Corn and soybean futures lost most of the gains
of the last session, as befits a Tuesday – by repute the day of turnarounds in
But wheat futures
managed to escape the sell-off, lifted by further tweaks to some familiar problems
– the Ukraine crisis and European wheat quality.
Concerns over Ukraine revived after Nato sources said that Russia
has some 20,000 troops in battle-ready formations on the border between the two
countries, above the 15,000 that US officials said were stood there last week.
The fear is that Russia will strike in response to gains
made by Ukraine forces in their battle against, apparently Moscow-backed
With both Russia and Ukraine major wheat exporters, unrest
in the region bodes ill for exports.
As a reminder that the crisis is effecting agricultural
groups, grains-to-chicken group MHP said that it had suspended operations at a
poultry production plant in eastern Ukraine's Donetsk region, the centre of
pro-separatist activity, because of "active hostilities" at the local town of
The move - which will mean MHP switching some hatching egg
production to another Ukraine plant, and relying on imports from Europe – was ordered
"for the sake of its employees' safety", the London-listed group said.
As for the European wheat quality problems, forecasts
indicated no let-up in the rains at the centre of the setback which, in falling
on ripe grain, have encouraged germination and left considerable quantities of
milling wheat fit only for feed.
"Additional rain fell from eastern France to Poland Monday perpetuating
small grain and late winter rapeseed harvest delays," World Weather said.
"Some rain totals of 1.00-2.00 inches occurred in central
and eastern Germany."
Looking ahead, "additional waves of rain will fall over the
next two weeks maintaining a slow harvest pace", the weather service said,
adding that "grain quality declines continue to be a serious concern, and a prolonged
period of dry weather is needed immediately to stop the deteriorating crop trend".
Wheat futures for September soared 1.6% to $5.52 ½ a bushel
in Chicago, the best finish in nearly a month.
That said, Kansas City hard red winter wheat fared worse in
adding a relatively small 0.7% to $6.38 a bushel for September even though, on
fundamental terms, it should be more favoured by Europe's problems, being a
higher quality grain.
Chicago wheat's gains appear to be being fuelled by position
closing among hedge funds, which had, as of a week ago, built their net short
in the contract's futures and options to the second highest level on record.
In Europe itself, Paris wheat for November added 0.9% to E174.75
For soybeans, the
focus was on the growing prospects of a huge US harvest, lifted by US
Department of Agriculture data overnight showing the condition of the crop
remaining stable at 71% "good" or "excellent" despite dry conditions last week.
Investors had expected a decline of 1-2 points.
And the prospect of a strong yield was underpinned by better-than-expected
overnight rains and increased confidence of more moisture on the way.
"Weakness in the row crop markets stems from benefits of
overnight rains stretching further into eastern regions of the Corn Belt,"
Benson Quinn Commodities said.
"Additionally, forecasts continue to indicate that many key
growing regions, including western regions, will receive beneficial rainfall
"Rains of 1-2 inches, possibly more, are expected in many
key areas through Iowa and Illinois."
OK, Informa Economics left its estimate for the US soybean
yield at 44.5 bushels per acre, and for production at 3.7bn bushels, below the
USDA forecasts of 45.2 bushels per acre and 3.8bn bushels respectively.
However, the consultancy is known for somewhat conservative
And investors preferred to focus on higher forecasts, such
as FCStone's estimate on Monday at 46.0 bushels per acre.
November soybean futures closed down 1.2% at $10.65 ¾ a
Corn falls less fast
For corn, Informa
raised its US yield forecast by 3.0 bushels per acre to 168.0 bushels per acre,
again below estimates from many other observers, if above USDA expectations.
Still, with US weather improving, December futures closed
down 0.5% at $3.67 ¼ a bushel, lagging soybeans in part because they have
already passed their sensitive development period, pollination, meaning they
have less risk premium to lose.
Furthermore, the condition of US corn did deteriorate last
week, by 2 points to 73% rated good or excellent, albeit with this still
representing a strong figure.
Demand is proving strong too, as Archer Daniels Midland
reminded in reporting strong profits from ethanol production, and forecasting
Among soft commodities, raw
sugar futures for October closed lower in New York, ending down 1.2% at
16.13 cents a pound, the weakest finish for a spot contract in five months.
After a fire at the Brazilian port of Santos, which
initially sent prices soaring more than 5% on Monday, proved to have caused
relatively little damage, investors focused on a more downbeat picture of ample
"There has been no change in the overall fundamental outlook
- physical prices are weak, spreads are widening and demand not enough to halt
the slide at the moment," Sucden Financial said.
Still, Macquarie offered sugar bulls longer-term hope,
seeing a current Brazilian stockbuild as likely to prove temporary.
for September closed down 0.6% at 189.40 cents a pound, despite the continued
concerns over Brazil's harvest.
"The potential for big production losses in Brazil this year
are real, and traders are starting to worry about production next year as well
as some contra seasonal rains hit coffee areas in the south," said Jack
Scoville at Price Futures Group.
"The rains could create premature flowering and the flowers
could be aborted as it has turned dry again."
However, he also noted an increasing willingness by
producers to sell at elevated prices, while some roasters appear to be waiting
out the latest wave of market volatility.