Have investors overdone the selling in grains and oilseeds?
To be sure, there are few thinking futures are away to the
But there is an idea that prices have done enough for now on
the downside to price in expectations of large world production, with Australia & New Zealand Bank the latest to caution against uber-bearishness.
futures did managed to extend their recovery quite convincingly, closing up 2.2%
at $11.07 ¾ a bushel for November delivery.
That was the first close starting with an $11 in two weeks,
and took the contract back above its 20-day moving average for the first time
It was fostered, in fundamentals, both by supply and demand
On demand, the US announced yet another sale to China, of 486,000
tonnes for 2014-15, although 66,000 tonnes are of optional origin, meaning they
could end up being bought from, say, Brazil.
Still, with weekly actual exports firm too, at 112,345
tonnes last week, up from 97,160 tonnes the week before, it was definitely
advantage bulls on this score.
"Analysts are expecting good demand for US soybeans after
the large break in prices," Fintec Group noted.
'The driving force'
On supply, the forecast for dryness in parts of the Midwest changed
a little, turning wetter in in the middle of the week for Nebraska and Kansas –
but at the expense of Iowa and Illinois, so offering no net gain.
"The dryness in the western production areas is really the
driving force in the market today," Darrell Holaday at Country Futures said.
Citigroup's Sterling Smith said that "there is some slight
nervousness about dry weather being seen across the western Corn Belt, and the
forecasts are leaning drier over the next 10 days.
"If this dryness and warmer bias continue on into the middle
of August, this will be an issue."
Soybeans, unlike corn,
have yet in earnest to get through their vulnerable developmental phase,
pod-setting, making dry weather a particular concern.
And at a time when hedge funds already have a large net short in the oilseed, the biggest since 2006, making the market vulnerable to
'Demand has seen an
Corn itself rose 1.3% to $3.76 ¾ a bushel for December
delivery, ending above its 10-day moving average for the first time this month,
helped also by the dry weather.
"There is some dryness beginning to creep into the south
western production areas," Mr Smith said, adding that "demand has seen an
uptick as prices have slumped nearly 30% since posting highs in early May".
That said, export sales, at 805,365 tonnes, were OK but not
fantastic, down from 941,977 tonnes the previous week.
It was wheat
which let bulls down, falling 0.6% to $5.34 ¾ a bushel in Chicago for September
Sure, there was much comment about worries in eastern
Australia, from the likes of Allendale, which said that "Australian wheat
producers are becoming concerned about dryness and the development of El Nino.
"Producers in New South Wales and Queensland are already
dealing with sporadic showers and low subsoil moisture."
However, conditions in the south have been near-optimal,
allowing National Australia Bank to forecast a harvest above that of the
official Abares crop bureau.
Furthermore, US exports were soft last week, at 395,963
tonnes, down from 527,633 tonnes the week before.
Signally, wheat in Paris dropped 0.8% to E178.25 a tonne
despite lingering concerns over the French crop, although drier weather in the
country is expected to improve harvest progress this week.
'A little less
Among soft commodities, cotton
hitched a ride with the row crops, adding 0.8% to 65.88 cents a pound in New
York for December delivery, recovering from a contract closing low in the last
In fact, "cotton is attempting to end a string of 12
consecutive weekly declines, its worst week to week swoon in 55 years", Mr
And it may get some help from the extent of selling that
hedge funds have already managed, besides a more promising shape to the future
curve, according to John Robinson, head of cotton marketing at Texas A&M
"After maintaining a months long inversion of old crop over
new crop futures, the December continues to trade below the March, May, and July
2015 contracts," he said.
"While the forward spreads don't cover the cost of storing
cotton, at least it is a move back towards normal economic relationships.
"And that move suggests things might be a little less
bearish for the future."
'Flowers could be
added 1.1% to 181.10 cents a pound in New York for September delivery, amid
continued concerns over the impact of rains on drought-hit Brazilian
plantations, unfortunately, not at the ideal, or usual, time.
"The longed-for rainfall in Brazil has now become so
extensive that harvesting keeps being disrupted," Commerzbank said.
"What is more, there are fears that it could result in the
pollination for the 2015 crop beginning too early."
At Price Futures, Jack Scoville noted rain in Brazil over
the weekend, which will encourage further early flowering, ahead of the 2015