Morning report: Traders hand out overnight gains for corn, soybeans and wheat. (Comments are updated by 7:30 a.m. Central Time.)
Overnight trends:
Corn: Up 7 to 8 cents
Soybeans: Up 23 to 26 cents
Wheat: Up 8 to 14 cents
Recent negotiations to get Ukrainian grain exports kickstarted have caused a slump in grain prices in recent sessions – but questions remain on what such a plan would actually look like. That reality, along with plenty of hot, dry weather in store for the central U.S. this week, prompted some overnight technical buying. Corn prices firmed around 1% higher heading into Monday’s session, with soybeans and some wheat contracts up more than 1.5%.
Overseas stock markets were all in the green today. Asian markets closed 0.5% to 1.5% higher, with European markets all rising around 1.25% in midday trading. Ahead of the opening bell on Wall St., Dow futures were up 272 points to 31,519 as investors await a new round of quarterly corporate earnings reports out later this week.
Energy futures also trended higher overnight. Crude oil firmed 1.75% to $99 per barrel as bargain buyers eye recent declines this past week. Gasoline climbed 2%, with diesel up around 0.75%. The U.S. Dollar softened moderately.
The latest 72-hour precipitation map from NOAA shows apart from parts of the upper Midwest and Northern Plains, don’t expect a lot of additional rainfall between today and Thursday. Official 6-to-10-day forecasts show bountiful hot, dry weather across much of the central U.S. between July 23 and July 27, although a few parts of the eastern Corn Belt (most notably Michigan and Ohio) could see some wetter-than-normal conditions during this time.
Last Friday, commodity funds were net buyers of soyoil (+6,000) contracts but were net sellers of soymeal (-5,000) and CBOT wheat (-7,000). Funds were roughly even when trading corn and soybeans.
Corn
Corn prices firmed more than 1% overnight as excessive heat in parts of the central U.S. are expected to hurt pollination prospects and drag down yield and quality potential. Seasonally, prices saw a sharp run-up in late February – peaking by April and struggling to find much positive momentum since that time. Current weather forecasts should be supportive of price gains moving forward but can still be overridden by headlines coming out of Ukraine if it looks more likely that its export woes will truly get solved soon.
Corn basis bids were steady to weak last Friday after eroding 6 to 15 cents lower across four Midwestern locations.
Traders will have plenty of additional data to digest from USDA later today after the agency releases its next grain export inspection and crop progress reports. For reference, USDA showed corn export inspections at 36.8 million bushels last week (on the high end of trade estimates), and it showed crop quality at 64% rated in good-to-excellent condition through July 10.
Summer’s halfway point is often a make-or-break moment for crop prices amid corn pollination and soybeans filling out their production potential, according to grain market analyst Bryce Knorr. “Oversold new crop futures are trying to prove they bottomed after Independence Day,” he says. “November soybeans held $13 while December corn rallied back above $6 last week following a break to the lowest level since January, and they weren’t alone. Big speculators were massive sellers in everything ag, taking bullish bets in crops and livestock to the lowest reading in nearly two years.” Knorr offers additional analysis in today’s Ag Marketing IQ blog – click here to learn more.
For France – Europe’s No. 1 grain producer – corn conditions slid a point lower this past week, with 83% of the crop rated in good-to-excellent condition through July 11, according to the FranceAgriMer farm office.
The preliminary report from the CBOT showed daily futures volume eased slightly to 270,468, with open interest also down another 8,523. Options volume was also down slightly, to 120,042 and still moderately favors calls (64,306) over puts (55,736). Implied volatility for near-the-money September contracts shifted slightly lower to 42.8% with another 38 days until expiration.
Soybeans
Soybean prices raked in double-digit gains overnight – a strong hint that traders are back to focusing on tight domestic stocks and potential yield-eroding weather forecasts in store throughout late July. USDA estimated that yield potential is 51.5 bushels per acre in its latest WASDE report, out late last week. It’s important to ask whether that number still feels realistic after we get through what is historically the hottest couple of weeks of the year.
Last Friday, soybean basis bids were steady to weak after dropping 5 to 20 cents lower across half a dozen Midwestern locations.
Be sure to keep an eye out on USDA’s next round of grain export and crop progress data, out later this morning. (NOTE: Farm Futures recaps both of these reports – just visit www.FarmFutures.com soon after they are released). A week ago, soybean export inspections were disappointing, with just 13.1 million bushels for the week ending July 7. Quality ratings took an unexpected three-point drop, meantime, with 62% rated in good-to-excellent condition through July 10.
South Korea passed on all offers in its tender to purchase 60,000 metric tons of soymeal that closed earlier today. Prices were regarded as too high. No word yet on whether the country’s animal feed maker group will issue a new tender later this week.
The preliminary report from CBOT showed daily futures volume fell moderately lower to 119,013 with open interest also down 1,053. Options volume eased to 42,413 and still moderately favor calls (26,947) over puts (15,466). Implied volatility for near-the-money August contracts fell to 30.1% and expire in just three days.
Wheat
Wheat prices hope to finally shake a series of misfortunes – falling to five-month lows last week after ample technical selling throughout the summer. Fundamentals are not necessarily bad, but traders are still dealing with a price runup earlier this spring that pushed them to near-record highs. Overnight, prices tested gains that ranged between 1% and 2%.
Harvest progress across the Northern Hemisphere has especially hampered prices in recent weeks, In the U.S., winter wheat harvest reached 63% completion through July 10. USDA will release its updated crop progress numbers later this afternoon.
Russia’s Sovecon consultancy estimates that the country’s July wheat exports will more than double from June, reaching 84.5 million bushels. That would be the best monthly tally since February, if realized. Russia is the world’s No. 1 wheat exporter.
French farm office FranceAgriMer estimates that the country’s soft wheat harvest progress jumped from 14% a week ago up to 50% through July 11%. Quality ratings firmed a point over this time, with 64% rated in good-to-excellent condition.
On Sunday, Egypt’s state grains buyer announced it will seek an “unspecified amount” of wheat in an international tender that closes on July 19. Origins include the United States, Canada, Argentina, Brazil and Australia. The grain is for shipment between mid-September and mid-November.
Pakistan received as many as seven offers in its tender to purchase 11.0 million bushels of wheat that closed earlier today. Additional details about the sale were not immediately available. The grain is for shipment in August.
Importers from the Philippines likely purchased 1.5 million bushels of animal feed wheat from Australia in a tender that closed on Friday. The grain is for shipment in November.
The preliminary report from CBOT showed daily SRW volume slide down to 86,817, with open interest trending 46 lower. Options volume improved to 51,904 and heavily favors calls (33,952) over puts (17,952). Implied volatility for September near-the-money options jumped to 49.2% but doesn’t expire for another 38 days.
Volume in HRW wheat improved to 43,195, with open interest trending 1,801 higher. Options volume is at 3,222 and still favors calls (1,688) over puts (1,534).
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