Grain bulls started the day with the benefit of two tailwinds.
The first was the tumble in the dollar following comments by US President Donald Trump that the
greenback is "getting too strong" – a correction which came too late to affect
markets in the last session.
The dollar stood at 100.2 against a basket of currencies as
of 09:20 UK time (03:20 Chicago time), some 0.5% lower than when Chicago's
grain market closed on Wednesday, and offering an immediate tailwind for ag
(A weaker dollar improves the affordability of
dollar-denominated exports, such as many agricultural commodities, for buyers
in other currencies.
'Close weather eye'
The second potential positive was the prospect of a long
weekend, with Friday bringing the Good Friday break to many countries.
The prospect of three days without trading (or four in the
UK, which takes Monday off too) is often a spur to taking profits while they
are definitely on the table.
And, with hedge funds net short on grains (and, indeed, ags
in general), position closing is likely to mean upward pressure on prices.
The urge to take profits ahead of a long weekend is often especially
strong when weather takes a higher profile markets – as it is now - meaning
that prices can spin on a turn in the forecast.
"Weather watchers are expected to keep a close eye on South America
and US weather maps over the weekend and next week," said Ami Heesch at CHS
Indeed, one of the primary concerns tend to surround wetness
in Argentina, brought back into focus by an estimate by the Buenos Aires grains
exchange that more than 1m hectares of land has been affected this month by
heavy rains which have brought flashbacks to similar crop-denting inundations
"During the past weekend large sectors of the province of
Buenos Aires received 200mm (8 inches) of rainfall that caused flooding of
fields and rivers to overflow, bringing the loss of planted area and harvest delays,"
the exchange said
"The disastrous April floods of last year will still be
fresh in the market's mind," said Tobin Gorey at Commonwealth Bank of
That said, the exchange stood by its estimate of a 56.5m-tonne
Argentine soybean crop, after a strong
start to yields in the early harvest, and restated a forecast of a 37.0m-tonne corn harvest too.
In the US, rains are also on investors' minds, albeit far
more modest ones, which are causing delays to early sowings of spring crops in
the Midwest, with a particular focus on corn, which has a slightly earlier
planting window than soybeans, so for which progress now is more important.
"The market is starting to worry about rainy conditions in
the US Midwest over the next fortnight or so," Mr Gorey said, adding that "the
issue warrants watching.
That said, "it's
still early days for US corn planting", he added, with delays from mid-May seen
as more crucial.
"The midpoint of planting usually occurs between weeks 18
and 19 or the end of the first full week of May," said Mark Welch at Texas
And even so, he noted that in 1984, when "a record slow pace
of planting was set in weeks 16-20, yields that year were still +2% of trend".
'Price upside does
Still, if these are the major weather issues that investors
are worried about, they are not the only ones.
Benson Quinn Commodities, thinking of soybeans, flagged that
the "mentality of the market going into US planting/growing season seemed to
shift just slightly on Wednesday to one cognisant of potential summer weather
While, price "upside looks limited and rallies will be
selling opportunities for producers… some upside does exist with strong demand
still forecast for US and world soybeans".
Soybean futures indeed led the way among Chicago's big
three, gaining 0.9% to $9.56 ½ a bushel for May delivery.
Corn futures showed more modest gains, of 0.5% to $3.70 ¾ a
bushel for May, although that was enough to take the contract back above its
50-day moving average, above which it has not closed for more than a month.
US, EU dryness
Weather concerns have gained some foothold in wheat markets too.
Sure, rains have eased worries over dryness in the southern
US Plains, hard red winter wheat country.
"Winter wheat areas have benefited from recent rain events,"
said CHS Hedging's Ami Heesch, if adding that "there are still some dry areas
in the western part of the south western plains".
(More will be known on US dryness later, with the release of
the US Department of Agriculture's weekly drought monitor report.)
But dryness is growing as a worry in the European Union, the
world's top wheat producer.
"Markets are supported by the dry conditions in place in a
good part of Europe," said Paris-based Agritel.
"We record now a multi-month rain deficit of about 30-50%"
in parts of France, the EU's top wheat grower.
"This trend is also observed in other parts of Europe at various
levels," and certainly in the southern UK, where Agrimoney.com is based, it has
not rained for weeks, although crops do not appear to be showing ill effects
Chicago wheat, the world benchmark, and in which hedge funds
have a near-record net short in futures and options, gained 0.5% to $4.35 ¼ a
bushel for May delivery.
Signally, that returned the contract back above its 100-day
moving average, which it tried (and failed) in the last session to close above,
for the first time in more than a month.
Still, grain market direction later may depend largely on
weekly data from the USDA on US exports last week.
For wheat, export sales are expected to show at
250,000-450,000 tonnes for 2016-17 (a wheat marketing year which in the US closes
next month), and 50,000-250,000 tonnes for 2017-18.
For corn, they are expected at 800,000-1.0m tonnes old crop,
and 100,000-300,000 tonnes for 2016-17.
Soybean export sales are expected at 400,000-600,000 tonnes
for 2016-17, and 150,000-350,000 tonnes for next season.
'Surely will have
The export sales data could affect, the cotton market too, given that strength in US exports has been a
major factor in supporting values – although the prospect of huge sowings this
year has undermined that prop in recent weeks.
While the forthcoming "export sales report does not seem to
be as eagerly anticipated as last week's, it surely will have some impact",
said Herman Kohlmeyer at Micheal J Nugent & Co in California.
"I know that the bulls would like to see sales back at the
300,000-bale level, with the bulk of the business falling into the current crop
For now, best-traded New York cotton for July added 0.7% to 76.73
cents a pound, gaining help from its fellow row crops.
The May contract stood up 0.7% at 75.24 cents a pound, appearing
to find quite some support of late at its 100-day moving average, at 74.61
cents a pound.