The corn rally showed
its age a bit on Friday, toiling for grip even as weather forecasts signalled
that the bad US growing conditions are not over yet.
Sure, not all the weather news was bullish, with rainfall in
the western Corn Belt in recent hours proving stronger than had been expected.
"Not a general rain, but still helpful to some areas,"
Darrell Holaday at Country Futures said of the precipitation.
But the general weather outlook remained yield-negative.
"Heat is clearly coming back into the upper and central
Plains and western Corn Belt in in the six-to-10 day and 11-to-15 day outlooks,"
weather service WxRisk.com said.
Late July weather "may not be as hot as what we saw
in late June and early July.
"But mid and upper
90s Fahrenheit, and dry, will still be pretty awful for late corn and soybeans."
Nonetheless, Chicago corn for July, having come $0.06 a
bushel from setting a record high for a spot contract, fell back to expire at
$7.56 a bushel, a loss of 2.0%.
December corn stood in positive territory, up 0.5% at $7.35 ¾
a bushel in late deals, but was well off intraday high.
Mr Holaday, noting that there were "not a lot of interested
buyers" said that "everybody goes into a hand-to-mouth attitude when price gets
to that level.
"The thought becomes that 'if I am going to have to pay that
for corn, I will wait and buy it when I need it'.
"The market will not surge to additional levels, up to $8.00
a bushel, without commercial buying interest."
Indeed, the US Department of Agriculture reported US corn
losing out on a sale to Mexico, with Brazil seen in the market as the likely
origin of the grain.
And, technically, FCStone's Mike O'Dea warned that the "key
reversal still in place from Wednesday in December corn will need to close
above $7.48 a bushel today to negate that signal".
US Commodities said that "the market has now moved to the final
phase of the bull market", albeit saying that this could yet see prices move a
But traders were not so keen to chase the market higher,
with a weekend ahead, and the prospect of changes to the weather forecast.
Sure, soybeans managed
decent gains, adding 1.5% to $15.51 ¾ a
bushel for November delivery.
But then it still has greater potential for yield premium
injection, with its vulnerable pod-filling phase yet to come, unlike corn's
sensitive pollination phase which is already largely past.
"A new concern will develop as we move to the podding time,"
US Commodities said, noting that US soybeans "have stopped growing", and that
investors expected official data on Monday to show a drop of 3-5% in the proportion
of US soybeans in "good" or "excellent" condition.
Furthermore, there are still signs of demand, with the USDA
unveiling the sale of 150,000 tonnes of US soybeans to "unknown destination".
'Brazilian crushers out
The demand idea got an extra boost from data showing China's
economy grew by 7.6% in the April-to-June quarter, the worst figure since 2009
but still viewed as a relief by some investors, who had feared a negative shock
China is the top importer of soybeans, besides cotton, which in New York soared 3.4%
to 72.30 cents a pound for December delivery.
And sourcing the oilseed from elsewhere is tricky, with Paraguayan
soybeans, unusually, trading at a premium to Chicago futures.
"Brazilian crushers are out of soybeans and need to
originate more," FCStone's Mike O'Dea said.
Little wonder that Brazil could be on its way to a record
soybean crop of 83.1m tonnes in 2012-13, overtaking the US as the world's top
producer, according to Agroconsult.
Black Sea downgrade
meanwhile, there was a negative from South American competition already kicking
in, with talk that Argentine supplies are $30 a tonne cheaper that US ones.
However, fears continue to grow over the dryness-pressed
Black Sea, a keen price competitor –when it has sufficient supplies.
Agritel on Friday cut its estimate for the Russian wheat
harvest to 45.9m tonnes, and forecast a sharply lower harvest, down 29% to 70.7m
tonnes, in combined Kazakh, Russian and Ukrainian output.
Wheat exports from the three countries will tumble by 45% to
Russia export ban
Indeed, fears are such that Mr O'Dea warned that "eventually
the market will be faced with the prospects of a Russian grain embargo similar
"This will be a story for January forward but can have a
huge effect on basis and spreads."
In fact, Chicago wheat for September stood 0.5% higher at
$8.51 a bushel.
In Europe, Paris wheat for November ended up 1.8% at E258.75
a tonne, while London November feed wheat gained 1.2% to £188.00 a tonne.