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Afternoon Market Recap for Oct. 17, 2019

Wheat leads market higher

Weaker dollar and bullish chart trigger short covering

Grain futures closed mostly higher today, though off session highs, paced by buying in soft red winter wheat. A strong dollar and a bullish chart gave lift to wheat, helping it avoid some buyers’ remorse noted in corn and soybeans after early hopes for a Brexit deal began to fade.

Drier weather into early next week is also encouraging more harvest activity, adding a little pressure from elevators buying grain off the combine. But with plenty of storage available in most areas, farmer selling remains light.

Stocks are trying to hold on to gains after a back and forth session headed into the close. Share prices rallied overnight on news of a Brexit deal between the EU and Britain, which gave a boost to grain prices as well. But the rally on Wall Street faded when doubts about passage of the measure in the British Parliament surfaced. Another rejection by lawmakers could pave the way for new elections that could secure passage early next year if Prime Minister Boris Johnson is successful.

The U.S. last year sold around 5.3 million gallons of ethanol to the UK – around 1.9 million bushels worth of corn – along with 12 million bushels of soybeans. Leading UK exports to the U.S. are fish and dairy products.

Crude oil futures recovered from losses to close with modest gains. Futures slipped below $53 a barrel after the government confirmed a sharp rise in inventories last week thanks to weaker exports and production that stayed at record levels as a couple more rigs were put back into production.

Diesel prices were steady to a penny-and-a-half lower on Midwest wholesale benchmarks despite tightening stocks in the region drawn down by harvest activity. Fuel prices are little changed so far in October though basis with futures delivered in New York Harbor is weaker than normal on the slow pace of harvest and lower crude costs. Refineries continue to maintain production of ULSD despite downtime for seasonal maintenance.

Corn prices closed with modest gains Thursday, as worries about lost production offset concerns about demand.

December futures closed up 3 cents at $3.9475.

Traders expect Friday’s export sales from last week to more than double last week’s tepid total of just 11.2 million bushels. Still, that would be well below the weekly rate needed to reach USDA’s forecast for the 2019 crop.

The government today reported plants produced around 1% more ethanol last week as margins improved, but stockpiles also increased. Total weekly production so far is down around 5% from last year, even though USDA forecasts a small increase for the entire marketing year.

Basis firmed a half cent at the Gulf and falling barge freight costs continued to strengthen bids on parts of the river system today.

Initial volume today was estimated at 231,175 compared to final volume of 229,632 Wednesday.

Soybeans closed with modest gains today, reversing higher off the two-week support line for November futures after the Brexit news broke.

November futures closed up 3.5 cents at $9.315.

Support came from positive comments in Beijing and Washington about the preliminary trade pact reached last week. White House economic advisor Larry Kudlow said the agreement would deal with tariffs, not just listing dollar amounts. The two sides are still talking, trying to hammer out the fine print in the first phase of the deal so it can be signed at the Asia Pacific summit in November.

Despite the happy talk, tensions continue on other matters. Two U.S. citizens were apparently detained recently in China, while the U.S. told Chinese diplomats they must report contacts with local and state officials in the U.S.

There also has been no confirmation of any new purchases by China. with chatter in the trade about buying also mute. Traders expect export sales for last week, delayed due to Monday’s holiday, to be down to around 45 million bushels, which would still beat the rate forecast by USDA for the 2019 crop. USDA already confirmed the sale of 21.9 million bushels to China last week under its daily reporting system for large purchases, with another 18.8 million to unknown destinations before the preliminary trade deal was struck.

Soybean basis firmed in the export pipeline today. Processors also bid higher as combines start running again this week with drier weather.

Initial volume today was estimated at 238,703 compared to 204,183 on Wednesday.

Wheat prices closed higher today, given a boost by the sharply weaker dollar and concerns about unharvested spring wheat fields buried by last week’s snow. As much as 50 million bushels of spring wheat could be at risk from unharvested fields on the northern Plains.

Still, the star of the day was the soft red winter wheat market. The nearby December surged through the 61.8% retracement of its selloff from June highs and also broke above the top of its uptrending channel off September lows.

Chart action in Minneapolis was not quite as positive with December failing a test of its 200-day moving average though it managed to close 1.5 cents higher at $5.52. SRW December closed up 12.25 at $5.255 and HRW December ended up 6.25 cents at $4.1325.

While the U.S. likely will get some of the big tender out of Saudi Arabia today, export business remains subdued. Traders expect the weekly total out Friday to reach the government’s forecast rate of 14 million bushels a week – but not much more.

Initial SRW volume was estimated at 111,859 today compared to final volume of 88,052 yesterday. HRW volume rose to 46,750 from 38,457 Wednesday.


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