PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 21:05 GMT, Monday, 31st Mar 2014, by Agrimoney.com
Evening markets: corn regains lead in grains, after US data

Yet again, grain markets are rewarding farmers' patience.

Growers who held-off the clamour of calls into early 2014 that they must sell or risk prices below $4 a bushel have found their obstinacy rewarded, with prices nudging $5 a bushel on Monday, for the first time since early September.

The major driver for the latest move in prices were quarterly grain stocks data, and estimates for US plantings, unveiled by the US Department of Agriculture.

But these reports were not the only shot that corn had in its locker, with weekly US export data coming in at 1.33m tonnes, a figure that CHS Hedging termed "way above expectations".

Furthermore, the quarterly report on the US hog herd released late on Friday showed numbers, while down 2.9% year on year, well in excess of market expectations, indicating that perhaps porcine epidemic diahorrea virus (PEDv) is not doing as much damage as had been feared.

Whatever, it means more porcine mouths to feed than investors had banked on.

'Double-barrel bullish'

Still, the big positive to prices was the USDA data showing that domestic stocks of corn as of March 1, at 7.01bn bushels, were more than 90m bushels smaller than investors had though, and a forecast that sowings will be 1m acres below market expectations.

The figures were "double-barrel bullish for corn", Richard Feltes at RJ O'Brien said.

Sure, corn sowings have a habit of ending up higher than estimated in March, but "gains in last three years averaged only 250,000 acres", he said.

What the data does mean is that, with less margin for error, the "corn market will be more sensitive to 2014 growing season adversity" – a factor already relevant with the cold soil temperatures boding ill for early plantings pace.

Prices soar

It was also evident that the data had caught investors, in Chicago speak, "leaning the wrong way", with futures showing losses of more than 3% ahead of the report.

Indeed, month-ends, and especially quarter-ends, are often associated with price falls in agricultural commodities as funds close positions and take profits to pay bonuses or clients.

Chicago's May contract ended at $5.02 a bushel, actually the best close for a spot contract since late August, a gain of 2.0% and, in chart terms, showing a potential buy signal in trading outside the range of the previous session but ending (firmly) higher.

The new crop December contract did even better, jumping 2.3% to $4.98 1/4 a bushel, closing its discount to the May lot to less than 4 cents.

 

Signally, the day also did significant damage to the new crop soybean:corn price ratio, viewed as an indicator of the market signal being sent to farmers in their choice between the two crops in spring sowings programmes.

The below-expectation corn sowings figure of 91.7m acres was complemented by an above-expectation soybean planting estimate, of a record 81.5m acres, an obvious negative for prices of the oilseed.

So, with high soybean sowings looking already in the bag, the market felt confident in lowering the price incentive a bit.

New crop November soybeans closed down 0.3% at $11.87 1/4 a bushel.

'Solid bid'

The soybean: corn ratio actually ended up down 2.5% on the day at 2.38:1, still in soybean-encouraging territory, but well below the levels approaching 2.5 it reached late last year.

And it was not the only spread being monitored, with price ratios within the soy complex a factor too, given a March 1 stocks figure of 992m bushels which was in line with expectations.

And soymeal for May was hardly discouraging for old crop soybean futures in rising 2.3% to $479.30 a short ton, signalling strong demand for the feed ingredient.

"Old crop soybeans continue to get a solid bid," Darrell Holaday said, adding that "the acreage number has prompted a large amount of old crop/new crop spreading in soybeans and that is driving the old crop higher."

Mr Feltes said that there was "nothing in today's report to resolve old crop soybean tightness".

Soybeans for May gained 1.9% to $14.64 a bushel, a six-month closing high for a spot contract.

'In poor agreement'

The row crops certainly left wheat, the market leader in grains for much of this quarter, in the shade, with some talk of rains for the southern Plains, where dryness is threatening winter wheat seedlings.

Mr Feltes highlighted forecasts showing a "wetter outlook for US hard red winter wheat [areas], although confidence is low given mixed model signals, especially for late this week".

US Commodities said that the GFS and EU forecast models "are in poor agreement beyond the next 5-6 days".

And indeed MDA cautioned that "significant dryness will continue in the central and south western Plains wheat areas".

Further north, "cool temperatures… will maintain low soil temperatures and will keep wheat growth there very slow", the weather service added.

German dryness

The USDA sowings and stocks data were pretty mixed, with stocks a little higher than forecast, but plantings below expectations, especially for spring wheat.

Still, there were some other factors for bulls to rely on, besides strength in corn, with worries ticking higher over some weather problems in the European Union and Ukraine, even as rains ease fears over drought in eastern Australia as sowings loom.

German rainfall has averaged 49% below average in past six months, according to World Ag Weather.

Ukraine damage?

And Ukraine suffered cold weather over the weekend at a time of thin snow cover, although Commodity Weather Group said that "it is unlikely that any wheat in those areas are far enough along with jointing to see outright freeze loss.

That said, "it is not a good thing in already drought-stressed areas, as the burn back to vegetative growth will just make it even a little more difficult to see crop improvement", the weather service said, adding that "there will be several more nights this week that reach similar [temperature] levels".

Wheat for May ended up 0.3% at $6.97 1/4 a bushel in Chicago, with Minneapolis-traded spring wheat for May doing better, closing up 0.4% at $7.42 3/4 a bushel, encouraged by the plantings estimates.

Paris wheat eased 1.0% to E209.75 a tonne despite the Germany dryness, closing before Chicago wheat, the world benchmark, enjoyed its late rally.

Latest condition data on French wheat is certainly not so discouraging, with 75% rated good or excellent by FranceAgriMer on Friday, flat week on week, and only 1 point below the year-ago level.

 Cotton reaction

Among soft commodities, cotton fell 0.2% at 93.52 cents a pound in New York, recovering most of early losses on end-of-month profit-taking.

The new crop December contract ended up 0.1% at 80.0 cents a pound.

The firmer finishes followed the USDA plantings report, which showed sowings expected at 11.10m acres, up 7% year on year but below expectations of many in the market.

Rains for Brazil?

Cotton certainly did better than arabica coffee, which fell 1.5% to 177.90 cents a pound in New York for May delivery, if up more than 60% for the quarter.

The decline came amid forecasts for some rain in the main Brazilian coffee growing state of Minas Gerais, with MDA saying that the front, also to hit Mato Grosso and Goais, southern Parana and Santa Catarina, could bring falls of up to 2.5 inches, or more than 60mm.

According to Somar, average precipitation this week in Brazil coffee areas will be some 5-15mm, after a March which has continued the dry conditions.

Many areas of Minas Gerais received less than half normal rainfall this month.

The prospect of Brazil rains, which Somar said would hit cane areas this week too, did few favours for sugar bulls either.

Raw sugar for May closed down 1.2% at 17.77 cents a pound in New York.

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