Corn futures made a bright start to the week, far
outperforming other grains, although whether this headway will last…
Chicago corn futures for December closed up 1.3% at $3.68 ¼ a
bushel, going a sixth successive session without setting a new contract low,
and nearly retaking its 10-day moving average line.
However, this appeared down more to the approach of key data,
with the US Department of Agriculture's monthly Wasde report due on Tuesday, rather
than any fundamental support.
US corn exports last week, at 905,137 tonnes, were OK, but
below the 1.14m tonnes the week before, USDA data on Monday showed.
And on the supply side, there appears no major threat to ideas
of record US production this year.
The outlook "leans negative" to prices, Richard Feltes at
broker RJ O'Brien said, noting forecasts of a "continuation of cool temperatures
this week followed by warming next week that will push crops to maturity".
But how big will the US crop be?
While the USDA currently foresees a record yield of 165.3
bushels per acre, thanks to good growing conditions the figure is widely expected
to be raised in the Wasde, to 170.1 bushels per acre, on a consensus market
However, will it be raised to far? And even if it is, have
investors already factored in a value so high?
"Possibly the best way to describe today in the grain and
oilseed markets is adjustment day," Darrell Holaday at Country Futures said.
"The corn market is making adjustments ahead of the USDA
numbers tomorrow," and actually the "primary adjustment is the unwinding of
November soybean/December corn
Soybeans vs corn
Going long on soybeans and short on corn has been a popular
bet, and a profitable one in recent months, as the November soybean: December
corn ratio has climbed to well above 2.9:1.
But, with US soybeans now going through their critical month
of August without a major weather test, after corn apparently sailed through its
July pollination without too many hiccups, there are ideas that the ratio
should be closing.
And the prospect of the Wasde provided a catalyst for some
Certainly, November soybeans ended down 1.1% at $10.73 ¼ a
bushel, back below 10-day and 20-day moving averages.
US weekly soybean exports were reasonable, at 98,910 tonnes,
more than double those the week before, taking the total for 2013-14 to 43.16m
Still, the USDA has forecast full-season exports at 44.09m
tonnes, with only three weeks left to run.
For 2014-15, the USDA announced the sale of 168,000 tonnes
of the oilseed to China, extending a recent pick-up in orders, but one which
needs to be maintained to signal exports next year meeting strong expectations.
Besides, elsewhere in the oilseeds complex, palm oil sent a downbeat signal in tumbling to a year low, helping depress rival vegetable oil soyoil by 1.8% to
35.21 cents a pound in Chicago for December delivery – a contract closing low.
For wheat, the
poor start gave way to a downbeat close, down 0.5% at $5.46 ½ a bushel in
Chicago for September delivery, although the contract did manage decent gains
at some points during the day.
At one point, the contract touched $5.56 ½ a bushel,
challenging its 40-day moving average.
Sure, the news on Europe's wheat crop was hardly promising,
with the remnant of Hurricane Bertha sweeping in to give extra threats to the
harvesting, and the quality of the crop.
"Rain totals of more than 1.00 inch occurred in a few locations
causing the greatest set back in field operations," World Weather said.
And the outlook is none too promising either with rainfall
this week to "continue frequent across much of central and north [Europe] resulting
in delays to small grain harvesting", the weather service said.
"Some crop quality concerns will continue, although the situation
will not be quite as wet as that of last month."
However, how well are US exporters taking advantage of the
setback to the EU, which had been expected to be the world's top wheat exporter
US exports last week were, at nearly 527,000 tonnes, well
above the 384,421 tonnes the week before, but compared less favourably with the
year-ago figure of 664,145 tonnes.
Besides, chart-wise, "after a solid correction, the
technical structure of the wheat markets failed last week and has yet to find
support," Benson Quinn Commodities said.
"It appears a test of the prior lows is in order."
Nor is there quite the same pressure on hedge funds to cover
short positions, with some already closed, and Russian-West tensions on the
wane, as Moscow pulls back troops from the border with Ukraine.
Paris wheat itself for November closed down 1.2% at E172.25
Buyers were more evident among soft commodities, with New
York cotton for December adding 0.3%
to 64.40 cents a pound, as Societe Generale raised some questions over the
health of the Texas crop, and questioned the wisdom of further short positions
in a fibre already trading near contract lows.
And raw sugar for
October added 0.6% to 16.24 cents a pound, recovering from earlier losses, amid
some debate over how supportive is a turn in hedge funds to net short in the sweetener,
after a hefty five-week sell down.
Is the selling spent, or is more to come?
did best, soaring 4.6% to 189.15 cents a pound in New York for September delivery,
retaking its 10-day, 75-day and 100-day moving averages, as talk of dryness
spread from Brazil to other major producing countries, in what looks like it
could become an emerging story.
"The weather is dry again in Brazil and much of Latin
America," Jack Scoville at Price Futures said.
Besides Central America, where plantations are still
recovering from a rust outbreak, there is some talk of a lack of rain in
Colombia, the second-ranked arabica producing country, and in east Africa too.