Sometimes grain markets tale a somewhat timid approach, as
important data approach.
But not this time.
This week will see data releases including Conab's monthly
report on Brazilian crop supply and demand, and the Malaysian Palm Oil Board
briefing on domestic palm oil
Signally, Wednesday will bring the US Department of
Agriculture's monthly Wasde report on world crop supply and demand.
Wasdes are high points anyway of the crop traders' calendar,
but this time especially so given the tests drought is posing to crops in the
likes of Australia and Brazil (for wheat),
as well as, importantly, in the US itself.
Indeed, the Wasde is expected somewhat to cut the forecasts
for US crops this year, to 14.126bn bushels for corn, a downgrade of 127m bushels.
For soybeans, the
output estimate is expected at 4.243bn bushels, a cut of 16m bushels, and for wheat at 1.748bn bushels, a downgrade
of 31m bushels.
The wheat figure includes a consensus estimate of 416m bushels
for the first forecast for output of the drought-hit spring wheat crop, down more than 60m bushels year on year.
It looked in early deals like traders were not banking on
those being output overestimates, with futures making strong headway.
Indeed, ideas that the USDA might take a less generous line
were only enhanced by the US weather, which showed weekend heat in the northern
Plains spring wheat belt spreading into western parts of the Midwest.
Temperatures on Sunday came in at 95-105 Fahrenheit over South
Dakota and Nebraska, according to WxRisk.com, although it added that
thunderstorms brought moisture to some parts of the northern Plains too.
Still, Commodity Weather Group said that on the outlook "rebuilding
heat in the norther western Plains, the Pacific North West, far south western
Canadian Prairies is adding to stress for spring wheat".
'Heat adds to stress'
And early this week, the heat will spread to the Corn Belt,
with temperatures in the mid-90s Fahrenheit for the south western area, and low
100s Fahrenheit for the far west.
This when corn is
undergoing its heat-sensitive pollination process, with the heat not boding so
well for yields.
Commodity Weather Group said: "Heat adds to stress in the
driest areas, encompassing at least one-quarter" of US corn-growing area, including
parts of the Dakotas, Nebraska, Iowa and Illinois.
"Intermittent shower chances and a lack of Midwest-focused
heat limits concerns in the rest of corn-soybean [growing areas] for now."
And what is the real impact of this?
Mike Zuzolo at Global Commodity Analytics, thinking especially
of corn, said: "Even though we've seen a US national yield below 150 bushels an
acre in five of the last 15 years, since I began my career in 1995 this is only
the fourth year I can recall where a potential weather market can disrupt supply
enough to shrink US ending stocks.
"Last year, for instance, we had double the amount of
drought in the lower 48 states, including the Corn Belt.
"Yet rains alleviated and erased the potential drought in
just the right time to keep yields elevated," and ensure a bumper US crop at a
time when Brazil was short of supplies.
This year, "instead of South America having production
disrupted, we have China, Europe, the former Soviet Union, and Australia are supporting
the idea that global supply is falling faster than demand."
'Funds out of
And such comments are coming at a time when hedge funds are,
awkwardly, net short in corn and soybean futures and options.
"The summer weather market is in charge and found the funds
out of position in grains and oilseeds," said ag advisory group Water Street
"The continued warm/dry forecast in the west should continue
to provide market uncertainty support."
Corn futures for December, the best-traded contract indeed gained
2.0% to $4.12 ¾ a bushel - a one-year high of the contract.
"The contract could see $4.25 a bushel soon if traders add
another $0.75 to Minneapolis wheat to the upside," said Terry Reilly at Futures
International, Minneapolis spring wheat having been the grain market star of
late, thanks to US northern Plains drought.
'Too light to improve
futures for September actually added a further $0.29 so far, hitting $7.95 ¾ a
bushel, a gain of 3.8% on the day, although remaining well below last week's
four-year high of $8.68 ½ a bushel.
That helped winter
wheat too, with Chicago's September contract adding 3.0% to $5.51 ¼ a
bushel, feeling too some help from the move of the US harvest into latter
stages, so easing harvest pressure on values, besides the setbacks to crops in
some other countries.
MDA noted that in Australia, "expected rains this week will
be too light to significantly improve moisture for wheat".
Agritel noted that in France, grain harvesting in most areas
has "been stopped because of violent thunderstorms".
On the demand side, Egypt's Gasc bought a further 115,000 tonnes of wheat over the weekend, from Russia, taking total purchases for 2017-18 above 1.5m tonnes already, with less than two weeks of the season gone.
meanwhile, gained 2.4% to $10.25 ¼ a bushel for August delivery, with the
best-traded November lot up 2.3% at $10.39 a bushel, a seven-month high for the