Ag markets have at least four data releases with potential
to move markets on Thursday.
Which may have stemmed the appetite for selling, allowing
prices some early headway.
One is the International Grains Council's monthly take on
world grain, soy and rapeseed supply and demand, which will give, for instance,
more insight into the dynamics in the wheat market stemming from disappointing Australian
and Canadian harvest prospects – but a huge Russian crop.
On the production side, Thursday is also the last day of the
Farm Journal Midwest crop tour, which in a day three release overnight did flag
some damage to crops in the top two US corn-producing
states, Iowa and Illinois, from dryness.
The Illinois corn yield was pegged at 180.72 bushels per
acre, below the 193.50 bushels per acre estimated last year by the tour for the
state, and the five-year average of 187.37 bushels per acre.
Signally, the figure was also below the 188 bushels per acre
at which the US Department of Agriculture has the Illinois yield.
For north western (district 1) Iowa, the corn yield was put at
178.67 bushels per acre, compared with a figure of 186.82 bushels per acre last
year, and a three-year average of 184.16 bushels per acre.
For centre west (district 4) Iowa, the yield estimate of
179.36 bushels per acre was below a figure of 182.65 bushels per acre, and a
three-year average of 182.53 bushels per acre.
For the south west (district 7), the crop fared a little
better, with the yield estimate of 185.65 bushels per acre above the average of
179.68 bushels per acre, if below last year's figure of 191.87 bushels per acre.
The USDA has the all-Iowa yield in line with the Illinois one,
at 188 bushels per acre.
"Problems include poor stands form a late wet spring, and
poor pollination from too much dry heat in July," said Benson Quinn Commodities.
Ethanol import levy
Back to the day's data, and sticking with output, Brazil's
Conab is expected to release fresh estimates on Brazilian cane and sugar output, which will be closely
watched given the country's stronger-than-expected sugar production so far in
2017-18, but with current prices incentivising a switch to making ethanol
The data may actually be overshadowed somewhat by an
overnight move by Brazil to unveil a 20% take on ethanol imports, above a tax-free quotas of 600m litres per year.
(Brazil's ethanol imports reached 1.29bn litres in the first
half of this year.)
In theory, this should encourage greater use of domestic
ethanol, so boosting prices of the biofuel, and lifting values of sugar too, if
the sweetener is to retail its allocation of cane.
That said, Brazilian ethanol prices are capped somewhat by prices
of gasoline, which many cars have the alternative to burn instead.
Export sales data
Staying with the demand side, and shifting back to grains,
the day will also bring USDA figures for last week on US crop export sales,
expected to come in at 300,000-600,000 tonnes for wheat for 2017-18.
For corn, sales
are expected at 400,000-700,000 tonnes for 2017-18, plus 50,000-250,000 tonnes
for 2016-17 (which ends next week for the crop, and for soybeans).
For soybeans, the figure for next season is expected at 400,000-600,000
tonnes, with 250,000-250,000 tonnes for 2016-17.
Indeed, for soybeans, "demand is good and with lack of
producer selling cash basis continues to firm for spot bushels", said Benson Quinn
"Look for soybeans to continue sideways trade with supplies
bearish while demand offers underlying support on weakness."
The November contract in fact stood up 0.4% at $9.41 ½ a bushel
as of 09:20 UK time (03:20 Chicago time), continuing to gain some support from soyoil, which added 0.3% to 35.18 cents a pound for December delivery, extending
its headway on a US ruling which has essentially closed off imports of Argentine
and Indonesian biodiesel.
Tobin Gorey at Commonwealth Bank of Australia said that the
decision means the US industry "naturally scrambling to find alternative
sources of biodiesel", which is made from vegetable oils, largely soyoil in the
US and Argentina, but palm oil in Indonesia
(the world's top palm producer).
Palm oil vs soyoil
In fact, the initial reaction on the Kuala Lumpur palm oil market
to the US decision was to send futures a little lower.
However, on Thursday, the vegetable oil revived, adding 1.2%
to 2,770 ringgit a tonne, coming close to touching it 200-day moving average on
a continuous chart for the first time in five months.
Sure, there is a bearish case for palm oil, as producer
Anglo-Eastern Plantations noted, with the seasonal high in South East Asian
"The upside of the crude palm oil price is limited as the
industry heads into its peak production cycle in the third quarter of 2017,"
the group said.
"A higher crude palm oil production for the second half of
the year amid strong competition from bumper soybean production will likely
hurt and depress the crude palm oil price for the remainder of the year."
That said, the relative strength of palm oil and soyoil is
important too, with the two interchangeable for many uses.
"The demand of crude palm oil from price-sensitive markets
may pick-up as the crude palm oil price discount to soyoil has widened," the
'Demand has been
Back in Chicago, corn futures for December nudged 0.1%
higher to $3.56 ¼ a bushel, although only after setting a fresh contract low of
$3.55 ¼ a bushel earlier.
"US corn is now very competitive so we expect the market to
find some buying eventually," CBA's Tobin Gorey said, although whether the demand
turns up in the export sales data later…
For wheat, Benson Quinn Commodities flagged too the importance
to the market of demand signals, given the record Russian harvest.
"Global demand for wheat has been surfacing but with Russian
offers cheapest, demand for US wheat still remains traditional and unimpressive,"
the broker said.
"Weekly export sales will be closely watched. Shipments have
been above last year's pace but sales to date are down from last year's pace."
Chicago wheat futures for December gained 0.5% to $4.32 ¼ a
bushel, with Thursday for now proving the first session in seven in which the lot
has not set a contract low.
In New York, cotton
futures for December eased, but by a modest 0.1% to 68.82 cents a pound.
Weekly US export sales data later will be closely watched
But so will the latest forecasts for Tropical Depression
Harvey, which poses a big threat to the US cotton belt – but just how much
differs with changing outlooks.
"Harvey is on a path that sees it move slowly up the Texas
coastline," CBA's Tobin Gorey said, noting that straddling the Gulf coast, it
is poised to "pick up huge amounts of water and dump it on the land.
"The region has enough unharvested cotton in it to make a
material difference to US production."
That said, "Harvey continues to evolve, and so does its
"The potential scale of crop losses shrinks if flooding
rains do not reach… major cotton regions."