So it looks like the dryness in the southern Plains is causing
some damage to winter wheat
seedlings after all, now that it has emerged from dormancy.
OK, the crop rating for Texas improved week on week, by 1
point, taking it to 35% rated in "good" or "excellent" condition (although that
is still below the year-ago figure).
But Texas is not where the dryness concerns are centred on,
with just 4.7% of the state seen as in drought, according to the latest US
Department of Agriculture drought monitor.
In neighbouring Oklahoma, 74.3% of which is in drought, the
winter wheat crop rating dropped by 1 point to 42%.
USDA scouts in the state reported a "continuation of dry
warm weather", besides "three large wildfires started in the northwest and
burned over 800,000 acres".
Meanwhile, in Kansas, 39.3% of which is in drought, the
rating dropped by 3 points week on week to 40%, amid temperatures 4-6 degrees
Fahrenheit above normal for most of the state, and precipitation of "generally
less than a half inch", and "limited to eastern counties and a few northern
"Warm and windy conditions affected the entire state," the
'Can't be ignored'
And this when, according to Tobin Gorey at Commonwealth Bank
of Australia, "there is now no weather premium in the market".
Indeed, "we can see the market eventually stabilising around
these levels", which represent the "the middle of the range traded from late
August last year", he added.
While southern Plains weather looks like remaining dry for
the next week or so, there is some hope of rain relief afterwards.
"Weather forecasters are starting to add a storm system to
US hard red winter wheat regions in forecasts seven-to-10 days ahead."
Benson Quinn Commodities said that "the extended forecasts
offer the potential for better precipitation in the southern Plains during the
last week of March.
"It is too far out to have much confidence. However, the
prospects of seeing measurable totals can't be ignored."
And indeed they were not, with Chicago soft red winter
wheat, the world benchmark, flat at $4.30 ½ a bushel as of 09:30 UK time (04:30
Kansas City-traded hard red winter wheat, as grown in the
southern Plains, was also flat, at $4.42 ¾ a bushel.
Richard Feltes at RJ O'Brien flagged not just the "improved
moisture prospects for the US hard red winter wheat belt", but also a "suspicion
that the pace of international wheat tenders will slow following the announced
wheat business by Algeria, Tunisia and Saudi Arabia" in recent days.
Egypt's Gasc also bought big last month, raising ideas that
it could now be out of the market for the rest of 2016-17.
'Highest of the year'
Furthermore, chart factors are not so encouraging either.
"Momentum studies are pointing lower and may be gaining
momentum," said Benson Quinn Commodities.
And if wheat, which had some kind of helpful story to rally
around in terms of the overnight USDA crop rating data, could not gain in early
deals, there was not much hope for the other Chicago majors either.
Corn futures for May
fell by 0.2% to $3.60 ¼ a bushel, setting a fresh two-month low and continuing
to defy the apparently strong signal from Monday's weekly US export inspection
data of 1.55m tonnes.
"Corn inspections were the highest of the year," said Joe
Lardy at CHS Hedging, adding that they have been very good for the past six
futures for May shed 0.6% to $10.00 ½ a bushel – earlier, briefing dropping
below the $10-a-bushel mark (to $9.98 ¾ a bushel) for the first time in nearly
(The new crop November lot did break below $10 a bushel,
falling 0.5% to $9.97 a bushel, so trimming its much-watched ratio against
December corn futures to 2.60.)
USDA officials underlined the idea of a seasonal slowdown in
US soybean exports as importers to Brazil – and without the relief of a summer
uptick, as last year.
"Compared to a month ago, the current weekly rate of
shipments is down sharply," the USDA said.
"With much brighter crop prospects in Brazil, the odds for a
repeat of last summer's unusually strong [US] exports are diminishing.
"Even with an abundance of [US] soybean stocks remaining,
new export sales are now expected to shrink with the accelerating foreign
In New York, cotton
defied its fellow row crops to post gains, albeit minimal ones, adding 0.1% to 76.93
cents a pound for May delivery.
The gain also defied a 0.9% fall to 15,390 yuan a tonne in
futures on China's Zhenghzhou exchange overnight (although that in turn
followed the last session's drop in New York.)
Investors will be looking keenly at the latest results from
China's auctions of stocks from its huge state stockpiles, with Monday's result
showing a slightly higher price than Friday, up 46 yuan at 14,905 yuan a tonne, but a sale rate cut to 84.7%
of fibre offered.
On Friday, 93.7% of cotton offered was sold.
While Monday's figure is "obviously not a poor result, it is
somewhat low by historical standards," CBA's Tobin Gorey said.
"And particularly given it's only the start of the second
week of China's 2017 auction programme.
"Question is, is that simply a one off result or a sign of
something more sinister," with ideas that the quality of cotton being offered
may be on the low side.