Markets-122316-scyther5-ThinkstockPhotos-2000 scyther5/Thinkstock

Morning Market Review for June 15, 2018

Futures crater on trade war threat. (Comments are updated by 7:30 a.m. Central Time.)

Overnight Trends:

Corn: Down 4 to 5

Soybeans: Down 15 to 17

Wheat: Down 3 to 9

Market meltdown sends prices to new contract lows

Grain futures are lower across the board this morning, pressured by new fears of a trade war and lack of weather threats for U.S. crops.

While stocks traded mixed in Asia and Europe today, U.S. indexes point to losses on Wall Street as investors brace for news on $50 billion in tariffs on China, with potential for the administration to add $100 billion more. The timing of any news announcement, along with a schedule for implementation is unclear, but the market assumes China will retaliate as previously announced, targeting U.S. agriculture in particular. 

The dollar may be one of the few winners this week, moving to a new high for the year on safe haven buying, buoyed by prospects for higher interest rates from the Federal Reserve. The strong greenback in turn is pressuring emerging markets: Both the Argentine peso and Brazilian real plunged to new lows yesterday, giving growers there more incentive to expand production.

 

Corn prices posted fresh losses overnight with selling starting to accelerate, sending July futures to a new contract low. New crop December also made a new low for the year.

While China isn’t a big importer of U.S. corn, especially the last few years, futures prices often move in tandem, a connection that increases during the growing season.  While temperatures in the mid-90s will bake the Corn Belt this weekend, storms over the next week should benefit most areas north of the Ohio and lower Mississippi river valleys. Official 6 to 10 and 8 to 14-day forecasts out yesterday show above normal temperatures and below normal rain easing and the latest morning updates are even cooler and wetter for the growing region.

Farmers reporting Feedback From The Field this week noted disappointing wheat fields on the central and southern Plains that have baked under hot temperatures and also affecting corn. “Winter wheat yield potential has gone from excellent to fair with several weeks of hot, dry weather.,” said a grower in Colorado.

What’s happening in your fields? Let us know by clicking this link to enter your data and comments and check out the latest reports on our interactive map.

Export sales last week totaled 46.3 million bushels, beating trade estimates though a strong pace of shipments will be needed through the summer to reach USDA’s increased forecast for the 2017 crop. China again accounted for no purchases of sorghum as the market braces for retaliatory tariffs against U.S. crops.

Overseas corn markets were mixed today. September futures in China gained 6.8 cents to $6.984 as another sale of reserves was met with an unenthusiastic response from buyers. August futures in Paris after adjustments for currencies and volumes were down 2.2 cents to $4.888 despite lower crop ratings in France this week.

The preliminary report from the CBOT showed daily futures volume soared 63% to a very heavy 811,711 contracts, while open interest rose 7,824 with active fund selling noted. Options volume rose 65% to 227,762, 62% of it calls as traders liquidated September $4.50 and $5 calls. Implied volatility in the at-the-money December options rose almost 1% to 22.83.

Bottom line: Aggressive sellers should consider using this break to pick up call options insurance to protect sales if the market can muster a rally on weather. For more, see my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Soybeans are suffering double digit gains again today, sending July futures to a new contract low on fears of Chinese retaliation. November futures plunged to its lowest level in almost a year, though markets are becoming very oversold. A bearish report, bullish reaction scenario when the tariff story finally breaks may be the best hope for stopping the bleeding in the market right now. 

Export sales last week of 29.8 million bushels improved markedly from the previous period, and shipments easily beat the pace needed to reach USDA’s forecast for the 2017 marketing year. Still, China added just 9.5 million bushels of new deals as the market waits for news about U.S. tariffs and Chinese retaliation. 

Members of the National Oilseed Processors Association today are expected to report May crush around 165 million bushels, which would easily be a record for the month. USDA raised its forecast for crush on Tuesday, which seems like an eon ago after the refocus on trade. 

Oilseed markets internationally were lower today. September soybeans in China lost 5.6 cents to $15.202, August rapeseed futures in Paris was off 2.6 cents to $9.221 and July canola futures in Winnipeg were own 2.6 cents to $8.912 after adjustments for volumes and currencies.

Vegetable oil markets in Asia were weaker. September soybean oil in China edged lower to 39.991 cents per pound while July palm oil futures in  Malaysia were closed for a holiday.

The preliminary report from the CBOT showed daily futures volume down 36% yesterday at 286,600 with open interest up 3,885 on modest new fund selling. Options volume was 16% lower at 132,670, 52% of its puts as traders rolled down August and July puts while adding the November $9.60 and $10 strikes. Implied volatility in November at-the-money options was up more than 1% to 17.81.

Bottom line: The market may try to make a bottom when a decision from China on retaliation emerges, but lack of a weather threat could limit any rebound for now. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Wheat prices are following other markets lower, with the strong dollar adding additional bearish pressure. Look for some pre-hedging to emerge today for the weekend as harvest gains steam on the southern Plains. Spring wheat is not doing quite as badly today as winter wheat after discovery of a GMO field in Canada was announced yesterday. Japan suspended purchases from Canada as a result.

Demand news remains tepid. Export sales of 11.1 million bushels were in line with trade estimates but fell below the rate needed every week for the rest of the marketing year to reach USDA forecast. 

Overseas markets moved lower today. January futures for Eastern Australian Wheat lost 4 cents to $6.964 and December futures in Paris were off 3 cents at $5.754 after adjustments for volumes and currencies.

Preliminary volume in soft red winter wheat dropped 12% yesterday to 231,048 while open interest was down 3,152 despite modest new selling. Options volume rose 67% to 55,269, 51% of it puts as traders added August puts. Implied volatility in at-the-money July options was up nearly 5% yesterday to 34.23.

Volume in HRW lost 37% yesterday to 71,133 on open interest that was up 2,113.

Bottom line: Wheat is being swamped by weakness in broader markets and the strong dollar. That’s disrupted the narrative for a long-term bottom. 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. 

Want to receive market commentary by e-mail twice each day? This service includes added information, charts and graphs to explain market trends, and more. Sign up for the FREE service today - Farm Futures Daily - and follow along on Twitter with @FarmFutures.

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.
Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish