PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 10:24 GMT, Monday, 10th Apr 2017, by Mike Verdin
AM markets: soy attempts bounce, despite drop in palm prices

On paper, the big headline data events for agricultural commodity traders this week occur on Tuesday, when both US and Brazilian officials unveil headline monthly data.

Brazil's Conab bureau will reveal monthly data for domestic crop production, while the US Department of Agriculture will publish its much-watched monthly Wasde report on world crop supply and demand.

The Wasde is expected to raise estimates for corn, soybean and wheat inventories, at both US and global levels, so providing a negative backdrop for prices.

Data later

Still, data later on Monday could have a notable impact on investor sentiment too, when the USDA unveils its first forecast for progress in US corn sowings.

And there seems to be some divergence of what figure traders should look for.

According to Joe Lardy at CHS Hedging, "the expectation is that 1-2% is in" the ground.

"The weather just hasn't been exceptional to have a really fast start," with wetness slowing fieldwork.

'Rain will hold up fieldwork'

And according to Tobin Gorey at Commonwealth Bank of Australia, "weather forecasters now think frequent rounds of rain will hold up fieldwork in the US Midwest this week, and probably the next too.

Expectations for South America 2016-17 crop estimates in Wasde and (current USDA estimate)

Argentina corn: 37.79m tonnes, (37.5m tonnes)

Range of estimates: 37.0m-38.5m tonnes

Soybeans: 55.89m tonnes, (55.5m tonnes)

Range of estimates: 55.0-57.5m tonnes

Brazil corn: 92.43m tonnes, (91.5m tonnes)

Range of estimates: 90.5m-94.0m tonnes

Soybeans: 109.86m tonnes, (108.0m tonnes)

Range of est'tes: 107.0-122.56m

"Consequently US farmers are unlikely to get as much early planting done as they would like."

Weather service MDA said that "showers in western and central [Midwest} areas will slow corn planting" this week

"Showers will favour western and central crop areas with lighter showers pushing into eastern areas," and with most activity early in the week.

'Best rally opportunity'

While it is early in the season to get too worried about the delays, and inject a stack of risk premium back into corn prices, there is the potential for sowing concerns ultimately really to give a lift to prices, if speculators are tempted into closing their 150,000-lot-strong net short in Chicago corn futures and options.

"The large managed fund short worrisome, if planting delays emerge," said Richard Feltes at RJ O'Brien.

Water Street Solutions said: "Funds are huge shorts going into the US growing season and should provide the best rally opportunity."

Mixed message

That said, are plantings really not doing so well?

Expectations for end 2016-17 US crop stocks in Wasde, (current USDA estimate)

Corn: 2.352bn bushels, (2.320bn bushels)

Range of estimates: 2.27bn-2.484bn bushels

Soybeans: 447m bushels, (435m bushels)

Range of estimates: 410m-475m bushels

Wheat: 1.147bn bushels, (1.129bn bushels)

Range of estimates: 1.10bn-1.20bn bushels

Sources: USDA, Reuters

According to Mr Feltes, the corn sowing data later should show completion "in the 6-7% area, versus 4% average" progress for the time of year.

And in fact, the Midwest weather outlook shows an "open week ahead" for most areas boding well for seeding progress, he said.

Commodity Weather Group backed this assessment, saying that while rains would "favour the north west Midwest" early this week, the rest of the region should see "only scattered showers" this week.

And if that all sounds inconclusive, the corn market was hardly displaying a strong trend in early deals, easing, but by a modest 0.1% to $3.59 a bushel in Chicago for May delivery as of 10:15 UK time (04:15 Chicago time).

Bouncing beans

It was soybeans which were showing a more definite direction, and upwards for a change, adding 0.4% to $9.46 a bushel for May delivery, contrary to its recent downwards trend.

"The soybean market has settled lower week to week, five times in a row." Said CHS Hedging's Joe Lardy, adding that "over that span, soybean prices have dropped from $10.37 a bushel to $9.42 bushel."

He flagged that "updated production estimates for Brazil continue to grow and are a constant pressure on the soybean market".

Argentine rains

However, the recovery in hopes for Argentina's production is not so secure, after the return of heavy rains.

"With harvest only 6% complete, there is still a long way to go," Mr Lady said.

"The flooding and big production losses from last year are fresh in trader's minds," and there is "a decent amount of rain in the forecast" for this week.

CBA's Tobin Gorey said that "parts of Argentina received too much rain over the weekend. 

"Forecasters say drier weather must evolve over the next few weeks to protect soybean quality."

'Tightening old-crop supplies'

Elsewhere in the oilseeds complex, there have been worries over canola sowings too, with Mr Gorey flagging "forecasts for unwelcome wet weather in Canada's Prairies".

Expectations for end 2016-17 world crop stocks in Wasde, (current USDA estimate)

Corn: 221.81m tonnes, (220.68m tonnes)

Range of estimates: 219.5m-225.15m tonnes

Soybeans: 83.91m tonnes, (82.82m tonnes)

Range of est'tes: 81.5m-85.75m tonnes

Wheat: 250.24m tonnes, (249.94m tonnes)

Range of estimates: 248.5m-253.0m tonnes

Sources: USDA, Reuters

Such worries come as "the market continues to worry about tightening old-crop supplies".

Still, canola for May edged a modest Can$0.10 a tonne higher to Can$489.20 a tonne in Winnipeg, held back by a 2.2% drop in Kuala Lumpur palm oil futures, to 2,602 ringgit a tonne in Kuala Lumpur. (Canola, as an oil-heavy rather than meal-heavy oilseed, tends to move more in line with palm oil prices than some other oilseeds, eg soybeans.)

The contract earlier dropped below 2,600 ringgit a tonne for the first time in six months.

The Malaysian Palm Oil Board earlier on Monday pegged Malaysian palm oil stocks last month at 1.55m tonnes a rise of 6.5% month on month, and ahead of the 1.46m-tonne figure that investors had expected.

Although Malaysian palm oil exports last month, at 1.27m tonnes, exceeded forecasts, so did output, at 1.46m tonnes.

'Clear need for prices to drop'

The delays in Prairies sowings would appear a positive for spring wheat prices too, given that the area is a big grower.

However, Minneapolis spring wheat futures remained a little on the defensive, easing 0.25 cents to $5.18 a bushel for May a fresh five-month low.

"The higher protein spring wheat futures continue to lose their premium to the lower milling grades," CBA's Tobin Gorey said

"The USDA keeps reporting slow export sales for hard red spring wheat, so there is a clear need for prices to drop."

Crop improvement

Winter wheat futures hardly helped either, dropping 0.5% to $4.19 a bushel in Kansas City for May delivery, as traders braced for the weekly USDA crop progress data later on Monday to show a further recovery in crop ratings, as rains ease concerns of dryness stress.

"All key negative fundamental features are firmly intact," said Benson Quinn Commodities.

"Expect the US hard red winter wheat crop to show an improvement. There aren't any significant threats to global wheat production at this time.

"Cash markets aren't offering a solid reason to buy futures."

Buyers' appetites whetted?

At Futures International, Terry Reilly said that a "lack of bullish news and good weather for US hard red winter wheat country are generally pressuring prices, along with large global stocks."

However, on a more positive note "further losses in US high protein wheat futures may trigger additional export business.

"Algeria bought 570,000 tonnes of wheat, optional origin, and some traders are hoping the deal included US wheat."

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