USA - Grains resume losses. But cotton and soyoil gain
Can grain futures, recovering from multi-year lows, manage a third winning session in a row?
Not if early deals are anything to go by.
It was bears, rather than bulls, who returned stronger from the long US weekend, to send corn and wheat futures lower.
That said, there was some unfinished business left over from before the holiday, with INTL FCStone late on Friday revealing upbeat US crop yield estimates, of 175.6 bushels per acre for corn.
That represented an upgrade of 0.6 bushels per acre on the broker's estimate last month, and was well above too the forecast of 175.1 bushels per acre by the US Department of Agriculture (which updates its figures next Monday, in the monthly Wasde crop report).
Furthermore, FCStone's estimate beat a 174.8 bushels-per-acre estimate from Informa Economics, earlier on Friday.
Harvest looms
And this wasn't bears only cause for cheer, with the seasonal wind in bears' favour, given that autumn brings harvest, and with it a ramp up in supplies which tends to depress prices.
"This week will see corn harvest expand in the southern Corn Belt, with above-normal temperatures," said ag advisory group Water Street Solutions, although there may be "some rain disruption possible later in the week.
Not that the group appeared among the uber bears, adding that with corn prices "close to locking in crop insurance floors, farmers are rightfully reluctant sellers at these levels".
They are "leaving the selling to speculators who are already tipped quite bearish.
"If yield reports the next couple weeks begin to indicate any doubt of the 175 bushels-per-acre expectation, look for the possibility of short covering by funds and end-user buying to continue."
'Not quite as good as expected'
Indeed, actual yield results will trump estimates, and the early talk from the early harvest is a little less impressive than the hype.
"Early yield reports are now filtering in to the trade from the Delta and Southern Corn Belt with a general trend of 'good, but maybe not quite as good as expected'," Water Street Solutions said.
Benson Quinn Commodities said that some reports on corn cut for silage "are seeing lower-than-expected yields", with the broker noting too that Midwest temperatures last month were 1.8 degrees above normal, which can be a bad sign.
"Out of the five years this warm, two of the years had large yield decreases 5-10 bushels. Two other years we saw a decrease between 2-4 bushels," the broker said.
"What typically happens with a fast finishing crop is smaller than normal kernel depth, thus needing more kernels to equal a bushel."
Futures retreat
Still, investors are rightly leery of taking too much store of anecdotal yield reports – especially from areas outside the Corn Belt, where the harvest battle will really be won or lost.
Corn futures for December stood 0.5% lower in Chicago as of 08:50 UK time (02:50 Chicago time), at $3.27 a bushel, although the contract remained above its 10-day moving average.
That said, the contract is at that level still up 3.6% so far this month, recovering from lows last week which, in spot contract terms, saw corn notch up a seven-year low.
Corn vs wheat
Chicago wheat eased too, depressed by its fellow grain, given the huge job that wheat has to do to price itself into the feed ration at the expense of the likes of corn, and reduce huge world supplies.
The job in feed for wheat is particularly important given a world harvest which while a record in quantity terms is seen as being poor on quality – implying a particularly large volume of feed supplies to clear.
Chicago wheat for December dropped 0.6% to $3.96 ѕ a bushel, lowering its premium to its corn peer below $0.70 a bushel – and taking it further below a mid-July high of $1.18 Ѕ a bushel.
Russian pressure
As an extra pressure, there is still debate on the impact of Russia's announcement on Friday that it was to ditch its wheat export tax for two years.
This will only enhance the competitiveness of Black Sea prices which are feeling pressure from a record Russian harvest, besides the broader weakness in world markets.
On Monday, Moscow-based consultancy Ikar reported Black Sea prices for Russian wheat with 12.5% protein at $170.50 a tonne, down $1.50 from a week earlier.
SovEcon, another Russian consultancy, quoted wheat prices in the Black Sea area down $2.50 week on week, at $172.50 per tonne.
'In need of drier weather'
Still, there was at least some deference to the concerns over supplies of higher grade wheat, with hard red winter wheat futures, as traded in Kansas City, down a more modest 0.4% at $4.11 Ѕ a bushel for December.
Earlier, the contract's premium to Chicago wheat hit a five-month high of $0.14 ѕ a bushel.
Minneapolis-traded hard red spring wheat, higher protein still, eased just 0.1% to $4.91 a bushel.
Meanwhile, in Australia, Commonwealth Bank of Australia's Tobin Gorey reminded of potential quality issues in the domestic crop, as January wheat futures nudged Aus$0.10 higher to Aus$231.10 a tonne in Sydney.
"A deluge of rain over the weekend has left Victorian and New South Wales crops in need of drier and warmer weather," he said.
"Forecasters though say these regions will see periodic rainfall this week, so concerns over milling grade supplies are likely to continue to dog the market."
Oil in demand
Still, for real gains, it was needed to travel back to Chicago and the oilseeds complex, where soyoil for December jumped 1.2% to 33.42 cents a pound, crossing back above its 10-day and 20-day moving averages.
The rise followed strong gains in the last session in rival vegetable oil palm oil, in Kuala Lumpur, and which continued on Tuesday before profit-taking set in.
The benchmark contract touched 2,662 ringgit a tonne, close to a two-month high, before easing back to 2,641 ringgit a tonne, a loss of 0.1% on the day.
Earlier, a Reuters poll underlined ideas of tightening Malaysian stocks, showing that investors expect official data to show inventories in the country falling last month to 160m tonnes, their lowest in more than five years, sapped by reviving Chinese demand, and modest output.
Flat beans
Back in Chicago, soybeans themselves struggled to follow soyoil higher, given the pressure from the forthcoming US harvest and mounting US yield estimates.
FC Stone lifted by 0.3 bushels per acre to 50.1 bushels per acre its forecast for the US soybean yield this season, well above the USDA figure of 48.9 bushels per acre.
It was also above the 49.5 bushels per acre expected by Informa, albeit in line with an estimate from Commodity Weather Group.
November soybean futures held flat at $9.52 Ѕ a bushel.
Revived auction demand
In New York, cotton for December rose by 0.6% to 68.18 cents a pound, reversing Friday's losses, helped by a firm performance by futures on China's Zhengzhou exchange.
There, January futures rose by 1.0% to 14,010 yuan a tonne, helped by signs of reviving appetite for cotton sold from China's huge state stockpiles, amid a disposal programme set to close this month.
On Monday, 22,400 tonnes of cotton were sold, equivalent to 75% of volumes offered, achieving an average price of 13,096 yuan a tonne.
On Friday, 20,000 tonnes were sold, for a similar price, of 13,100 yuan a tonne, and on Thursday, just 15,800 tonnes were sold, 53% of volumes offered, at 12,966 yuan a tonne.
Source - http://www.agrimoney.com
