PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 21:00 GMT, Thursday, 1st May 2014, by Agrimoney.com
Evening markets: May Day brings distress call for crop bulls

Mayday, mayday.

The new month brought distress calls for grain bulls, as two of the main props to values crumbled, bringing heady price falls.

Indeed, instead of bringing new money into agricultural commodities, as month beginnings have a reputation for doing, the start of May witnessed a significant sell-off by funds.

"Profit-taking dominates the trade today," CHS Hedging said.

'Better planting progress'

It is easy to see why when one major price support, the poor conditions which have been delaying US corn sowings, was undermined by forecasts of drier and warmer weather ahead.

"Drier weather is returning to the central and southern Midwest, and will continue there through mid next week, which will allow planting to improve considerably," MDA said.

"Drier and less cool weather by next week should allow for better planting progress."

At broker RJ O'Brien, Richard Feltes said the Midwest would see "only two more days of cool temps before weekend warming that will continue next week.

"US planting delays will be limited to Minnesota, the Dakotas, northern Iowa."

Strong export data

That more than stole the thunder from some decent weekly US export sales data for corn, at 937,900 tonnes for this season.

That was "up 52% from the previous week and 35% from the prior four-week average", the US Department of Agriculture said.

Actual exports were a strong 1.22m tonnes, albeit a figure well below the previous week's number.

Still, corn futures for July closed down 2.3% at $5.07 a bushel, closing back below its 10- and 20-day moving averages.

New crop December corn tumbled 1.9% to end at $4.99 a bushel, surrendering the psychologically important $5.00-a-bushel mark as well as its own 10- and 20-day moving average lines.

'Export sales were poor'

Soybeans fell even more, hurt by some erosion in ideas of tightness in US supplies.

Export sales proved negative, ie cancellations exceeded new orders by 16,400 tonnes, the weakest performance of 2013-14, albeit showing the direction that trade needs to take to meet USDA estimates.

(The USDA has forecast the US shipping 43.0m tonnes of soybeans in the year to the end of August, less than the 44.59m tonnes the country is currently committed too.)

While export sales were positive for 2014-15, at 78,900 tonnes they were hardly bumper.

"Soybean export sales were poor," Darrell Holaday at Country Futures said.

Import estimates on the rise

Indeed, ideas are now mounting of extra US imports, another way, besides reducing export commitments, of balancing the country's tight balance sheet.

New York-based Jefferies Bache said that when the USDA next week unveils its latest Wasde crop report, the department "could add 5m bushels to US imports, increasing them to 70m bushels" for 2013-14.

Allendale said that "trade is now estimating 85m bushel of soybeans could be imported in US", noting talk of two cargoes imported in New Orleans, one cargo each en route to Mobile, Alabama, Norfolk, Virginia and Wilmington, North Carolina "and another three cargoes showed up in the Brazilian export line up".

RJ O'Brien's Richard Feltes flagged talk that the Wasde "may be forced to up 2013-14 US soy imports to 95m bushels".

'Caught the market completely off-guard'

Furthermore, there was a negative signal in terms of deliveries against Chicago soy complex contracts, a sign that futures markets may be a more attractive place to sell than the cash market.

Archer Daniels Midland delivered a total of 19 contracts of soymeal against the expiring May contract.

"That caught the market completely off-guard as for a long time everyone has watched big gains in the soymeal cash and futures," Country Futures' Darrell Holaday said.

"The delivery overnight hinted at a crack in the soymeal cash market and the sell-off began in the soybean complex."

Prices sink

It undermined the positive of decent soymeal export sales last week, of 140,900 tonnes for 2013-14.

And there were 2,336 contracts delivered too against soyoil, the other main soy processing product.

July soymeal plunged 3.4 to $476.70 a short ton, while July soyoil dropped 2.3% to 41.16 cents a pound, ending below its 75-day moving average for the first time since mid-February, and surrendering its 200-day moving average too.

Soybeans themselves for July tumbled 3.4% to $14.61 a bushel, back below 10- and 20-day moving averages.

'Critical two weeks ahead'

Nor could wheat, the bulls' champion of late thanks to concerns over drought-hit US winter wheat, extend its winning run to eight sessions.

Not that concerns over US winter wheat are waning, with the Wheat Quality Council's Kansas crop tour producing results worse than investors had expected.

Indeed, the average yield in the top US wheat-growing state was, after the close of markets, put at 33.2 bushels per acre, below the five-year average finding of 41.8 bushels per acre and the actual result last year of 38.0 bushels per acre.

And there is "still a critical two weeks ahead for this crop", Mr Holaday said.

'Significant dryness'

Indeed, MDA said that, while conditions were improving for corn, "significant dryness will continue to stress wheat in the west central and south western Plains", with cold temperatures remaining a, small, threat too.

"Much warmer temperatures next week will accelerate wheat growth, but will also exacerbate the dryness," the weather service said.

Still, US weekly export sales were soft, at 214,900 tonnes for old crop, "down 37% from the previous week and 25% from the prior four-week average", the USDA said.

And for 2014-15, export sales were a modest 13,800 tonnes.

'Significant rains'

As a further negative for prices, forecasts look better for Europe, where dryness concerns were beginning to emerge in the eastern UK grain belt, besides in central European countries such as Germany and Poland, and further east in Ukraine.

"Strong upper air disturbance dropping out of the UK will bring significant rains to Germany and Italy this weekend," David Tolleris at WxRIsk.com said.

"This system will bring significant rain to all south eastern Europe as well as most of the Ukraine and central Russia."

It will also "bring significant rains to England, northern France, Germany and Poland."

Paris outperforms

Hard red winter wheat, the type most threatened by US drought, dropped 1.0% to $8.04 a bushel for July delivery, albeit a slow enough decline to raise significantly its premium nearly to $1 a bushel - over Chicago soft red winter wheat, the world benchmark.

Chicago wheat for July ended down 2.0% at $7.07 a bushel.

It should be noted that the price closes came before Egypt's Gasc, the top wheat buyer, surprised many investors by unveiling a fresh tender, with ideas that the authority had enough stashed away for now.

Cocoa drops

Soft commodities broadly a little better, although cocoa dropped 1.9% to $2,922 a tonne in New York for July delivery, having hit $2,910 a tonne earlier, the lowest for a nearest-but-one contract in nigh on two months.

The bean was undermined by lingering ideas that the Ivory Coast mid-crop will beat forecasts, allowing traders to ignore for now the rising risk of an El Nino, which often causes undue dryness in West Africa.

There has been talk of speculators getting twitchy too over their net long position, which remains large, at some 65,000 lots as of Tuesday last week, the latest data available.

Coffee cools

Arabica coffee for July closed down 0.8% at 204.15 cents a pound in New York.

"Arabica is congesting above the 200.00 cents-a-pound level as there is little fresh news at the moment to perk up the market," said Sterling Smith at Citigroup.

"The May Day holiday will stretch into a long weekend for many people and this will keep market activity subdued for the balance of the week."

At Price Futures, Jack Scoville also said that "little coffee will be offered for the rest of this week due to the May Day holiday today".

Still, on the bearish side, "rains are appearing in Central America that should trigger a new round of flowers and also will help cherries as they start to appear for the coming crop", he added.

'Little in the way of producer selling'

Raw sugar for July ended up 0.5% at 17.80 cents a pound on its first day as the spot contract.

The USDA attaché in New Delhi helped by pegging Indian exports this season at 1.8m tonnes, 200,000 tonnes below the USDA's official estimate, besides foreseeing a drop to 1.5m tonnes next season.

Mr Scoville noted that futures had been getting support from "forecasts for cool weather in Brazil this week", besides from ideas of "little in the way of producer selling interest".

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