Writing from the UK - where the general election result, in
giving no party leader a clear mandate as the country enters Brexit talks, is
being viewed with general dismay – any distraction is welcome for Agrimoney.com.
And bless the US Department of Agriculture for providing
one, with the release later of its monthly Wasde world crop supply and demand,
a highlight of the ag trader's calendar.
Not that the Wasde is expected to produce too many
fireworks, with a trade forecast that the report will show a 25m-bushel cut to
2.085bn bushels in the estimate for US corn stocks at the close of 2017-18 the biggest
change expected in the inventory data.
But could the drop in stocks be bigger?
Market estimates, corn data in Wasde, (current USDA figure)
US stocks, close of 2016-17: 2.287bn bushels, (2.295bn bushels)
Range of estimates: 2.215bn-2.336bn bushels
US stocks, close of 2017-18: 2.085bn bushels, (2.110bn bushels)
Range of estimates: 1.985bn-2.200bn bushels
World stocks, close of 2016-17: 224.0m tonnes, (223.90m tonnes)
Range of estimates: 221.5m-226.8m tonnes
World stocks, close of 2017-18: 195.48m tonnes, (195.27m tonnes)
Range of estimates: 193.4m-197.25m tonnes
Sources: USDA, Reuters
One of the factors traders are weighing up in the run up to
the Wasde is whether the USDA will use it to make an initial trim to its
forecast for this year's US corn yield, currently at 170.7 bushels per acre,
not far from a record high.
Some would argue that this is optimistic, given the less-than-ideal
start that the US corn crop has made, undermined first by extreme damp which
slowed sowings, and then by heat and dryness.
Indeed, much of the crop has required replanting, a factor
which has raised ideas of a cut to area expectations too.
'Temperatures are too
Nor is the weather threat over.
"I expect the weather to keep the market on edge as the temperatures
are too high for this time of the year," said Benson Quinn Commodities.
"With 90s Fahrenheit temperatures and wind expected through
much of the western Corn Belt through the weekend, the areas that would benefit
from a rain are increasing in size.
"Additionally, there are areas of late planted or replant
corn that are going to struggle."
David Tolleris at WxRisk.com said in the early hours that
latest weather model runs showed that over the next five days, "the vast
majority of the central Plains the Dakotas the lower Plains and the Midwest
remain quite dry.
"The models also are quite hot and have not backed off the
temperatures which will be building this weekend into early next week across
much of the Plains and the western Corn Belt."
Furthermore, there are weather worries in other countries
too, including Ukraine, the fourth-ranked corn grower, where dryness is
threatening wheat crops too.
Market estimates, soybean data in Wasde, (current USDA figure)
US stocks, close of 2016-17: 433m bushels, (435m bushels)
Range of estimates: 400m-458m bushels
US stocks, close of 2017-18: 485m bushels, (480m bushels)
Range of estimates: 435m-612m bushels
World stocks, close of 2016-17: 90.79m tonnes, (90.14m tonnes)
Range of estimates: 90.14m-92.35m tonnes
World stocks, close of 2017-18: 89.44m tonnes, (88.81m tonnes)
Range of estimates: 88.8m-90.7m tonnes
Sources: USDA, Reuters
Indeed, MDA said that while "some improvements will be
possible in north central Ukraine next week," in rainfall terms, "much more will
still be needed to end stress on wheat, especially in central and eastern
Meanwhile, in China, the persistent worries over dryness in
the north east showed up in a downgrade of 1.5m tonnes, to 211.7m tonnes, in the
farm ministry estimate for the country's corn crop this year – a small
downgrade, but significant nonetheless in being undertaken so early in the growing
The cut reflected a drop in the area estimate, by 250,000
hectares to 35.6m hectares, attributed to dryness setbacks to sowings.
'Yield loss already
Not, it has to be said, that this translated into higher
Chicago corn futures, with the July lot down 0.4% at $3.84 ¼ a bushel as of 09:15
UK time (03:15 Chicago time).
For all the pondering over whether the Wasde will introduce
bigger changes to the US corn balance sheet estimates, there is a case to be
made that it won't.
