For wheat futures,
there is significant talk that price lows for now have been made – even if
expectations of price rises ahead appear muted.
Tobin Gorey at Commonwealth Bank of Australia, for example, highlighted
that in the last session "both Chicago and Kansas City [winter wheat futures] saw
steepish falls during the day but sizeable buying emerged to turn the market
"The market's continued resilience is bolstering the
impression that seasonal price lows are in the rear view mirror. "
Benson Quinn Commodities said that that late market revival suggested
a "lack of confidence in pressing trade much lower at current levels.
"Look for sideways trade to continue in the wheat complex."
In fact, the Chicago December soft red winter wheat contract added 0.3% to $4.44 ¼ a bushel as of
09:25 UK time (03:25 Chicago time), with Kansas City hard red winter wheat futures for December up 0.4% at $4.43 ¾ a
bushel, trying to regain a premium over its lower-protein peer.
There is talk of yet further upgrades to Russia's harvest,
with Agritel flagging official data showing that the country's farmers had, as
of Monday, harvested 82% of their wheat crop at a yield of 3.44 tonnes per
hectare, compared with 2.9 tonnes a year before.
"Central region, the Volga and the Urals, are registering
excellent yields respectively higher of +27% compared to 2016, + 27 % and + 12
%," Agritel said.
"Therefore, the Russian harvest is already reaching 78.2m tonnes,
and the production forecast by the US Department of Agriculture at 81m tonnes
Still, with Russia's exports logistics still in question,
how much of this will hit the world market…
Where the talk of price resilience breaks down is over
Minneapolis-traded spring wheat, which
is feeling pressure in part from ideas of a better-than-expected Canadian
(Indeed, Canadian officials on Tuesday estimated the country's
spring wheat harvest at 20.08m tonnes, based on the likes of weather and satellite
data, compared with the 18.89m-tonne harvest suggested by a farm survey made in
July, results of which were released three weeks ago.)
Furthermore, the talk just will not go away over a gap left
in the chart of the Minneapolis December contract three months ago, when
futures were leaping higher daily on US dryness worries.
"Minneapolis still looks vulnerable till market can fill
lower side of the gap at $6.07 a bushel," said Benson Quinn Commodities.
The Minneapolis December lot edged 0.25 cents nearer by
easing to $6.17 a bushel, also getting nearer its 200-day moving average, at a
little below $6.12 a bushels, which prices have not touched in four months.
There is less confidence that fellow grain corn has set a price low, with its late
Terry Reilly at Futures International said that "US
harvesting pressure is around the corner", with the idea that the spike in
supplies as harvest progress weighs on prices, as does the allowance of the removal
of the last bits of risk premium.
Benson Quinn Commodities, flagging a "seasonal tendency of the
[corn] market to make its seasonal lows at end September to very early October",
added that a "record large carry-in, undersold producer and new supplies with
harvest just around the corner all offer resistance" to higher prices.
CBA's Tobin Gorey said that while a drop in prices in the
last session was not large, it was "enough to mean the potential season low at
the start of this month is in question.
"Buyers might perhaps emerge at those lower levels again."
There were in fact a few around in early deals, to allow a
rise in December corn futures – but not by much, all of 0.1% to $3.48 ½ a
South America watch
meanwhile, which are also facing harvest pressure on prices, but seeing support
too from ideas of strong demand, added 0.3% to $9.78 ½ a bushel for November.
Benson Quinn Commodities said that the "largest carry-in
stocks in 10 years and forecast for record production offer resistance" to
price gains, while a "delayed start to Brazilian planting due to dry conditions,
and record large world demand forecast for 2017-18 offer underlying support".
CHS Hedging added that "the trade continues to watch for
planting disruptions in South America", although noting that the weather had
turned more favourable, ie wet, for central Brazil late next week.
Direction later may depend on whether the US Department of Agriculture,
through its daily alerts system, unveils a fresh export purchase of US soybeans,
with an absence on Tuesday denting confidence somewhat.
On call support
In New York, cotton
posted better gains, of 0.6% to 69.67 cents a pound for the December contract, despite
decreasing chances that Hurricane Maria will make landfall in the US, with it
looking more and more likely to head off eastwards into the Atlantic.
Mr Gorey said that "the market is clustering around the idea
that the US crop, and USDA's estimates of it, will be closer to 20m bales",
than the 21.8m bales currently expected.
Ecom restated the imbalance in so-called "on call" data
between the larger number of mills, ie buyers, needing to fix cotton prices
against futures than producers.
"I suspect that the mills needing to fix their on call sales
contracts will be provide some support to the December cover month as the
contract moves closer to expiry," the trading house said.
It also cautioned over the threat of a rapid reversal, if
prices do fall, as hedge funds liquidate their large net long in futures and
"If the market starts to fall away then we may see some long
liquidation which would just see the situation get worse for the specs."