PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:24 GMT, Thursday, 14th Aug 2014, by Agrimoney.com
Evening markets: bulls take control in grains. Softs soften

Bulls seized control of grain markets on Thursday, lifting some soybean and wheat futures sharply from contract lows, as signs of strengthened demand prompted a wave of profit-taking on short positions.

Weekly US export sales data were actually a touch soft for corn, at 787,800 tonnes for 2014-15, and wheat, at 338,700 tonnes, although viewed as decent for soybeans, coming in at 1.08m tonnes for new crop and showing a positive number for 2013-14 even with just two weeks left of the season.

But that told only part of the story.

'Persistent dryness'

For corn - which closed up 1.0% at $3.73 a bushel in Chicago for December delivery, rising for four consecutive sessions for the first time since February - there is growing speculation that China may be forced back into imports, with talk of harvest prospects being reduced by in some growing areas.

"It could be we see as much as 4m-5m tonnes taken from the US Department of Agriculture estimate for the Chinese corn crop, of 220m tonnes, because of persistent dryness," said Terry Reilly, senior commodity analyst, grain and oilseeds, at Chicago-based Futures International.

Not, of course, that Chinese import demand would necessarily be fulfilled by US supplies, after the fuss over the Syngenta corn variety approved by Washington, but not Beijing, which has led to China's rejection of a series of American cargos.

Mr Reilly plugged Ukraine as the likely origin, although the overall impact of increased Chinese import needs would be supportive to values elsewhere too.

US vs German

Meanwhile, US ethanol production margins remains strong, and statistics on Mississippi River barge traffic are raising hopes of a decent US weekly export data on Monday, when the USDA releases cargo inspection numbers.

OK, for wheat (and soybeans) the barge data are less promising, and the US appears to be continuing to struggle to nail down orders from importers.

While Pakistan bought 100,000 tonnes of wheat, and Bangladesh 50,000 tonnes, the orders went to Black Sea suppliers, although Jordan and Israel at least went for optional origin in purchases of 50,000 tonnes and 25,000 tonnes respectively.

But it has been noted that "high protein wheat out of the US is now competitive with high protein German wheat", Mr Reilly said.

Chicago leads

As for how much high protein German wheat there will actually be, Strategie Grains underlined the problems facing the European Union crop, quality wise, by hiking its estimate for production close to record levels, but signalling a drop of more than 10m tonnes of crop of milling quality, following harvest time rains.

It was actually lower protein, Chicago-traded, soft red winter wheat that led the revival in the complex, rising 1.8% to $5.37 a bushel for September delivery.

But that came against a background of a large, potentially record, hedge fund net short position in the contract already, raising doubts about the extent of unfulfilled selling pressure.

Kansas City hard red winter wheat, in which hedge funds retain a net long position, added 0.5% to $6.07 a bushel for September delivery, recovering from a contract low of $6.02 a bushel set earlier.

That was, at least, enough to regain a premium over Minneapolis hard red spring wheat, which added just 0.2% to $6.05 a bushel, also rebounding from a contract low.

In Europe itself, Paris wheat for November eased 0.3% to E170.75 a tonne, while London wheat eased 0.4% to £121.80 a tonne, weighed by a UK harvest which is, so far, showing near-record yields.

Rising basis

As for soybeans, it gained extra vim from a strong US cash market, viewed as a sign of resilient US domestic and export demand.

"Bean basis, in selected locations, has been noted dramatically improving over the past 24-48 hours," CHS Hedging said.

Mr Reilly told Agrimoney.com: "In the eastern Corn Belt, each day it is becoming that bit tougher for crushers to find soybeans, and for exporters to find soybeans too."

The issue is made more pressing by the prospect on Friday of monthly US soybean crush data from the NOPA industry group, for which a downbeat figure of 115.8m bushels, compared with 118.7m bushels in June, is expected.

"If realised, a July crush of 115.8m bushels would be lowest July crush rate since 2004 when 108.66m bushels were crushed," Benson Quinn Commodities said.

Data ahead

And there is more US data due on Friday too, with Farm Service Agency statistics on claims for prevent plant etc, which could prove a particular test for soybeans.

The huge increase in US sowings this year is seen as being fuelled by a switch to the oilseed, which can be later planted, from corn thanks to a wet spring.

Did farmers really switch so much to soybeans, or to other crops, or not plant at all?

"Trade was caught off guard by the 2m+ acre increase in soybean planted acres over expectations in the June 30 acreage report," Benson Quinn Commodities said.

Friday's FSA report "should be good indication if those June 1 intentions were really planted to beans", with commentators split on what the data are likely to show.

Soybeans for November added 0.9% to $10.56 a bushel, recovering from a contract low of $10.38 a bushel reached earlier.

The strong US basis helped the near-term September contract gain 1.7% to $10.98 a bushel.

Softening softs

Among soft commodities, New York December cotton futures faded, losing early gains to end lower, albeit by only 0.1% at 64.67 cents a pound, comfortably above its contract lows hit earlier in the month.

Commerzbank noted "reports that brisk demand from spinning mills can be observed at the low prices", with futures having gained some support too from investors taking profits on short positions.

Raw sugar fell too, ending down 0.6% at 15.91 cents a pound in New York for October delivery the first close for a spot contract below 16 cents a pound for six months.

Results from Cosan and Sao Marthino have underscored the extent of stockpiling that Brazilian sugar producers are undertaking in expectation of price rises ahead, but with higher inventories of course pressing on near-term values.

"Physical values are still weak and, despite the worries over a curtailed crush season in Centre South Brazil due to the dry weather having stunted the cane, recent reports show that sugar production continues at a fair pace and is adding to the near-term oversupply," Sucden Financial said.

Roaster stand-off

Arabica coffee dropped too, by 0.6% to 188.45 cents a pound for September delivery, amid a lull in roaster interest.

"The buy side of the market is still offering weak differentials or is quiet." Jack Scoville at Price Futures said.

"They are expected to wait for lower futures prices before getting real interested in buying in a big way again, and should find out soon if they will be able to buy cheaper coffee."

But cocoa edged 0.1% higher to $3,235 a tonne in New York for December, having earlier set a fresh three-year high of $3,248 a tonne.

"Demand remains a primary driver of the market and stronger demand is expected to continue well into next year," Mr Scoville said.

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