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Corn, Soybeans Sell Off Friday

Favorable crop weather pressures the grains.

DES MOINES, Iowa -- On Friday, the CME Group’s farm markets couldn’t hold on to any strength.

Trading sentiment turned negative when a Chinese delegation, scheduled to visit a Montana farm next week, canceled the visit Friday. This added pressure to the soybean and stock markets.

At the close, the Dec. corn futures finished 2¢ lower at $3.70¾. March corn futures finished  2¼¢ lower at $3.81¼.
 
Nov. soybean futures ended 10¼¢ lower at $8.82¾. Jan. soybean futures closed 9½¢ lower at $8.96½.

Dec. wheat futures closed 3¾¢ lower at $4.84¼.

December soymeal futures settled $1.10 per short ton lower at $295.00. December soy oil futures ended 0.57¢ lower at 29.40¢ per pound.

In the outside markets, the NYMEX crude oil market is $0.04 per barrel lower, the U.S. dollar is higher, and the Dow Jones Industrials are 74 points lower.

Jason Roose, U.S. Commodities, says that this week’s trade action has mostly spurred selling, not buying.

“It has been an exiting week in the grain market, with strong exports giving the market underlying support. Also, crude oil gave the grains mild support. Harvest will limit rallies at any given minute on the grains, but at any indication that yields are much below the USDA figures, premium will be added in quickly,” Roose says.

Al Kluis, Kluis Advisors, says investors are watching yield reports closely.
 
“As harvest draws closer, the market will remain a bit choppy as we start hearing some initial yield results. The upside is limited, since weather will let a good portion of the crop finish off. However, we will also have support. Many feel the USDA will cut the production number further in future reports,” Kluis told customers in a daily note.

Kluis added, “The cash basis for corn will remain pretty strong as we head into harvest. The late crop this year will get harvested later than normal, plus we could see the crop a lot wetter. This would result in bushels not coming to town until later in harvest.”

Technically

Technically speaking, Kluis says that the December corn futures seem to be struggling with the $3.74 to $3.75 area, which was Monday’s high.

“If we can break through that level, you can see the next area of resistance will be just under $3.80. That is the 38% retracement of the $4.24½ to $2.52¼ sell-off,” Kluis stated to customers.

Above the $3.80 level, the next price of resistance is at $3.89, he says. “That is the bottom end of the gap we left in mid-August. The gap between $3.88 and $3.92¾ would be a good area to consider some new-crop corn sales,” Kluis stated.

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Thursday’s Grain Market Review

On Thursday, the CME Group’s farm markets close higher.

At the close, December corn futures finished 1½¢ higher at $3.72¾; March corn futures are 1½¢ higher at $3.84.
 
November soybean futures settled 4½¢ lower at $8.93; January soybean futures settled 3¾¢ higher at $9.06.

December wheat futures ended 1½¢ lower at $4.88.

December soy meal futures finished 70¢ per short ton higher at $296.10. December soy oil futures closed 0.03¢ lower at 29.97¢ per pound.

In the outside markets, the NYMEX crude oil market is 6¢ per barrel higher, the U.S. dollar is lower, and the Dow Jones Industrials are 10 points lower.

On Thursday, the USDA’s weekly Export Sales Report shows strong corn, soybean figures.

  • Corn: 1.529 million metric tons (mmt) vs. the trade’s expectations of between 500,000 and 1,550,000 mmt
  • Soybeans: 1.72 mmt vs. the trade’s expectations of between 600,000 and 1,500,000 mmt
  • Wheat: 286,600 mt vs. the trade’s expectations of between 200,000 and 700,000 mt
  • Soybean meal: 435,800 mt vs. the trade’s expectations of between 125,000 and 350,000 mt

Matt Tranel, cash advisor for Commodity Risk Management Group, says investors are building in premium into the soybean market.

“Soybeans have seen a bounce ever since September 9. A few reasons for that. The $8.50-per-bushel level has served as fairly solid support ever since the beginning of August. Every crop tour that has published data has found low pod counts in fields. So, that offers support as well, especially if the crop has trouble finishing out. The South China Post reported that an interim trade deal could be agreed upon next month, so traders are building some premium into the market for that. We have heard this headline many times before, so traders are a little hesitant to push the market significantly.  We'll see how it all unfolds to that end,” Tranel says.

Al Kluis, Kluis Advisors, says investors are liking the recent activity of Chinese purchases of U.S. soybeans.
 
“Traders are patiently awaiting the next face-to-face meeting between the U.S. and China to see about any new trade deals. So far this week, China has been rather actively buying up some U.S. soybeans. The weather in South America might be changing, allowing those folks a chance to get some soybeans planted early,” Kluis told customers in a daily note.

Kluis added, “China has been buying soybeans from the U.S. (instead of South America) over the past couple of weeks. This has to do more with the fact that soybeans in South America are getting very tight. World supplies seem to be dwindling.”

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Wednesday’ Grain Market Review

On Wednesday, the CME Group’s farm markets turn mostly higher.

At the close, December corn futures finished 3¼¢ higher at $3.71¾; March corn futures closed 2½¢ higher at $3.82½.
 
November soybean futures finished 5¢ lower at $8.88¼; January soybean futures settled 5¢ lower at $9.02¼.

December wheat futures ended 5½¢ higher at $4.89½.

December soy meal futures closed $2.40 per short ton lower at $295.40. December soy oil futures finished 0.01¢ higher at 30.00¢ per pound.

In the outside markets, the NYMEX crude oil market is $1.36 per barrel lower, the U.S. dollar is higher, and the Dow Jones Industrials are 171 points lower.

