PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 09:35 GMT, Friday, 28th Apr 2017, by Mike Verdin
AM markets: wheat futures rise as fresh US freezes loom

Descriptions of the weather the US is facing over the sound almost biblical.

"Flooding rain will occur from eastern Oklahoma to central Illinois this weekend with rainfall of 4.00 to nearly 10.00 inches of rain expected," Friday through Sunday, said Terry Reilly at Chicago broker Futures International.

Indeed, the eastern Corn Belt will "see 100% coverage" of rain during this window, although an estimate 25% of the western Corn Belt will escape.

"More rain is slated for both belts Tuesday through May 4," Mr Reilly added.

'Some crops might be replanted'

Tobin Gorey at Commonwealth Bank of Australia, also noting forecasts of a "significant rain event" for the Midwest this weekend said that "investors will be anxious about the prospect of torrential rain and flooding.

"Some crops might have to be replanted."

And this after a slowish start to corn sowings anyway.

"With the large short position that managed money currently holds and the upcoming weather forecast, things could become interesting as planting delays mount," Benson Quinn Commodities.

Futures could show sharp gains if funds are tempted en masse into closing short bets in corn.

'Susceptible crops'

Meanwhile, in winter wheat country, "nightly frost and freezes are expected from the west-central high Plains region into the Dakotas, Minnesota and north western Wisconsin through Monday," Mr Reilly said.

Benson Quinn Commodities said: "It looks like Sunday has the best possibility of seeing cold temperatures" which "may reach as far south of the panhandles.

"The advanced stage of the crops further south makes them susceptible."

This after mild frosts in the central Plains earlier this week, thought to have caused "some crop damage", but "above levels that would cause significant damage", the broker said.

French crop condition slides

And if anyone doubted the potential for poor weather to hurt crops, a reminder came from France, the European Union's top grains producer, which has suffered unduly dry weather, as well as frost.

FranceAgriMer, the official crop bureau, rated the French soft wheat crop at 78% "good" or "excellent" as of Monday down 7 points week on week, and 10 points year on year.

For winter barley, the good or excellent reading was 71%, also down 7 points week on week, and a drop of 16 points year on year.

For durum wheat, the rating tumbled by 12 points week on week to 63%, a decline of 19 points year on year.

Spring barley fared a bit better, at 80% good or excellent, a drop of 5 points week on week, and 14 points year on year.

Nafta update

So the potential was there for rises in Chicago especially in corn and wheat prices. (Soybeans, being a little later seeded than corn, can see area rise if wet weather prompts farmers to ditch some corn sowing plans.)

However, there was a potential fly in the ointment in bulls in corn in particular, in the form of some revived concerns about President Donald Trump's stance on Nafta.

Overnight reports underlined that he was yet willing to withdraw the US from the trade agreement with Canada and Mexico, fears of which hurt trading on Wednesday before an announcement that the President had agreed to talks on the treaty.

"If I'm unable to make a fair deal for the United States, meaning a fair deal for our workers and for our companies, I will terminate Nafta," Mr Trump said.

Peso performance

How seriously are investors taking the chance of a US exit from Nafta?

The Mexican peso, which has become a barometer of Nafta fears, did fall against the dollar, but by a modest 0.2% as of 09:30 UK time (03:30 Chicago time).

It remains some 1.1% weaker than before Wednesday's Nafta worries emerged.

Corn, meanwhile, of which Mexico is a huge importer from the US, eased by 0.1% to $3.68 a bushel in Chicago for July delivery, finding technical resistant too in an effort earlier to bust above its 200-day moving average, at $3.69 a bushel.

Hard vs soft

Wheat, for which Mexico is not quite such as important market for the US, fared better, adding 0.4% to $4.33 a bushel for Chicago soft red winter wheat, the global benchmark.

Still, Kansas City-traded hard red winter wheat - as grown in the Plains, so facing the freeze concerns - fared better, adding 0.9% to $4.37 a bushel for July.

Indeed, the contract built on the premium to its Chicago peer it regained in the last session (and which is more typical, given hard wheat's higher protein count).

The premium, at $0.04 a bushel, stood just below its 50-day moving average, having jumped above the 100-day line in the last session.

Minneapolis spring wheat added 0.4%to $5.55 a bushel for July, gaining support from wet northern US Plains/ Canadian weather which is raising fears for spring sowings progress.

Argentine upgrade ahead?

Soybean futures, meanwhile, nudged 0.1% lower to $9.57 a bushel for July delivery, maintaining something of a consolidation after their tumble from levels above $10.90 a bushel reached in January.

If unusually strong US export sales (for the time of year) last week of 808,100 tonnes old crop were a boost to bullish sentiment, the latest news coming from Argentina was not, with the Buenos Aires grains exchange returning to a stance that it may upgrade the country's harvest from 56.5m tonnes.

"Thanks to the high yields of areas harvested so far, and good weather forecasts over the short term, it is possible that the season will end with a bigger crop than currently estimated," the exchange said.

This after earlier in the month cautioning over crop losses to flooding.

'Didn't pick up any steam'

Another factor which has disappointed some soy bulls is the failure of soyoil to respond much to a move which might increase US consumption of the vegetable oil in biodiesel manufacture.

This week, 14 senators introduced bipartisan legislation to increase renewable fuels use with a biodiesel tax credit, although switched to producers from the blenders that credits have applied to historically.

This would limit the risk of the benefit spilling abroad, with blenders often turning to Argentine or Indonesian biodiesel imports.

However, Futures International's Terry Reilly noted that "talk of the biodiesel tax credit coming back for US producers didn't pick up any steam" in market terms.

Soyoil futures for July stood down 0.2%at 31.89 cents a pound, while in Kuala Lumpur, rival vegetable oil palm oil eased 1 ringgit to 2,505 ringgit a tonne.

PM markets: wet, cold weather raises US wheat worries
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