis firmed on the river system thanks in part to lower barge freight. For more, see my Basis Outlook.

The preliminary report from the CBOT had futures volume in corn up 4% on Thursday to 407,029. Open interest rose 2,414 despite active fund short covering, suggesting elevators hedging farmer sales. Options volume was 2% higher at 172,986, 58% of it puts as implied volatility in corn jumped almost 9% Thursday to 31.96. 

Traders liquidated August calls that expire today but added August puts, betting September futures would close below $3.85. Open interest also shot 8,776 higher in calls that expire at the end of next week.

Overseas markets were fairly quiet today. September futures on the Dalian Exchange in China lost 2 cents to $6.285 after the government sold nearly 70 million bushels of corn from its reserves, most of it from the 2014 crop. The auctions continue to attract good attention from buyers thanks to financial incentives and expectations for lower production this year.

November futures in Paris were flat at $4.982, after adjustment for volumes and currencies, as France made no change to its crop ratings this week.

Bottom line: While yields may wind up lower than USDA projects, specifics won’t be known for a month or more. Charts show classic signs of a top but ratings will have to improve to confirm. This is a rebound rally for now; use it to step up protection. For more, see my Weekly Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Soybeans saw fairly steady selling overnight, keeping rally attempts in check. November futures are holding to an inside day, keeping their two-week uptrend intact.

Export sales last week were strong at 71 million bushels. Totals reflected new crop deals signed by a Chinese trade delegation but also included another 15.1 million bushels of old crop. Basis posted gains in the export pipeline last week with processor bids also showing strength. 

Vegetable oil markets in Asia were mixed today. September soybean oil futures on the Dalian Exchange in China moved higher to 41.117 cents per pound but September futures for palm oil in Malaysia slipped slightly to 27.346 cents.                                        

Oilseed prices internationally were mixed. September soybean futures in China lost 5.3 cents to $15.31 while November rapeseed was steady at $9.762 and November canola in Winnipeg edged three-quarters of a cent lower to $9.181. 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 10% Thursday to 214,565 with open interest up 6,281 despite moderately active fund short covering, with potential end user buying involved. Options volume jumped 47% to 110,078, 62% of it calls as implied volatility in soybean options was 9.5% higher at 27.81. 

Traders again added September and November $11 calls with new interest also noted in the September $10.30/$11.30 call spread. 

Bottom line: Soybeans still have plenty of weather to trade but ability to hold now is key. Large global supplies remain an anchor on prices appears to have limited gains to short-covering for now. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Wheat prices are fighting to hold momentum from Thursday’s bullish reversals, following two-sided trade overnight.

Export sales of 24.6 million bushels last week reported Thursday were a surprise, morning doubling trade guesses and easily topping the rate forecast by USDA for the 2017 crop.

Volume in soft red winter wheat eased a little to 115,787 with light fund short covering taking 2,346 off open interest. Volume in hard red winter fell 26% to 39,418 on open interest that was up 1,104.

Options volume for soft red winter wheat fell 3% to 31,665, 51% of it calls with implied volatility edging higher to 29.70. Traders liquidated August calls that expire today. 

Overseas markets were quiet. January futures for Eastern Australian Wheat lost another 2.1 cents to $6.224 while December futures in Paris morning trade were up a penny at $5.616 after adjustments for volumes and currencies.

Bottom line: Seasonal trends suggest wheat may have more time to rally. Make sure you have sufficient protection in place in case a rebound fails. 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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