Al Kluis, Kluis Advisors, says despite the latest Chinese purchases of U.S. soybeans, the market needs fresh bullish news each day.
 
“Soybean traders got another announcement of an export sale to China on Tuesday morning, which puts the total since last Friday at 720,000 metric tons. Why did soybeans slip with the bullish news? Recall that prices rallied nicely on the prospects that China was buying U.S. soybeans. This is a great example of “buy the rumor, sell the fact.” The bulls need some fresh news before they will be willing to mount another push higher,” Kluis told customers in a daily note.

Kluis added, “The Federal Reserve Board will release its decision on short-term interest rates this afternoon. Many analysts expect to see at least one more rate cut this year. Will it be today? Whatever the Fed commentary reveals about future monetary policy decisions will likely have a big impact on the stock market and the U.S. dollar.”

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Tuesday’s Grain Market Review

On Tuesday, the CME Group’s farm markets give back the gains from yesterday’s trade.

At the close, December corn futures finished 6¢ lower at $3.68; March corn futures closed 56¢ lower at $3.80.
 
November soybean futures ended 6¼¢ lower at $8.93; January soybean futures closed 6½¢ lower at $9.07.

December wheat futures settled 4¼¢ lower at $4.84¾.

December soy meal futures ended $1.10 per short ton lower at $297.80. December soy oil futures finished 0.29¢ lower at 29.99¢ per pound.

In the outside markets, the NYMEX crude oil market is $3.64 per barrel lower, the U.S. dollar is lower, and the Dow Jones Industrials are 8 points lower.

On Tuesday, private exporters reported to the USDA export sales of 260,000 metric tons of soybeans for delivery to China during the 2019/2020 marketing year.

The marketing year for soybeans began September 1.

Al Kluis, Kluis Advisors, says investors are squarely focused on harvest results and the crude oil market.
 
“Grain traders are more interested in hearing what the early yield reports have to say. It is still worth watching crude oil prices,” Kluis told customers in a daily note.

Kluis added, “It is still early, but the early yield indications for harvest in the U.S. are not sounding great. Many reports from clients suggest we need a few weeks of warm, dry weather for this crop to finish.”

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Monday’s Grain Market Review

On Monday, investors are eyeing the weekend news of the disruption of the Saudi Arabia oil supply, U.S. weather, and China’s purchases of U.S. soybeans.

At the close, December corn futures finished 5¼¢ higher at $3.74; March corn futures closed 4½¢ higher at $3.86.
 
November soybean futures settled 1¼¢ higher at $9; January soybean futures ended 1½¢ higher at $9.13¾.

December wheat futures finished 5¼¢ higher at $4.88¾.

December soy meal futures closed $2.60 per short ton lower at $298.90. December soy oil futures closed 0.85¢ higher at 30.28¢ per pound.

In the outside markets, the NYMEX crude oil market is $7.48 per barrel higher, the U.S. dollar is higher, and the Dow Jones Industrials are 122 points lower.

On Monday, private exporters reported to the USDA export sales of 256,000 metric tons of soybeans for delivery to China during the 2019/2020 marketing year.
 
The marketing year for soybeans began September 1.

Britt O’Connell, cash advisor for Commodity Risk Management Group, says corn is showing nice gains starting on the overnight session and carrying through, here, today.

“With many expecting a bottom firmly in place on corn, short positions are being covered. You’re also seeing some outside strength helping support corn. After significant damage was done over the weekend to the Saudi oil fields, oil is reacting with a gap higher overnight of over $5. With the extent of the damage now fully estimated, fears around the larger scale impact from a political perspective are being assessed. Generally speaking, high oil prices are good for corn,” O’Connell says.

O’Connell added, “Hopeful that this increases ethanol demand. The other large demand sector for corn is cattle. Trading at multiyear lows after the Tyson plant fire in Kansas, it appears as if that market has found some support, as well. While we need continued strength in that market, sentiment is turning more favorable.”

China is rumored to have bought 15 cargos of soybeans off the P&W last week with 1 to 3 million tonnes rumored to be additional bookings, she says. The 204,000 tonnes have been confirmed as a sale to China last week. Most of this news hit the market last week.  

“A bearish weather forecast is going to continue to stare down a bean crop that, while less than last year, still wrestles with burdensome supplies; $9 has a psychological effect, and it may not yet be convinced enough to blow through,” she says.  

O’Connell added, “It seems that traders are so over the trade war and the rhetoric around it. I believe that until we can see and smell the dry ink on a deal, the markets’ reactions will remain somewhat muted,” O’Connell says.

Al Kluis, Kluis Advisors, says investors are squarely focused on crude oil prices and weather.
 
“After a good close in the U.S. grain last week, we are seeing some spillover strength to start out the week. Crude oil futures are up sharply after a drone attack in Saudi Arabia over the weekend. Strength in crude oil should help lend support to most commodities to start out the week,” Kluis told customers in a daily note.

Kluis added, “I think the hot, dry weather – especially in the eastern Corn Belt – will do more damage to the soybean crop than help it. Being forced to shut down more quickly this late in the season, I think will cut yield a little more.”

On Friday, the Commodities Futures Trading Commission (CFTC) released its weekly Committments of Traders Report. 

In its report, the CFTC showed that the producers and commercial investors are net short corn, after this week, by 202,311 contracts vs. 245,477 a week ago.

Meanwhile, managed money investors are net short corn by 143,467 contracts vs. 123,800 a week ago.
 
For soybeans, producers and commercial investors are net short the market by 23,045 contracts vs. 36,271 a week ago.

Managed money is now net short soybeans by 90,013 contracts vs. 71,558 a week ago.

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