Grains started off by putting a foot in positive territory,
although whether they stay that way…
The weather forecast is one key determinant, of course, with
prices in the last session swinging forward and backwards, with a little late
recovery, on shifts in the outlook.
WxRisk.com, while seeing a wet close to August, was less
upbeat about immediate prospects.
"Most the Midwest will not see significant rain over the
next 10 days," the weather service said.
Talking of the chance of getting more than inch of rain over
the next 10 days, the weather service said that "for many areas in the Midwest
the probabilities under 30% which is quite striking".
"Ensemble [weather] model agreement is very strong that the
heart of the Midwest remains essentially dry all the next five days," although
temperatures look like remaining below average, and even well below, limiting
the threat of evaporation.
'Feels like late
Benson Quinn Commodities put it that "rains continue to miss
short areas", with the market focusing in the main on Iowa and Illinois, the
top corn and soybean growing states.
Forecasts for US 2017-18 corn data in Wasde and (existing figure)
Harvested area: 83.418m acres, (83.496m acres)
Range of estimates: 83.1m-83.5m acres
Yield: 166.2 bushels per acre, (170.7 bpa)
Range of estimates: 162.8-168.5 bpa
Production: 13.855bn bushels, (14.255bn bushels)
Range of estimates: 13.59bn-14.07bn bushels
Year-end stocks: 2.003bn bushels, (2.325bn bushels)
Range of estimates: 1.642bn-2.375bn bushels
Year-end stocks, 2016-17: 2.386bn bushels, (2.37bn bushels)
Range of estimates: 2.34bn-2.73bn bushels
Sources: USDA, Reuters
"But cool temperatures also reduce stress and the moisture
That said, coolness also means "slowing" the rate at which a
crop like corn "adds yield", the
And in soybeans, "we
are also hearing from some in our trade territory that with beans short, the
cooler weather is not necessarily ideal with crops in reproductive phase as
beans like heat to fill out".
"It is also a bit disconcerting that here in southern
Minnesota, the garden spot," in early August, "morning temperatures feel like
late September and we are running about a week behind normal on maturity".
And then there is the prospect on Thursday of the US
Department of Agriculture's monthly Wasde report, on world crop supply and
demand, to factor in.
The Wasde is anyway a highpoint of the ag investors'
calendar, but especially this time, when downgrades to estimates for US corn
and soybean yields, following a dry July, are expected.
In corn, for instance, traders are expecting a cut in the US
yield forecast to 166.2 bushels per acre, from the current figure of 170.7
bushels per acre.
In fact, this is a "modest" reduction, according to Richard
Feltes at broker RJ O'Brien, taking a glance at historical downgrades in August
"The six years since 2000 with July to August cuts in corn
yield, excluding droughty 2012, averaged 5.1 bushels per acre."
If that offers hope to bulls, not all the takes on this
dynamic are monumentally upbeat for prices.
Forecasts for US 2017-18 soy data in Wasde and (existing figure)
Harvested area: 88.669m acres, (88.731m acres)
Range of estimates: 83.3m-88.731m acres
Yield: 47.5 bushels per acre, (48.0 bpa)
Range of estimates: 46.9-48.0 bpa
Production: 4.212bn bushels, (4.26bn bushels)
Range of estimates: 4.165bn-4.307bn bushels
Year-end stocks: 424m bushels, (460m bushels)
Range of estimates: 424m-460m bushels
Year-end stocks, 2016-17: 401m bushels, (410m bushels)
Range of estimates: 370m-420m bushels
Sources: USDA, Reuters
Mr Feltes also noted that even if the corn yield ended up an
extra 3.3 bushels per acre lower (the average drop from August Wasdes to final estimate
in years when yields indeed decline) that would reduce the carryout figure for
US stocks to 1.728bn bushels.
That is "not enough to take out summer high for December
futures of $4.07 a bushel, but enough to provide strong support in the $3.70-3.80
Corn futures for December stood up all of 0.1% at $3.84 a
bushel as of 10:00 Chicago time (04:00 UK time).
investors are expecting a modest 0.5 bushels-per-acre drop in the yield figure,
to 47.5 bushels per acre, with August more crucial for crop prospects, bringing
pod-setting (rather than July as for corn, when the grain pollinates).
This would also be a small downgrade, by historical
perspectives, for an August Wasde.
"The eight years since 2000 with July to August cuts in soybean
yield, excluding droughty 2012, averaged 1.4 bushels per acre.
"The smallest July to August cut was 0.8 bushels per acre,"
seen in both 2001 and 2004.
Soybeans back to $10
Furthermore, for bulls, there is the prospect of a cut to the
US carryout estimate for 2016-17, which ends this month, thanks to a strong pace
Mr Feltes mused that a "lower-than-expected 2016-17 US soy
stocks figure on Thursday, a positive last half of August soybean seasonal
[price trend] and concern over a dry finish to the Midwest summer may
collectively boost November futures closer to $10.00 a bushel by late August".
Still, soybean futures for November in early deals stood at $9.74
½ a bushel, up 0.1%.
'Shipments will be
over 31m tonnes'
As for wheat
futures, while investors maintain a close eye on North American spring crop
prospects, after dryness in the northern US and less so Canada's Prairies, there
are many factors abroad too to build into prices.
These include, on the negative side for prices,
ever-increasing expectations for Russia's harvest,
With Russia's harvest "in full swing, yields are well over
initial expectations in several major production regions, mainly in the Centre
and Volga," said Agritel.
"Russian exports are expected to grow significantly even if
uncertainties remain about logistical capacities."
"Shipments will be over 31m tonnes for sure" in 2017-18.
'Eastern grain market
However, there are worries for investors too.
Forecasts for US 2017-18 wheat output in Wasde, (existing figure)
Hard red winter: 756m bushels, (758m bushels)
Range of estimates: 737m-775m bushels
Soft red winter: 307m bushels, (306m bushels)
Range of estimates: 300m-311m bushels
White winter: 215m bushels, (216m bushels)
Range of estimates: 205m-224m bushels
All winter: 1.278bn bushels, (1.279bn bushels)
Range of estimates: 1.258bn-1.293bn bushels
Other spring: 393m bushels, (423m bushels)
Range of estimates: 350m-440m bushels
Durum: 56m bushels, (58m bushels)
Range of estimates: 50m-56m bushels
All wheat: 1.711bn bushels, (1.760bn bushels)
Range of estimates: 1.550bn-1.784bn bushels
Sources: USDA, Reuters
In Australia, the outlook is mixed.
"Weather forecasters' confidence in forecasts for
significant rainfall in Australia's western crop regions is growing," said
Tobin Gorey at Commonwealth Bank of Australia.
"Forecasters' outlook for grain regions either side of the
Queensland New South Wales border though is not encouraging.
"These worries will keep the eastern grain market on edge."
And in Germany, worries are growing over a rain-delayed
harvest (as they are in the UK too, although more currently over earlier
harvested crops than wheat).
Agritel flagged "uncertainties about quality of the German
harvest penalised by persistent rains.
"Harvest works have hardly reached 25% in the north of
Germany and qualitative tests are confirming a significant degradation" in
Chicago wheat for September added 0.3% to $4.58 ¼ a bushel.