The narrative of excessive US moisture as a threat to crops
ran somewhat into the sand, prompting steep retreats in wheat and, especially,
The idea that strong rains are getting corn and soybean crops
in the likes of Iowa and Minnesota off to a poor start, while hurting the
quality of close-to-harvest winter wheat, remains on the radar.
"Plentiful moisture across many parts of US growing regions
keep this market jittery as wheat, corn, and bean concerns get assessed," CHS
"Disruption of wheat
harvest and quality concerns build, while new crop corn and soybeans, for
better or worse, sit in excessive water soaked fields.
"There are concerns of reduced yields in this year's corn,
from all the rain across the Corn Belt last week and over the weekend."
In fact, the US Department of Agriculture will later reveal
weekly crop condition data expected to show drops of 1-2 points in the
proportion of corn and soybeans rated "good" or "excellent".
Not all bad
But with that factored in, many investors decided to book
profits on the recent rally rather than wait to see the actual data.
Besides, there remained plenty of talk too that the rains, while
disastrous for many farms which received too much, were a boon for others,
working on the "rain makes grain" philosophy.
At Citigroup, Sterling Smith acknowledged "worries that they
heavy rains some areas may stunt root development".
However, traders should also "keep in mind that the same
weather has also put a far larger part of the growing area into very good
Darrell Holaday at Country Futures noted that, for many
regions of the US, "weather models continue to point to favourable weather
conditions, a good mix of sunshine a rain".
In fact, according to MDA, "more limited rains in Iowa and
southern Minnesota," major corn and soybean growing areas, "should allow
wetness to ease a bit".
Besides, on the demand side, US exports, as measured by cargo
inspections, fell last week to 987,386 tonnes, from 1.15m tonnes the week
And late on Friday, the USDA confirmed a steep fall in
placements of cattle on US feedlots last month, falling 7.0% year on year to
1.91m head, signalling less feed requirement on that score.
Corn for July dropped 1.9% to $4.44 ½ a bushel, dropping
back below its 10-day moving average, while the new crop December lot slumped
2.2% to $4.42 ½ a bushel.
'Continue to lower
Wheat futures had
reasons for relative strength, such as the orders by Egypt, on Saturday, and
Saudi Arabia, today, of nearly 1m tonnes of the grain.
The weather remains less than idea for the harvest, but good
for spreading disease in crops and compromising quality.
"Rains should remain active across the central and southern
Plains, which will further ease long-term drought but will continue to lower
wheat quality and slow harvest progress," MDA said.
In Canada too, "rains in central Saskatchewan will maintain
wetness concerns", although rains in Alberta, as well as Montana, will be more
'Big supplies and
Furthermore, US wheat exports were better, rising to 581,453
tonnes last week from a little under 500,000 tonnes the week before, and
431,532 tonnes in the same week of 2013.
Still, the export news was not all good, with the Egyptian
tender pointing out that US supplies remained uncompetitive compared with those
from the Black Sea.
"Russian new crop prices were seen easing in the last week
and this serves to further highlight the big supplies and tight competition
that is currently dominating the wheat market," Citigroup's Mr Smith said.
With wheat fighting a weak seasonal time (with the harvest)
and tending to fall to early July, and corn lower, futures lost early headway
to end down 0.7% at $5.89 a bushel for the best-traded September contract, a
four-month closing low.
Futures did a little better in Paris, adding 0.1% to E188.50
a tonne for November delivery, helped by coming closer into contention at the
Egyptian tender and, in their earlier close, missing out on the last weakness
in Chicago futures.
fared best, receiving support from more than just the wetness threat to US crop
It helped that Chinese factory sector data out overnight was
strong, with the country the top soybean importer.
And, on trade, US exports came in, while hardly at bumper
levels, at 61,847 tonnes, enough to pose more questions over the US balance
sheet tightness that Rabobank reminded of, in an upbeat price outlook –for now.
CHS Hedging said: "Weekly soybean export inspections were
reported at 2.3m bushels, still above levels needed to meet the USDA's
Funds cover shorts?
Still, there was something going on technical in soybeans
too, with more talk about the late surge on Friday in soybean prices that Agrimoney.com
"There is a rumour that some funds were short a large amount
July soymeal calls and they had to
buy as many as 9,000 futures to cover those calls late Friday and early today,"
Country Futures' Darrell Holaday said.
"Once that was done, all of the markets have backed off."
Soybeans for July in fact ended up 0.6% at $14.24 ¾ a
bushel, while the November contract edged 0.1% higher to $12.33 ¾ a bushel.
But soymeal more dramatically lost its way, ending down 0.7%
at $455.80 a short ton for July delivery.
technical factors too may have had a hand in a tumble in the July contract -
which ended down 0.7% at 87.52 cents a pound, having slumped 4.5% to 84.16
cents a pound at one stage.
With the contract due to expire on July 9, funds are getting
out and, in many cases, switching to the December contract, which indeed rose
0.8% to 77.68 cents a pound.
The December contract faces some fundamental pressure from the
US Plains rains, which mean better growing conditions for spring crops in
Texas, the top cotton producing state.
However, the weak monsoon is raising concerns over India,
the second-ranked cotton producer after China.
Raw sugar futures
found gains hard to maintain, after getting to the ceiling of the price
corridor they have walked for the last four months or so.
The October contract got to 18.81 cents a pound for getting
vertigo and retreating to close 0.10 cents lower, down 0.2% on the day.
Losses were limited in part by ideas that the extent of fund
selling has, in fact, just created scope for fresh purchases.
Regulatory data on hedge fund positions were "a little of a
surprise and [show] perhaps the funds have a little more buying room than we
thought", said Sucden Financial.