PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 19:52 GMT, Wednesday, 3rd Sept 2014, by Agrimoney.com
Corn price hits 4-year low on 'bountiful bear news'

Corn prices fell to a four-year low, while wheat tumbled more than 3%, on what one broker termed "bountiful bearish news", as strong US row crop prices coincided with hopes of a ceasefire in eastern Ukraine.

Wheat futures for December delivery slumped 3.5% to close at $5.35 ¾ a bushel in Chicago,

In Paris the November contract closed down 1.4% at E171.00 a tonne despite the first victory since January by French wheat in a tender by Egypt's Gasc grain authority.

Chicago corn futures for September delivery plunged 4.1% to $3.41 ¼ a bushel, the lowest finish for a spot contract since June 2010.

The better-traded December lot ended 3.2% down at $3.52 a bushel, 0.75 cents above a contract low reached earlier.

"We have seen a major break in the grain markets today," said Darrell Holaday at broker Country Futures.

'Wheat resumed its drive lower'

The declines followed progress by Ukraine President Petro Poroshenko and his Russian counterpart, Vladimir Putin, towards a ceasefire in eastern Ukraine, where pro-Russian separatists have been fighting domestic forces.

The Kremlin said that the two leaders were "largely in agreement on possible ways to resolve the severe crisis".

Wheat prices have been acting somewhat as a barometer for Russia-Ukraine tensions, given the region's status as a large source of competitively priced supplies.

CHS Hedging said: "Wheat resumed its drive lower as a potential ceasefire in the Ukraine appears likely."

'Record high crop ratings'

Furthermore, expectations for strong US corn and soybean harvests were further enhanced by data overnight showing a surprise improvement, in a weekly US Department of Agriculture report, in the condition of both crops.

"That has been a bearish psychological factor for the market today," Mr Holaday said.

"We are seeing record high soybean crop ratings for this time of year," with corn ratings at their highest since at least 1994.

The strong crop prospects were underlined by a series of upbeat yield estimates from commentators including Allendale, INTL FCStone and Lanworth, which all came in with figures well above the USDA's own forecasts –which are up for revision next week.

Furthermore, talk from the early US harvest, in the south, continued to show strong yields.

"Early yield reports in the southern regions continue to be bearish," Mr Holaday said.

'Bountiful bear news'

At Chicago-based RJ O'Brien, Richard Feltes highlighted "better-than-expected weekly crop ratings, big FC Stone production forecasts and ongoing high yield reports from the southern US.

"Bottom line - bountiful bear news is converging today."

As an extra cause to sell, the price falls sent futures down through key technical points, such as $3.60 a bushel and $3.58 a bushel in December corn, encouraging further liquidation.

However, Mr Feltes also offered some hope that the sell-off may run out of steam for now, with futures potentially in the session setting "lows for the week".

The next set of US yield forecasts, from Informa Economics, expected on Friday, "won't be as negative as FCStone's", with the analysis group having a reputation for conservative estimates.

And while early southern yields "are fabulous, the next major leg down will need confirmation of blow-out Midwest yields".

'Concerns over disease'

There remain yet some hurdles for US row crops to overcome, including growing disease pressures highlighted in some of the USDA reports which noted strong overall crop condition.

In Iowa, for instance, the top corn and soybean growing state, USDA scouts noted that "diseases in both corn and soybeans were reported across the state".

In Indiana, scouts warned that "precipitation and humidity have raised concerns over disease".

And there is the threat of frost too which, in bringing an early finish to crop development, would depress yields, although ideas on the deadline for this differ from mid-September to early October, and from region to region.

"Concerns of an early frost are starting to percolate back into the market," CHS Hedging said, noting a forecast from DTN meteorologist Doug Webster that North Dakota could see frost before September 20.

"Frost before September 30 would cause substantial yield loss in the upper Midwest."

Model differences

At Allendale, Paul Georgy said that "the only real threat of frost/freeze is seen in the middle of the month in northern regions of the Canadian growing regions.

"However, the models disagree with that forecast. The GFS is the colder model calling for a freeze north of a line from Edmonton to just north of the northern edge of Lake Winnipeg."

The European weather model "keeps the freezing temperatures a good 200 miles farther north".

Furthermore, for spring wheat, the wet weather which has helped US corn and soybean crops is proving a difficulty in terms of getting the harvest completed.

Still, the best that could be said for Minneapolis spring wheat futures is that they fell less far than those in Chicago, ending down 1.7% at $6.12 ¾ a bushel for December delivery, albeit a contract closing low.

Soybeans for November managed a bounce from an intraday low of $10.12 ½ a bushel, but only to $10.20 a bushel at the close, down 1.2% and the contract's weakest finish ever.

Coffee cools

The day was hardly positive for soft commodities either, although cotton managed gains, adding 1.0% to 65.96 cents a pound for December delivery, despite a downbeat outlook from the International Cotton Advisory Committee.

More bullishly, the National Development and Reform Commission said that the Chinese government would stop selling cotton from state stockpiles after new crop supplies come to the market, in an attempt to stabilise new cotton prices.

But raw sugar for October dropped 1.3% to 15.62 cents pound, as the profit-taking wave which boosted values in the last session, through closing short positions, fizzled out.

And arabica coffee for December slumped 3.4% to 202.30 cents a pound, as producers took advantage of the recent rally in prices.

Values were also undermined by talk of rain in Brazil's coffee belt, which would improve hopes of flowers setting, rather than aborting, and underpinning prospects for the 2015 harvest.

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