If grain prices had been unexpectedly buoyant in the run-up
to the Wasde report, they were more muted afterwards than many investors
OK, that was not so true of wheat, which had good reason to tumble by 1.8% to $6.69 a bushel in
Chicago for May delivery.
Although there was some support from delayed official US
crop condition data overnight - which showed just 35% of winter wheat seedlings in "good" or "excellent" health, even worse than last year – the Wasde offered
little to support prices of the grain.
The report, the US Department of Agriculture's flagship
monthly briefing on world crop supply and demand, raised the estimate for world
supplies at the end of 2013-14 by 2.9m tonnes to 186.7m tonnes, rather than
making the small downgrade that traders had forecast.
The USDA forecast for
domestic stocks was raised in line with expectations, by 25m bushels to 583m
bushels (15.9m tonnes).
"There was nothing in
today's report for wheat bulls," said Richard Feltes at RJ O'Brien.
'Model runs have
Furthermore, there is some hope of rain for the drought-hit
southern Plains at the heart of the poor winter crop condition.
"The morning and midday GFS model runs have turned wetter
for the Plains and Midwest and, yes, wetter in the hard red winter wheat areas,"
said Darrell Holaday at Country Futures.
"This will be interesting to watch as the weekend
approaches," with forecasts having a habit of u-turns.
WxRisk.com noted that the European weather model is "drier
over east Texas, east Oklahoma, and east Kansas" in the short-term outlook, and
shows no rain over the southern Plains in the six-to-10 day outlook.
It was notable that Kansas City-traded hard red winter wheat
- as grown in the southern Plains, and less of a fund favourite too than its
Chicago soft red winter wheat peer – fell by a more modest 1.2% to $7.32 ¼ a
But corn fell despite
some bullish numbers in the Wasde, with the USDA cutting its estimate for
domestic stocks at the close of 2013-14 by 125m bushels, more than the market had
Although this initially sent May futures to $5.19 a bushel,
the highest for a spot lot in seven months, the contract ended down 0.9% at $5.02
¼ a bushel, a retreat for which various explanations were offered.
One was disappointment that the USDA stuck by expectations
for feed use, despite the surprisingly large usage implied by domestic stocks data
last week, and for consumption by ethanol plants too, despite their strong
"Both could be revised higher on upcoming crop reports," RJ
O'Brien's Mr Feltes said.
'Already priced in'
In fact, weekly ethanol data were soft, with weekly US production
falling 26,000 barrels a day last week to 38,000 barrels a day.
And US inventories rose nonetheless, by 532,000 barrels to
16.41m barrels, helped by strong imports, which soared to 38,000 barrels a day
last week from 11,000 barrels a day the week before, and from zero for the
previous five months.
Profit-taking was widely seen as a setback too, with some
idea that futures are already fairly valued.
"Today's ending stock number implies $5.10 a bushel for nearby
futures," said Rich Nelson, chief strategist at Allendale.
"In other words, the market may have already priced in [the
New crop December corn underperformed, falling 1.4% to $5.05
½ a bushel, although the extent of the decline was in part down to a closing
price to the last session deemed artificially high, and a result of the
temporary glitch to CME Group's Globex electronic trading system.
It was left to soybeans
to keep Chicago bulls' happy, rising 0.9% for May to $14.95 ¼ a bushel, although
even this was well below the intraday high of $15.12 a bushel, again with
profit-taking seen at work.
The spurt followed a cut of 10m bushels to 135m bushels in
the USDA forecast for domestic soybean stocks – a small change on paper but one
which exceeded expectations and implies very squeezed supplies.
Indeed, as a proportion of use, they match the tightest on
records going back 50 years.
Soymeal for May
fell back too, closing up 0.8% at $478.10 a short ton, but below the four-month
high of $490.90 a short ton set earlier, after the USDA raised its estimate for
US exports by 100,000 short tons, but cut ideas of domestic use.
Mr Feltes said: "Domestic soymeal users will be forced to
lean on more use of distillers' grains," the rival protein feed source
manufactured as a byproduct by corn ethanol plants.
Lowest stocks since 1951
Among soft commodities, cotton
futures followed something of the same path as grains, suffering a late
sell-down to end 1.5% lower at 90.44 cents a pound in New York for May
The USDA also lowered its forecast for domestic stocks at
the close of 2013-14 by 300,000 bales to 2.5m bales – a 62-year low.
However, this downgrade had been largely expected, after
surprise ginnings data released two weeks ago.
Meanwhile, the USDA also nudged its estimate for world
stocks higher, by 170,000 bales to 96.9m bales, thanks to increases to
forecasts for Brazil and China.
Cocoa was mixed,
falling by 0.6% to $3,011 a tonne in New York for May delivery, but rising by 0.3%
to £1,887 a tonne in London for July, as traders await demand European data due
An increase of some 3% in the European grind for the
January-to-March quarter is expected.
But arabica coffee
rebounded from early losses to close up 1.7% at 199.85 cents a pound for May, after
Parana's rural economy department, Deral, forecasting a sharp drop in the
Brazilian state's coffee crop this year, thanks to the impact of frost last
year and the 2014 drought.
However, further gains may take some buying pressure to
achieve, with traders reporting significant selling pressure when prices have
strayed above 200 cents a pound.