As Tregg Cronin at Halo Commodity Company said, "meaningful
changes to the 2017-18 balance sheet are likely to be minimal", in the Wasde,
given that the USDA "has only adjusted yields on the June report a handful of
times on the June Wasde, and usually only in the case of extreme weather.
"While dryness has been increasing the last week, not sure
it would have made it on this report."
Meanwhile, the market appears to be already "trading a 3-4
bushels per acre cut in the 2017 US corn yield", Richard Feltes at RJ O'Brien
said - expectations then which the Wasde looks likely to disappoint.
Furthermore, there is plenty of talk of farmer selling into the
rally and, indeed, the last session saw a further increase, of 3,636 lots, in open
interest in corn futures, rather than the decline (and price gains) which would
be expected if short-covering was the predominant game in town.
Nor could Chicago winter
wheat manage further gains, easing 0.3%
to $4.48 a bushel for July, extending its late pullback which curbed headway in
the last session, although remaining above its 100-day and 200-day moving averages.
Market estimates, wheat data in Wasde, (current USDA figure)
US stocks, close of 2016-17: 1.161bn bushels, (1.159bn bushels)
Range of estimates: 1.144bn-1.20bn bushels
US stocks, close of 2017-18: 911m bushels, (914m bushels)
Range of estimates: 860m-995m bushels
World stocks, close of 2016-17: 255.24m tonnes, (255.35m tonnes)
Range of estimates: 253.3m-256.1m tonnes
World stocks, close of 2017-18: 257.77m tonnes, (258.29m tonnes)
Range of estimates: 254.8m-260.0m tonnes
Sources: USDA, Reuters
"The market closed pretty sloppy," said Benson Quinn Commodities,
adding that while funds were "big buyers again" in the last session (in terms
of covering short bets), they "may have reached their limit on how much Chicago
they want to buy back".
Open interest in Chicago wheat futures dropped by 7,115 lots
on Thursday, in a sign of short-covering.
Besides the fall in prices of rival grain corn, it was also
signal that values of spring wheat -
which has been the epicentre of wheat complex concerns, thanks to rapidly
expanding drought in the key northern Plains growing area – stood unchanged at $6.04
½ a bushel in Minneapolis for July.
Elsewhere, the French soft wheat crop, which has itself been
on a declining trend thanks to dryness, was rated at 75% good or excellent by
FranceAgriMer – unchanged week on week, so cutting support for values on that
Still, officials in Saskatchewan underlined the threat to
crops from dryness in parts of Canada's top grain-producing province.
"Topsoil moisture conditions are rapidly deteriorating in many
southern parts of the province," they said.
"Persistent strong winds and lack of moisture are drying up
fields and delaying crop maturity. There are concerns in areas of the south east
that crop and hay yields will be affected if rain is not received soon.
'Poor emergence and
Furthermore, the Saskatchewan report noted that "some canola crops have been reseeded due to
poor emergence and insect damage," with flea beetles being mentioned in
That helped canola futures for July nudged 0.1% higher to Can$513.00
a tonne in Winnipeg – a small gain, but enough to carry them above their
200-day moving average.
Elsewhere in the oilseeds complex, In Chicago, soybeans gained the minimum 0.25 cents
to $9.38 ¼ a bushel for the July contract, getting a modicum of help too from cheer
at China's strong import data on Thursday.
"China's appetite for soybeans is very strong," said Joe
Lardy at CHS Hedging.
"The current USDA import figure for China is 89m tonnes.
With 4 months left in the year, I think the number is going to be just over 91m
In New York, cotton
for July eased 0.2% to 76.40 cents a pound, giving back some of the gains of
the last session which Ecom traders represented "the bounce that the market has
been waiting for", and fuelled by "possible mill buying".
The trading house also noted that, in the longstanding focus
on mills' on-call cotton commitments, which are priced against futures, there
are "still are fair amount of fixations to be made", ie 24,560 contracts' worth.
And with "now only 12 trading sessions left until first
notice [ie the start of contract expiry] we will begin to see the rest of the
Still, Ecom flagged that the Wasde could prove the key determinant
of price direction, saying that "the next move for the futures may be
determined by the results of this report".