PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 08:16 GMT, Wednesday, 19th Apr 2017, by Mike Verdin
AM markets: meal protects soybeans from weak vegoil markets

Soy bulls haven't quite lost the last morsel of support from the Argentine rains story.

Sure, the outlook for the country has turned drier, boosting hopes for soybean harvest progress, and reducing concerns over flood damage to crops.

"Meteorologists say Argentina will continue to dry down over the next 10 days or so, allowing fieldwork conditions to improve," said Tobin Gorey at Commonwealth Bank of Australia.

But the slow start to harvest may still be having a knock on impact on supplies of the soybean processing products, soyoil and soymeal, of which Argentina is the top exporter.

"Argentina soybeans are not moving fast enough and we are guessing the availability of soymeal out of Argentina is not as good as it could be at this time of year," said Terry Reilly at Chicago broker Futures International.

"This was reflected in the Nopa figures on Monday," ie the US industry data which showed US exports of soymeal last month at 1.06m short tons well above the 738,825 short tons shipped in February and the 779,100 short tons exported in March last year.

In the US Gulf ports, "soymeal basis has been slowly moving higher", Mr Reilly noted.

Meal vs oil

And while Chicago soymeal futures have hardly been buoyant, they at least managed some headway in early deals on Wednesday, adding 0.4% to $313.30 a short ton for May delivery as of 08:10 UK time (02:10 Chicago time), returning above their 20-day moving average.

That helped soybeans too, which for May gained 0.3% to $9.49 a bushel, remaining above their 10-day moving average.

This despite the hindrance of a negative soyoil market, with futures in the vegetable oil for May easing 0.2% to 31.09 cents a pound.

While Argentina's harvest hiccups may have stemmed soyoil supplies, there are alternatives vegetable oil users can look at, including palm oil, which in Kuala Lumpur shed 0.4% to 2,464 ringgit a tonne, earlier setting an eight-month low of 2,452 ringgit a tonne.

As Oriental Pacific Futures noted, "production growth in the world's top producers [Indonesia and Malaysia] of the tropical oil is forecast to recover between now and the third quarter of the year, as the lingering effects of a crop-damaging El Nino wear off".

Corn sowings

The firmness in soy failed to rub off on fellow row crop corn, which eased 0.1% to $3.61 a bushel for May delivery despite the rain-slowed start to the US sowing season.

As of Sunday, 3% of US corn was sown, compared with average progress of 9% for the time of year.

And more rainfall is on its way.

"Showery conditions are still expected to interrupt field work across the Midwest and particularly the lower Midwest for the next 10 days or so," CBA's Tobin Gorey said.

Still, "forecasters now say an important period of drier weather is likely for the end of April/start of May," which is a more crucial period for seedings completion.

Broker Benson Quinn Commodities said: "Getting the trade worked up about being behind on planting progress might be asking a bit much in the middle of April."

'Some dry pockets'

It didn't help that winter wheat futures returned to the defensive too, easing 0.2% to $4.21 a bushel in Chicago for May delivery, amid easing weather concerns in many areas.

Besides rain relief for US winter wheat, "recent precipitation in portions of the Black Sea region should keep the bulk of that crop on track for good yields," Benson Quinn Commodities said, although some jitters do remain over European prospects.

"There are some dry pockets in western Europe. The situation isn't critical, but better rains would be welcome in the next couple of weeks."

'Trade would have to respond'

The one weather threat which has been capturing wheat investors' imagination more in the last week or so is that of wetness in Canada and the northern US delaying sowing of spring crop, and potentially

Benson Quinn Commodities highlighted investor focus on "the slow pace of planting and damp, cool conditions through much of the northern plains and western Canada.

"The six-to-10 day and eight-to-14 day forecasts offer average-to-above-average precipitation.

"The trade would have to respond to some extent if the weather profile is forecast to extend into the middle of May."

Spring vs winter

At RJ O'Brien, Richard Feltes flagged the prospect too of a "likely cut in 2017 Canadian hard red spring wheat acres" which will be issued on Friday in a briefing from Statistics Canada.

Analysts expect an all-wheat sowings figure of 22.4m acres, some 200,000 acres fewer than the Canadian farm ministry has forecast.

And spring wheat area in the US might come in short of official expectations too.

Mr Feltes said he was "hearing more reports that the US Department of Agriculture is likely overstating US hard red spring wheat acres in view of intensifying lender pressure and a higher soybean crop insurance guarantee" price.

Minneapolis spring wheat futures for May were flat at $5.39 a bushel, but this did mean raising their premium to Chicago spring wheat further, with the premium now back above its 50-day and 100-day moving averages.

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