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Morning Market Review for March 24, 2017

Oversold soybeans look for lifeline. (Comments are updated by 7:30 a.m. Central Time.)

March 24, 2017

Overnight trade
Corn: Steady to down 1
Soybeans: Down 5 to 6
Wheat: Steady to up 2

Rising estimates of South American crops, U.S. acres, weigh on prices

Grain futures are mixed this morning, as markets around the world wait for news out of Washington, where a vote is expected in the House today on new health care legislation. Despite uncertainty over the outcome of the showdown, U.S. financial markets are holding after stocks turned lower in Europe.

The dollar is a little softer, providing support for crude oil futures trying to get back to the $48 level. Safe havens, including Treasuries and gold, are little changed.

 

Corn prices are fractionally lower, keeping May futures to a range of just a penny overnight during a lighted traded and choppy session. Good demand and expectations for lower acres in 2017 provide some support to a market holding yesterday’s break to new 2017 lows.

Farm Futures latest grower survey released this morning found producers ready to cut corn acreage to 90.3 million this spring, down some 3.7 million from 2016. With average yields of 170.2 bpa the U.S. could still harvest more than 14 billion bushels, keeping carryout at 2 billion bushels or more. USDA reports its official Prospective Plantings a week from today on March 31. 

Export Sales last week improved to 58 million bushels, most of them old crop. The total was above trade guesses and easily beat the weekly rate forecast by USDA for the rest of the marketing year. The strength helped improve basis in the northern half of the export pipeline this week. For the latest interactive basis maps, see our Weekly Basis Review.

The preliminary report from the CBOT had futures volume down 9% to 231,545 with more new modest fund selling helping to add 9,839 to open interest. Options volume rose 2% to 75,002, with a few more puts trading than calls as traders liquidated April puts that expire today while adding April $3.60 calls for a cheap bet on a turnaround. 

Overseas markets were narrowly mixed. May futures on the Dalian Exchange in China gained 1.5 cents to $6.01 while June futures in Paris morning were down less than a penny to $4.71 after adjustments for volumes and currencies.

Bottom line: Old crop prices look to be following the seasonal trend confirming an early March top, with large supplies limiting potential. The debate over acreage could provide new crop some support, but the best chances for profitable prices likely won’t be seen until the growing season is underway. For more, see my Weekly Corn Review. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Soybeans are trying to halt steady overnight selling after breaking to new five-month lows. May futures are finally starting to reach oversold levels after the trading range of the past two weeks around $10 gave way.

Farm Futures survey released this morning showed farmers hoping to plant a record 89 million acres of soybeans, 5.6 million more than 2016. With average yields of 47.3 bpa, a crop of 4.167 billion bushels could increase carryout to 450 million bushels in the year ahead.

Sales last week topped 30 million bushels, most of them old crop, beating trade guesses and the weekly rate forecast by USDA for the rest of the marketing year. Still, rising estimates of South American production are creating more headlines. The Bolsa de Cereales in Argentina raised its forecast of this year’s crop to 2.8 billion bushels, 36.75 million bushels above USDA’s March 9 estimate.

While Argentina was mostly dry this week, showers are expected to return according to forecasts for the next two weeks

Vegetable oil prices in Asia were lower. May futures for palm oil in Malaysia broke to 28.95 cents/lb while May soybean oil on the Dalian Exchange in China slumped to new six-month lows, losing a third of a cent to 41.03 cents.

Oilseed markets were mixed. May soybean futures in China lost less than half cent to $15.194, May rapeseed for delivery in Paris was down 9.8 cents at $9.862 but May canola in Winnipeg edged four cents higher to $8.334. 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 15% on Thursday to 164,889 while open interest rose 8,227 despite modest additional fund liquidation. Options volume jumped 85% to 54,770, 51% of it puts as traders liquidated November $11 and $13 calls while adding the November $9 put. 

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 mostly higher this morning, finding some support despite rainy forecasts for the next two weeks. Spring wheat, the leader recently, is soft, while winter wheat contracts gain a little traction

Farm Futures survey found growers ready to cut seedings of spring wheat and durum this year, taking all-wheat acreage to 45.8 million for harvest in 2017. But with average yields of 46.6 bpa production could still top 1.8 billion bushels, more than enough to satisfy domestic demand and a modest export program.

Export sales last week were a little behind trade estimates at 20.9 million bushels, with the old crop total falling further behind USDA’s forecast for the 2016 marketing year that ends May 31. Still, hard red winter wheat sales are doing better, helping firm basis last week. 

While the latest Drought Monitor showed 26% of the winter wheat crop in drought areas, rains are already starting to move into the dry western Plains. Some areas could top 3 inches according to maps for the next week, with a couple storms in the outlook. Official 6- to 10 and 8- to 14-day forecasts out yesterday and the latest updates this morning continue to add moisture in the second week.

Overseas markets are a little lower. January futures for Eastern Australian Wheat settled slightly lower at $4.972 and May futures in Paris morning trade were down a penny at $4.903 after adjustments for volumes and currencies. 

Volume in soft red winter wheat dropped 5% on Thursday to 92,070 as open interest rose 11,102 on only light new fund selling. Options volume was down 26% to 21,206, with a few more calls trading than puts as traders added out-of-the-money May puts while liquidating out-of-the-money May calls. Volume in hard red winter wheat rose 22% to 48,055 on open interest that was up 3,984.

Bottom line: March and April are a crucial time for wheat as it tries to swim against a bearish tide and prove a long-term bottom is in. Lower U.S. production may not make much difference in a world full of wheat. 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

 

 

  

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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