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Morning Market Review for April 20, 2018

Futures tumble, options trade weighs. (Comments are updated by 7:30 a.m. Central Time.

Overnight Trends:
Corn:
 Down 2
Soybeans: Down 5 to 7
Wheat: Down 7 to 9

Rain for wheat, heat for corn add to other pressures overnight

Grain futures are lower across the board this morning, with markets under pressure from improving weather forecasts and questions about export demand in light of ongoing trade friction in China. Expiration of May options after the close could also be a factor today, with markets typically nervous into weekends. 

Worries about headline news are especially key for financial markets, which show little change ahead of the open on Wall Street. Stocks were mostly lower in Asia before a rebound in Europe faltered on the heels of yesterday’s losses by blue chips in the U.S. 

The dollar is firm, pressuring gold, but crude oil is trying to hold on to gains after moving to a three-year high this week. Diesel prices continue to creep higher as agriculture use picks up.

 

Corn prices are posting modest losses this morning, with May struggling to hold two-week lows. Prices broke into the start of trading in Europe and were unable to fight back.

The Corn Belt should see a warming trend continue into next week, with only light precipitation expected. Forecasts look wetter for the second week of the outlook, though models are conflicted about temperatures into the first week of May. While tractors likely will stay parked in many areas, a northern Missouri grower reporting Feedback From The Field this week hopes to be moving this weekend. 

What’s happening in your fields? Let us know with our interactive feature and check out what other producers are saying.

Export sales improved to 47.4 million bushels last week, with strong shipments boosting basis in the export pipelines to the Gulf Cost and Pacific Northwest. Average bids across the growing region firmed a penny or two, with terminals running at normal levels after a sluggish start. 

Overseas corn prices were weaker today. May futures on the Dalian Exchange in China slipped 1.7 cents to $7.106 and June futures in Paris were down around a penny at $5.103 after adjustments for volumes and currencies 

The preliminary report from the CBOT showed daily futures volume down 23% yesterday to 301,347 with open interest down 4,396 despite light fund liquidation.

Options volume fell 20% to 62,770, 62% of it calls as traders liquidated May strikes that expire today. Implied volatility eased to 12.28 Thursday.

Bottom line: When will the markets be concerned about the weather? Traders think farmers can plant the crop in a week if needed, so it may take a while. Keep pricing old crop on rallies while waiting for better opportunities to sell 2018 production at 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 lower, with selling into the start of trading in Europe kicking off a break to two-week lows by the May contract.

Weakness yesterday came despite what on the surface was a good week of business. Export sales were strong at 78.3 million bushels, but 60 million of the total had already been announced under USDA’s daily reporting system for large purchases. More worrisome were net cancelations by China, though purchases by traders there did account for new crop purchases. Total commitments to China are down 19%, and the world’s largest importer accounts for just 53% of deals to date. Concerns increased following reports that some shipments of sorghum bound for China reversed course after being threaten by anti-dumping penalties this week. 

Basis slid in the export pipeline down the Gulf this week, but processors outside areas feeding the river were stronger as crush margins remain attractive due to the drought in Argentina. Total meal commitments are running at the second highest level ever.

Soybean oil futures in Chicago are trying to hold onto small gains this morning following mixed trade in Asia. May soybean oil futures in China eased to 40.742 but May futures for palm oil in Malaysia was up a quarter cent to 28.061 cents per pound.

Oilseed markets internationally weakened. May futures on the Dalian Exchange in China lost another 3.6 cents to $16.246, May rapeseed futures in Paris were down 2.8 cents to $9.56 and May canola futures in Winnipeg dropped 7 cents to $9.51. Note: International prices are converted to bushel or pound equivalents after conversions for currencies.

The preliminary report from the CBOT showed daily futures volume slightly higher Thursday at 263,902 while open interest was down 19,985 despite only modest fund selling.

Options volume rose 29% to 77,283, 62% of it calls as traders liquidated more November $11, $12 and $13 calls while adding $10 puts. Implied volatility dropped 6% to 14.36. 

Bottom line: Soybean supplies are large and higher prices may be attracting more acres. While the market could have legs into summer, use rallies to get some coverage on for new crop production, because prices are at profitable levels. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Wheat prices are lower at all three markets this morning with charts looking weak.

The weekend storm should bring much-needed moisture to parts of the dry southern Plains, which received little over the past week. The outlook into May also wetter. 

Export sales reported yesterday were again disappointing, slipping to 6.4 million bushels due to net old crop cancellations. Good moisture in the Black Sea area has key importers in no hurry to buy.

Overseas markets were mixed today. May futures for Eastern Australian Wheat gained a penny to $5.966 as forecasts continue to look mostly dry, but May futures in Paris morning trade were down a penny to $5.475 after adjustments for volumes and currencies. 

Preliminary volume in soft red winter wheat dropped by 9% yesterday to 131,756 with open interest up 3,005 despite light fund short covering.

Options volume was 7% lower at 23,967, 56% of it calls as traders liquidated May puts and calls ahead of expiration today. Implied volatility rose another 1.7% to 25.84. 

Volume in hard red winter wheat eased 5% to 56,598 on open interest that was down 446.

Bottom line: The clock is ticking on the wheat market into the May 10 USDA report. 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.
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