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Morning Market Review for Aug. 14, 2018

Dollar pullback is a sign that buyers are back. (Comments are updated by 7:30 a.m. Central Time.)

Opening Calls
Up 1 to 2
Soybeans: Up 3
Wheat: Up 2 to 6

Follow the money as traders appear to be shifting to buying mode

Grain futures are higher this morning, getting a modest bounce from a weaker dollar that lifted the mood across world markets.

Nothing materially changed around the world, from Turkey’s currency crisis to other tariff and sanctions battles. But after fleeing to safety yesterday, money managers again appeared to have a short memory and shifted back into buying mode. That helped ease some of the lingering pain from Friday’s bearish USDA reports.

I’ll be doing a webinar on the impact of the USDA reports at 3 p.m. CDT Aug. 16 for the University of Arkansas Extension. Click here to register.

The pullback by the greenback from 13-month highs also gave a lift to crude oil, which flirted with $68 a barrel overnight.

Corn prices are a little higher, again holding to narrow ranges after December held a test of three-week lows Monday. A drop in crop ratings gave the market a bit of a lift overnight.

Corn conditions declined for the fourth straight week, reducing yield potential nearly one bushel per acre nationwide accord to our model. That brought the estimate of yields based on state conditions to 178.5 bpa, one-tenth of a bushel above USDA’s forecast Aug. 10. Ratings improved in only two states at either end of the growing region: South Dakota and Pennsylvania.

Progress remains well ahead of average, with 26% of the crop dented, twice the normal rate, and 76% in the dough stage.

Farmers reporting Feedback From The Field yesterday cited huge variations in conditions, with corn yields ranging from 70 bushels per acre to 195 bpa.

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 by scrolling down to our updated interactive map.

Storms moving through the southwest part of the growing region should spread moisture over most of the Corn Belt over the next week, with heaviest accumulations south of I-80. The official 6 to 10 and 8 to 14-day forecasts out yesterday and morning updates from the ensemble model show a trend towards cooler and wetter conditions for the end of the growing season.

Weekly export inspections of 49.7 million bushels were down just 1 million from the prior week, but fell short of the rate needed to reach USDA’s forecast, which could be 75 million bushels too high. USDA also reported the sale of 7.8 million bushels of corn to Mexico under its daily reporting system for large purchases, split between old crop and new.

Overseas markets were also stronger today. September futures in China rose 2 cents to $6.743 and November futures in Paris in midday trade gained 2.9 cents to $5.391 after adjustments for volumes and currencies

The preliminary report from the CBOT showed daily futures volume down 20% Monday to 482,824, and 84,462 of that was done in the September-December on the final day of the Goldman roll, when investors following the index move positions out of the nearby. Open interest fell 18,080 with light fund selling noted.

Options volume was off 36% to 161,588, 73% of it calls as traders liquidated some of the out-of-the-money December calls bought Friday. Implied volatility in the at-the-money December options fell to 17.91.

Bottom line: Signs of lower yields may be needed to firm the market now. 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 turn higher after initial profit taking overnight from Monday’s rally. Crop ratings and export hopes helped improve the mood a little this week.

Soybean ratings declined in Monday’s progress report. Overall yield potential fell two-tenths of a bushel per acre, reducing the yields based on national ratings to 51 bpa, compared to the 51.6 bpa found by USDA in Friday’s report.  Increases in soybean yield potential were hard to find this week, gaining ground only in Louisiana, Indiana and North Carolina. USDA said 84% of the crop is setting pods, 12% ahead of the five-year average.

Export inspections last week of 21.7 million bushels fell below the rate needed to reach USDA’s forecast for the 2017 crop. Based on current inspections it appears USDA be a tad high with its current export sales forecast depending on how the final three weeks of the marketing year play out.

Still, the market seemed encouraged by news the Peak Pegasus, which arrived in the Dalian harbor too late to beat the tariffs, was being unloaded, paying the tariff, with the delay attributed to port congestion. The inspections breakdown showed another ship was loaded out August 5 from the PNW bound for China, the MG Mercury with 2.3 million bushels. Three other ships are either in port or bound for China and U.S. soybeans for immediate delivery out of the Gulf are trading $2.25 a bushel cheaper than October delivery out of the Gulf.

USDA also reported the sale of 5.2 million bushels of new crop to Mexico under its daily reporting system for large purchases.

Vegetable oil markets in Asia were narrowly mixed today. September futures in China rose to 37.707 cents per pound and September palm oil futures in Malaysia were at 24.35 cents.

Oilseed markets internationally were mixed. September futures in China were up 3.2 cents to $14.398, November rapeseed futures in Paris in midday trade gained 6.5 cents to $9.846 and November futures on Winnipeg canola overnight were down 2.8 cents to $8.722 after adjustments for volumes and currencies.

Deliveries today against August futures fell to 52 lots as August prepares to go off the board at noon. The preliminary report from the CBOT showed daily futures volume down 26% at 259,912, with open interest up 4,038 on light fund short covering.

Options volume was down 12% to 103,894, 56% of it calls as traders rolled down out-of-the-money November calls and added the November $8 and $8.50 puts. Implied volatility in November at-the-money options fell to 19.59.

Bottom line: The outlook for soybeans is bearish until China starts buying again. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

Wheat prices are mostly higher this morning. Winter wheat contracts held to inside days while Minneapolis tried to recover from came pressure caused by better conditions on the northern Plains.

Spring wheat ratings improved as more results came in off the combine. The gain was modest, just a tenth of a bushel per acre, but yields based on the ratings continue to run well above USDA’s forecast yield of 47.6 bpa.

USDA also reported 94% of the winter wheat crop harvested, with spring wheat harvest at 35%.

Egypt’s latest tender due this morning should show now if sharply weaker Russian ruble is affect exporters. The currency plummeted on new U.S. sanctions, sending wheat prices in the local currency to all-time highs.

Export inspections perked up to 17 million bushels last week, though that still fell below the rate needed every week to reach USDA’s forecast for the 2018 crop.

Overseas markets are firming today. January futures for Eastern Australian Wheat edged a penny higher to $7.981 and December futures in Paris midday trade were up 3.5 cents to $6.468 after adjustments for volumes and currencies.

Volume in soft red winter wheat was 14% lower Monday at 247,655 with 44,975 done in the September-December spread. Open interest was up 3,593 on modest new fund selling.

Options volume rose 15% to 62,037, 68% of it calls as traders liquidated more September calls that expire at the end of next week. Implied volatility in at-the-money September options rose to 32.22.

Volume in HRW futures was down 21% to 90,999 with 13.120 done in the September-December. Open interest was up 2,579.

Bottom line: Wheat could stabilize over the next week or so and perhaps mount a rebound. 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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