So much for turnaround Tuesday.
While the second session of the week has a habit of
reversing a strong direction on the first, Chicago traders say, this time
futures managed to keep heading the same way, upwards.
This as investors digested two sets of important data, and anticipated
'Looks a little odd'
Overnight bought, as usual, the weekly US Department of
Agriculture crop progress report, which actually didn't appear to offer that
much in the way of a lead.
Yes, the US soybean condition rating edged higher 1 point
also to 60% good or excellent, rather than holding steady as investors had
But the corn figure dropped by 1 point to 60% rated "good"
or "excellent", rather than staying flat as traders had expected, a decline
reflecting in part a 5-point decline in the figure for Illinois, the second
biggest producing state.
"The Illinois slide looks a little odd, and may prove
supportive in the night trade," said Benson Quinn Commodities.
Certainly, Chicago corn futures for December added 0.5% to
$3.88 ½ a bushel as of 09:45 UK time (03:45 Chicago time).
However, that also seemed to be down to the data underlining
the weaker condition of the US crop this year, ahead of Thursday's USDA Wasde
world crop supply and demand briefing, a key event of the grain trader's
calendar, which is expected to cut the forecast for the US corn yield this
"The crop condition is no disaster but it is materially
poorer than normal," said Tobin Gorey at Commonwealth Bank of Australia.
The three-year average rating is 72% good or excellent.
"The survey will bolster analyst's confidence that yields
will be sub-par in 2017."
But how much lower?
The market forecast is that Thursday's Wasde will show a
figure of 166.2 bushels per acre, below the current estimate of 170.7 bushels
Still, that consensus forecast disguises a fairly wide range
of expectations, from 162.8-168.5 bushels per acre.
And there is always the prospect of further downgrades
Terry Reilly at Futures International said that "based on
the decline in Illinois corn by 5 points for good or excellent, there is a good
chance the USDA September [Wasde] yield figure could end up below what they
report this Thursday".
Chinese import surge
For soybeans, the
good or excellent reading of 60% compares with a three-year average of 69% for
the time of year, ie a little closer than corn to what is typical.
Still, investors have been talking of only a small drop in
the USDA yield figure in the Wasde, of 0.5 bushels per acre to 47.5 bushels per
acre, suggesting prices are prone to upward move if the figure ends up below
And the other piece of overnight data, on Chinese imports
for July, was firmly supportive for the oilseed, coming in at a record 10.08m
tonnes, up 30% year on year, and 31% from the 7.69m tonnes imported in June.
'Should be taken
The strength of the figure looks in part down to a cut in
VAT on soybean imports from the start of July, which would have incentivised
importers to delay purchases until then.
Nonetheless, the data, combined with data imports in the
likes of steel and oil, was viewed as underlining strength in China's appetite
for raw materials.
"China's imports of commodities for July came in better than
expected, with the normal seasonal downturn seemingly delayed for another month,"
Australia & New Zealand Bank said.
"Of the major commodities, only coal has failed to record
strong year-to-date growth rates in imports.
"This supports our view that the outlook for China's demand
for commodities remains broadly positive."
The data continue "a run of better-than-expected data which
should be taken positively by the market", the bank added.
Investors anyway expect an increase in the Wasde in the USDA's
estimate for US soybean exports this season (which ends this month), given a
Data on Monday coming in at 25.2m bushels, above
expectations, suggested that "soybean exports could exceed USDA's current export
projection of 2.10bn bushels" for 2016-17, Futures International's Terry Reilly
"Only 19.2m bushels per week are needed to reach USDA's
projection from now" until the end of the season.
Soybean futures for November added 0.8% to $9.77 ¾ a bushel,
crossing back above their 40-day moving average.
Chicago winter wheat
futures too added 0.8%, to $4.67 ¼ a bushel, before running into a chart
ceiling, with both 100-day and 200-day moving averages at around this point.
Benson Quinn Commodities noted that "the winter wheat
markets haven't had much interest in trading near the $4.50-a-bushel level.
"The winter wheat markets had been oversold, but are quietly
correcting that issue."
'Isn't going to
measure up very well'
The gain also grabbed back a bit of ground versus Minneapolis-traded
spring wheat, which has outperformed on drought damage to the US crop.
In Thursday's Wasde, the "most important wheat number will
be the USDA's updated take on US hard red spring wheat production, with trade
looking for a 33m bushel cut to 393m bushels" in the harvest, Richard Feltes at
Chicago-based RJ O'Brien said.
In fact, the US spring wheat rating improved 1 point week on
week, albeit to a still-poor 32% good or excellent.
But it is not only the US crop under the microscope, with
Benson Quinn Commodities noting that the
relatively warm, relatively dry conditions in western Canada are limiting the
production potential of that crop.
"It's by no means a failure, but the crop isn't going to
measure up very well against production of the prior year."
Minneapolis wheat for September actually added 0.6% to $7.30
½ a bushel, with the better-traded December lot up 0.5% at $7.43 a bushel.