Grain markets began on Friday largely where they left off
the last session, with concerns over Ukraine tension following the Malaysia
Airlines crash lifting wheat, but corn and soybeans proving reluctant to follow.
In fact, wheat's gains were modest, and futures had by 08:00
UK time (02:00 Chicago time) failed to beat the intraday high of the last session.
It has yet to be officially confirmed that the Malaysia
Airlines aircraft was shot down (although US figures have said it was a missile strike), let alone who by, what the reprisals might be,
and how these could affect grain markets.
(The consensus theory appears to be that the plane was shot
down accidentally by separatist rebels in Ukraine, with a Russia-provided
missile - but that is speculation.)
Not that a rally in wheat prices is unwarranted.
"The outcome [of the crash] is not known, but just the fear
of it may send the funds out of their net short wheat position which could be
short-term friendly for corn and wheat," one US broker said.
Investors are "justifiably concerned about another surge in
tensions that may divert Black Sea grain buyers to other origins - especially
if the European Union employs tougher sanctions" against Russia, said Richard Feltes
at broker RJ O'Brien.
"Recall the wheat market rallied over $1.40 a bushel in late
February-March as Russia moved on Crimea following the Winter Olympics."
Ukraine and Russia are major wheat exporters – not that any
sanctions are likely to apply to grain itself, a major source of cheap supplies
for, for example, North Africa, but regional instability could affect
transportation, or least raise fears of disruptions that persuade buyers to
Meanwhile, weaker currencies can curtail production in
raising credit costs, and through currency weakness, making imported inputs
such as seed and agrichemicals more expensive, although it has to be noted that
Russia appears set for a strong harvest this year.
Chicago's September soft red winter wheat contract stood 0.8%
higher at $5.55 a bushel, up a more modest 16.75 cents over the last two
Kansas City-traded hard red winter wheat for September was
up 0.5% at $6.51 ¾ a bushel, up less than 15 cents over the two sessions,
lacking the extra firepower from short-covering that has lifted its Chicago
Hedge funds had a large net short, of more than 40,000
contracts, in Chicago wheat as of Tuesday last week, the latest data available,
compared with a net long in Kansas City wheat.
'At least 2m acres
Separately, the US winter wheat harvest remains a negative
theme for prices, bringing seasonal pressure, but also improving as it heads
"Quality remains good with proteins holding higher than
normal," CHS Hedging said.
On a more price-supportive note, the broker also flagged
talk that "Canada ended up with at least 2m acres unplanted because of wet
conditions", a factor which has proved most supportive to prices of canola, the rapeseed variant, and of which Canada is the top exporter.
Canola for November actually stood 0.6% lower at Can$448.00
a tonne in Winnipeg, but this would be the first negative session this week.
Back in Chicago, corn
did a bit better in trying to keep up with wheat this time, adding 0.3% to
$3.88 ¼ a bushel for December delivery, with the old crop September contract gaining
0.3% to $3.80 ¾ a bushel.
Still, the main theme in the corn market is the prospect of
a huge US crop, with warmer Midwest temperatures due next week provoking little
concern, despite occurring during the heat-sensitive pollination process.
"Some areas are
looking at above-normal temperatures and below-normal precipitation, but
overall no one is calling this a major threat at this time," one US broker said.
CHS Hedging said: "Highs in the 80s and 90s [degrees Fahrenheit]
are expected next week which should have limited impact on crop development as
scattered rains are forecast".
In fact, "weather conditions remain nearly ideal as tassels
appear in many states".
Futures are receiving support, thought, from ideas of firm demand
especially at current price levels, amid decent US export and ethanol production
Societe Generale forecast a further recovery in corn prices,
based in part on strong consumption ideas.
'More work on the
Soybeans for November,
however, eased 0.1% to $10.92 ¾ a bushel, despite talk of decent demand here
too, with Chinese buyers in town.
But has the buying got legs? "I suspect the torrid pace of Chinese
new crop soybean buying will abate in coming days," RJ O'Brien's Richard Feltes
Meanwhile, the movement of a benign forecast into the sensitive
soybean growing month of August, when pod-setting occurs, is encouraging the
removal of risk premium, just as corn suffered as conditions for its current
pollination period were forecast as benign.
In fact, with November soybeans still worth 2.81 times as much
as December corn, a historically high ratio, "soybeans have more work on the
downside than corn", Mr Feltes said.
struggled, shedding 0.4% to 67.40 cent a pound for December, within an ace of
contract lows, as growing US production hopes offset the glow from decent weekly
US export sales data released on Thursday.
"The weather in west Texas continues to be beneficial from
crop production and this is adding to an already bearish situation," Citigroup's
Sterling Smith said.