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AM markets: grain prices extend falls, albeit at slower rate

Three grain market guides clashed on Tuesday.

One says that market moves typically occur in three-day runs. So that the huge price losses in the last session after the US said its corn and soybean stocks, and soybean plantings, were far larger than the market thought should continue until Wednesday at least.

The other, the Turnaround Tuesday concept, says that a sharp price movement on the first day of the trading week is reversed on the second.

That would imply higher values this time.

A third concept is that month beginnings bring in fresh money into markets, just as month ends see cash withdrawn.

In fact, it looked like these forces were largely neutralising each other in early deals, although corn and new crop soybeans among the Chicago majors did show convincing direction - downwards.

Harvest slowdown

But then wheat had two fundamental factors in its favour even since the US Department of Agriculture released its stocks and acreage data some 17 hours ago.

The first is the release of separate USDA statistics overnight on US crop progress.

That showed a slowdown in the pace of the winter wheat harvest which, while advancing by 10 points to 43% complete as of Sunday, slipped back behind the average, a reflection of rains in the central Plains and the Midwest.

A slower harvest means less harvest pressure on prices, besides introducing more of an element of risk which is an issue when rains pelting much of the Midwest, while good for corn and soybean growth, are a negative for the quality of ripe winter wheat.

Egypt in the market

Indeed, the condition of winter wheat deteriorated in Illinois and Indiana, soft red winter wheat states, although this was balanced out by a small improvement in Kansas, a hard red winter wheat growing area.

And the condition of spring wheat eased too, by 1 point to 70% rated good or excellent, a reflection of inundations in parts of the northern Plains.

The second point in wheat's favour was the announcement by Gasc, the grain authority of Egypt, the top wheat importing country, of an import tender.

That indicated that prices had fallen far enough to eke out at least some demand.

Wheat for September eased 0.3% to $5.76 a bushel in Chicago as of 09:40 UK time (03:40 Chicago time), if remaining well above the last session's four-month low of $5.67 a bushel.

The best-traded December spring wheat lot added 0.2% to $6.88 a bushel in Minneapolis.

Old crop supplies still tight

For soybeans, the drop in old crop prices stalled, as investors considered that Monday's US stocks data, while higher than had been expected, were still the lowest since at least the 1980s.

"Getting through the next couple months will certainly not be easy with on-farm stocks seen at 27% [of total inventories], down from 39% for same period last year," said Kim Rugel at Benson Quinn Commodities.

This means that "basis and spreads will do the work of pulling beans out of the nooks and crannies", a factor which was evident even in the last session in the outperformance of old crop lots while the "flat price was falling to pieces".

August soybeans eased 0.1% to $13.28 a bushel.

Steady condition

That represented an outperformance over the new crop November contract, which fell 0.6% to $11.50 a bushel, and earlier set a four-month low of $11.46 a bushel.

The acreage data imply that, "assuming all else is unchanged, US soybean ending stocks [at the close of 2014-15] would be 490m bushels, nearly four times larger than [for the end of 2013-14] and, if realised, would be largest since 2006-07's 574m bushels", Ms Rugel said.

As an extra setback, the crop condition data overnight showed the soybean crop remaining steady at 72% rated "good" or "excellent", with improvements in southern states, offsetting declines in the over-wet north.

On-farm vs off-farm

Still, corn did no better, dropping 0.6% to $4.22 a bushel for December delivery, setting a fresh contract low of $4.21 a bushel earlier.

The condition of corn improved, by 1 point to 75%, again with rains in the likes of Kansas and Nebraska helping national crop prospects more than the excessive rains in the likes of Minnesota and North Dakota hindered them,

And for the old crop September contract, there was not, as in soybeans, the comfort for bulls of tight stocks left over from last year's harvest to rely on.

In fact, farmers appear to have a stack of corn left to sell, with 1.86bn bushels, equivalent to 48% of inventories, on farm as of June 1, up from 1.26bn bushels a year before.

And some of what is off-farm, in elevators, will have yet to have been priced.

'Regardless of price'

"The producer isn't going to be able to hide the fact that they own a proportionately large percentage of existing corn stocks for this point in the year," Benson Quinn Commodities said.

And given the strong state of the current crop, "corn is going to have to move regardless of price in many areas".

September corn was 0.7% lower at $4.16 a bushel, earlier hitting $4.14 a bushel, the lowest for a nearest-but-one contract since August 2010.

Coffee edges higher

In New York, cotton extended its decline too, dropping 0.6% to 73.10 cents a pound for the December lot, hitting a fresh two-year low for the contract.

Besides taking a knock from USDA acreage data on Monday showing an upgrade to the estimate for this year's US plantings, cotton prices also felt pressure from the lack of damage from heavy rains, with the proportion f the crop rated good or excellent staying at 53%.

London robusta coffee did a little better, edging 0.1% higher to $2,017 a tonne, helped by data showing exports from Indonesia's main growing area of Sumatra falling to 6,897.62 tonnes last month down 41% year on year.

Indonesia, a grower of robusta rather than arabica beans, was the third-ranked coffee exporting country until late when poor weather depressed its output, while Colombian volumes were boosted as the impact of a replanting programme came through.

PM markets: downbeat quarter for ag prices ends on low note
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