For the second time in two weeks, important US crop data
caught investors, as the expression goes, leaning the wrong way.
Funds had prepared for the US Department of Agriculture's
monthly Wasde crop report by reducing hefty net long positions in corn and soybeans (and to a lesser extent wheat), depressing prices of the row crops well below summer record
Some of the expectations being their positioning proved justified,
including a larger-than-expected upgrade by the USDA to its estimate for the
domestic soybean crop.
If the yield figure did not live up to the hopes of many investors,
the extra 1.1m acres of the oilseed that was factored in, with spring sowings
beating forecasts, certainly did.
The trouble was that the USDA lifted its estimate for
consumption sharply too – an upgrade which could hardly be called rash when the
country has, a little over one month into 2012-13, already received orders
covering more than 80% of soybean shipments it is expecting for the full year.
"Changes to the soybean balance sheet were bullish were
offset by higher demand expectations," Rabobank said.
Wasde soybean data, change on last and (on market expectations)
Planted acres: 77.2m acres, +1.1m acres
Harvested acres: 75.7, acres, +1.1m acres, (+1.1m acres)
Yield: 37.8 bushels per acre, +2.5 bushels per acre, (+0.8 bushels per acre)
Production: 2.860bn bushels, +26m bushels, (+101m bushels)
End-stocks: 130m bushels, +15m bushels, (-4m bushels)
"While we do not expect this report to push Chicago soybean
price to new highs, we do view it as confirmation of a still-very-tight supply
Chicago soybeans for November indeed closed higher, up 1.7%
at $15.48 ½ a bushel, if well off their high of $15.68 a bushel.
Notably, the rise also took the lot back above its 100-day
moving average, leaving at only one night its sojurn below the line, and eroding
a negative technical signal.
Corn stocks shrink
If funds were looking for any succour from corn, here they
had even less luck.
The USDA downgraded its estimate for year-end stocks of the
grain even thinner than the market had thought, to 618m bushels.
While the harvest was put just above market consensus, the
USDA baulked at cutting its estimate for domestic feed use of corn, already at
a 35-year low, if cutting its forecast for exports to a 38-year low.
And even this balance sheet included a figure for
abandonment of acres to drought at less than 10%, a proportion many analysts
questioned given a crop tested by the worst US drought since 1956.
"This is not down even one percentage point from the number
of a year ago," Darrell Holaday at Country Futures said.
'Corn has retaken the
So the report was termed "bullish" for corn among all the brokers
Agrimoney.com was in contact with, and as highlighted by a 4.9% leap to $7.73 ¼
a bushel in the price of Chicago's December contract.
(The lot came, at its intraday high of $7.76 a bushel,
within 1 cent of hitting the maximum rise allowed in a day.)
Wasde corn data, change on last and (on market expectations)
Planted acres: 96.9m acres, +0.5m acres
Harvested acres: 87.7, acres, +0.3m acres, (+1.56m acres)
Yield: 122.0 bushels per acre, -0.8 bushels per acre, (-0.88 bushels per acre)
Production: 10.706bn bushels, -21m bushels, (+105m bushels)
End-stocks: 619m bushels, -112m bushels, (-39m bushels)
"Corn has retaken the reins and is upside leader of the ag
complex as the market needs to do a lot of demand rationing over the next 11
months," Benson Quinn Commodities said.
That said, Societe Generale, which has been one of the more
bearish commentators on grains, was less upbeat, saying that "we would be
cautious going forward given the demand destruction seen thus far".
"While farmers can be expected to sell any rallies, we
remain mindful of the $7.50-8.50 a bushel futures prices that led to demand destruction"
over the summer, the bank said.
Wheat was bears' best bet for traction, with the Wasde being
given a mixed review by commentators in terms of likely price impact.
Rabobank termed the report "bullish" for wheat, US
Commodities "bearish" and Benson Quinn Commodities "neutral". Take your pick.
Closing grain, oilseed prices
Chicago corn (December): $7.73 ¼ a bushel, +4.9%
Kansas wheat (December): $9.18 a bushel, +2.3%
Chicago wheat (December): $8.86 a bushel, +1.7%
Chicago soybeans (November): $15.48 ½ a bushel, +1.7%
London wheat (November): £202.00 a tonne, +1.3%
Paris wheat (November): E263.50 a tonne, +0.9%
Paris rapeseed (November): E480.00 a tonne, +0.4%
The beef was in essence that the USDA left its estimate for
US stocks at the close of 2012-13 above market expectations, reflecting a cut
to export expectations.
And, as an extra pressure on prices, Ukraine announced that
it had raised its wheat export cap by 1.0m tonnes to 5.0m tonnes, resolving,
for now, the tension identified by UkrAgroConsult earlier in the week.
And the outlook for the US weather turned wetter for hard
red winter wheat areas which need moisture to promote seedling development,
which has got off to a tardy start.
'Fresh wheat tender
But supporting prices were a cut to the US estimate for world
inventories, which many analysts believe stands to get bigger still given that
it factors in a 23.0m-tonne Australian crop which is a more optimistic guess
than those from most other commentators.
Furthermore, "fresh world wheat tender activity overnight
offers support as well", Benson Quinn noted, with Indonesia and South Korean
among buyers, and Jordan tendering.
And with corn moving higher, it was hard for wheat to flop.
Chicago's December lot ended up 1.7% at $8.86 as bushel,
with its Kansas peer soaring 2.3% to $9.18 a bushel.
In Europe, Paris wheat for November added 0.9% to E263.50 a
tonne, feeling some pressure from a stronger euro, while London wheat for
November gained 1.3% to £202.00 a tonne.
'Confirms our bearish
Among soft commodities, the Wasde was not kind to cotton, raising the estimate for world
production by 2.3m bales, thanks to ideas of better crops in China, India and
Meanwhile, the estimate for Chinese consumption was cut by
2.0m bales as, in the USDA's words, "the high domestic support price continues
to erode offtake".
The forecast for world stocks at the close of 2012-13 was raised
to a record 79.1m bales, equivalent to nearly nine months' use, also the
loosest supplies on record.
"The USDA confirms our bearish outlook for the current
season, and that the market needs to signal to northern hemisphere growers to
sharply reduce area for the 2013-14 crop," Rabobank said.
New York cotton for December dropped 1.9% to 70.71 cents a
Nor, among crops not touched much by the Wasde, did raw sugar fare any better, despite positive comments from Macquarie, which forecast higher prices as
Brazil mills turn more cane into ethanol rather than the sweetener.
Talk of "washouts", ie physical buyers walking away from
orders, didn't help.
Nor did the move down by New York's benchmark March contract
through a string of technical support levels, including 10-, 20- and 50-day
Talk of producers keen to sell, "taken with the lack of end
user demand coupled with rumours of physical washouts on recent business, the
tone is getting determinedly bearish once more", Sucden Financial said.
The March lot tumbled 3.8% to 20.45 cents a pound.