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Morning Market Review for April 26, 2018

Export hopes boost soybeans. (Comments are updated by 7:30 a.m. Central Time.

Overnight Trends:
Corn:
 Down 1 
Soybeans: Up 3 to 5
Wheat: Mixed

Buyers may lock up supplies sooner than later as China tariffs loom

Grain futures are mixed this morning, with an improving weather outlook limiting corn, while export hopes boost soybeans. 

Stocks traded mixed in Asia but turned higher in Europe, leaving U.S. index futures posed for a higher open after share prices turned around yesterday. The dollar traded both sides of unchanged overnight when yields on the 10-Year Treasury proved unable to hold a move above 3%. 

The softer greenback lent support to crude oil, which moved back above $68 a barrel overnight. Crude oil inventories rose last week on record U.S. production, but diesel stocks were down nearly 2 million barrels despite strong output in the Midwest. Whole diesel benchmarks are at or near the highest price since 2014. For more, see my Energy/Ethanol Outlook.

 

Corn prices are a little lower, holding to an inside day consolidating Wednesday’s surge higher. While it appears traders finally got the word about slow planting yesterday, a warmer and drier outlook into next week triggered a little profit taking.

Readings in the 70s raised soil temperatures in parts of Iowa above 50 degrees yesterday. Still, the second week of the outlook is looking cooler and wetter for much of the Corn Belt. Growers posting Feedback From The Field continue to report slow planting progress.

“A few fertilizer spreaders in the field not much else,” said a Michigan grower who hoped to get in the field. But in north central Kansas, drought was still a concern after storms this week. “About 1 inch of moisture total since October 2017,” wrote a farmer there. 

What’s happening in your fields? Let us know with our interactive feature and check out what other producers are saying. Click this link to enter your data and comments.

Ethanol production fell to the lowest level since harvest, though that’s not unusual as blenders start to make the transition to summer gasoline stocks. Inventories rose last week but prices rebounded from early selling on turnaround in crude prices.

Export sales out this morning are expected to stay strong, topping 50 million bushels. 

Overseas corn prices were weaker today. May futures on the Dalian Exchange in China dropped 6.2 cents to $7.02 after the government sold 105 million bushels from reserves at a price of just $6.02. June futures in Paris were down less than a penny to $5.026 After adjustments for volumes and currencies 

The preliminary report from the CBOT showed daily futures volume up 28% yesterday to 485,687 while open interest rose 4,009 as heavy fund buying offset liquidation of May ahead of first notice day Monday. There are 1,034 lots registered for delivery along the Illinois River, which cash was 8 to 21 below option yesterday.

Options volume rose 42% Wednesday to 110,408, 68% of it calls as traders rolled up out-of-the-money September puts and added the August $4 and $4.50 calls. Implied volatility rose another 6.6% yesterday to 15.58. 

Bottom line: Slow planting appears to be gaining a little traction, but traders won’t really get worried unless it appears 85% of the crop won’t be planted by the third week of May. 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 trying to lead the market higher, buoyed by hopes of seasonally strong exports as buyers worry China could dominate the market if tariffs halt imports of U.S. supplies. Better weather for corn planting also eased worries about rising acreage.

Export sales are expected to be down from last week’s big totals, but still run around 40 million bushels.

Vegetable oil prices in Asia weakened overnight thought soybean oil futures in Chicago were slightly higher. May soybean oil futures in China dropped a quarter cent to 39.812 cents per pound, hitting a new low for the year, while May futures for palm oil in Malaysia couldn’t hold an early rally, ending at 27.639 cents.

Oilseed markets internationally were also lower. May futures on the Dalian Exchange in China dropped 17.3 cents to $15.999, May rapeseed futures in Paris was down 3.5 cents to $9.368 and May canola futures in Winnipeg was 4.2 cents lower at $9.415. Note: International prices are converted to bushel or pound equivalents after conversions for currencies. 

The preliminary report from the CBOT showed daily futures volume off 3% to 290,333 while open interest fell 6,021 as modest fund buying offset May liquidation. There are 1,186 lots registered for delivery, all but one in Chicago where basis is 15 under. 

Options volume fell 235 yesterday to 55,841, two-thirds of it calls as traders added the July and September $11 calls while liquidating the November %11 strike. Implied volatility edged higher to 15.34. 

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 mixed today. While winter wheat contracts reversed lower, Minneapolis edged higher on drier forecasts for the northern Plains.

Wheat exports are expected to show a sift to new crop demand as some old crop deals get rolled. Total sales could come in around 10 million bushels.

Overseas markets were better today. May futures for Eastern Australian Wheat jumped 9.3 cents to $5.915 as forecasts are mostly dry for the next two weeks. May futures in Paris morning trade edged a half cent higher to $5.481 after adjustments for volumes and currencies. 

Preliminary volume in soft red winter wheat was 12% higher Wednesday at 158,289 with fairly active fund short covering helping to cut open interest by 14,733. Only 25 contracts registered for delivery in Toledo, where cash is 10 to 20 over the board.

Options volume was 43% higher yesterday at 49,587, 56% of it calls as traders added both June and July puts and calls. Implied volatility rose another 6.5% to 26.82, 

Volume in hard red winter wheat was up 7% to 66,973 on open interest that fell 4,423. Basis is 30 to 35 under May in Wichita, where most of the 381 lots registered are sitting.

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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