Tuesday turned out to be a turnaround one after all.
After being little apparent in early deals, allowing soybean futures a strong start, the
phenomenon beloved of Chicago traders, who say a trend in the first session of
the week reverses in the second, was awakened by a damp turn in the weather
outlook for the US Midwest.
"Weather models have
increased precipitation chances out towards the end of the 10-day forecast period
which seems to be the trigger for [the] bout of liquidation," Benson Quinn Commodities
"Gulf moisture" is expected to "seep back into southern half
of the belt next week while still maintaining a cooler temp profile.
"Adding weight to this better forecast next week is fact
that all weather models are in agreement on shift in pattern, which has been a
rather rare occurrence of late."
Darrell Holaday at Country Futures said: "The midday today
is certainly wetter for a larger area from August 6-8. In addition, it is
indicating another significant system August 11-12."
Brazil rains too
Such ideas erased concerns over dry weather which -
compounded by the data overnight showing a surprise decline in US corn and soybean crop condition, tested last week by everything from
100-degree-Fahrenheit temperatures to hailstones nearly as large as soft balls -
had spurred investors to reinject some risk premium into prices, particularly
Although US corn is largely through its weather-sensitive
pollination process, soybeans still have most of their vulnerable pod-setting stage
to go through.
As an extra boost to soybean supply hopes, there is growing comment
over the rains in central Brazil which - while proving a negative for, corn, cotton and sugar cane producers in threatening progress and for coffee growers in causing premature
flowering - bode well for seedbeds when soybean plantings kick off in September.
Farmers in Mato Grosso, the top Brazilian soy-growing state,
"have received rain during a time of the year when it is normally extremely
dry," influential crop scout Michael Cordonnier said, noting a headline in the newspaper
for the state's capital, Cuiaba, stating that "it hasn't rained like this in 86
The news was not all negative for soybeans with, besides the
drop in US crop ratings, continued talk of Chinese purchases for import,
although any deals failed to show up through the US Department of Agriculture's
daily alerts system.
In fact, this showed export sales of 135,000 tonnes of US soymeal to "unknown destinations" for
Buyers may prefer US soymeal supplies in part because of the
threat of turmoil in Argentina, the top exporter of soy processing product, after
the country rejected talks with creditors in a battle over defaulted bonds.
Still, Paul Georgy, president of broker Allendale, noted
that "when calculating the current crush margin in China", the top soy
importing country, "yesterday's rally has turned it to the negative side".
Chinese soybean crush volumes last week were estimated in-country
down 8.3% at 1.34m tonnes.
And, with plenty of talk of South American producers selling
big volumes into Monday's rally, soybeans for November closed down 1.2% at
$10.95 a bushel, surrendering their 20-day moving average and the $11-a-bushel
mark after one session back above them.
Elsewhere in the oilseeds complex, rapeseed did better, adding 0.2% to E332.75 a tonne in Paris for November
delivery, closing above its 20-day moving average for the first time in a
month, amid weakened expectations for exports from Ukraine, on the European
Ukraine rapeseed exports will fall some 12% to just under 2m
tonnes in 2014-15, undermined by production seen falling 13% to 2.15m tonnes.
The country's crisis has "worsened the financial situation
of many Ukrainian farmers" this year, prompting many to lift sowings of
sunflowers and soybeans, at the expense of other crops, because of their
relative cheapness to grow.
However, ideas for Ukraine's grains crop rose, with UkrAgroConsult
lifting its forecast for the country's output by 2.1m tonnes to 57.4m tonnes, including
a 500,000-tonne upgrade to 21.0m tonnes in the wheat harvest outlook.
After the latest upgrade, on Monday, by Ikar to its estimate
for Russia's wheat crop, the revision supported ideas of strong former Soviet
Union production, and export potential, from a region renowned for its price
Indeed, UkrAgroConsult lifted its estimate of Ukraine grain
exports by 2.0m tonnes to 31.7m tonnes.
With "strong US spring wheat ratings and increased production
estimates for Australia," as outlined by National Australia Bank on Monday,
wheat production prospects "weigh" on prices, Benson Quinn Commodities said.
It little helped that futures fell in Paris, whose
prominence has grown of late with the weather damage to the European Union wheat crop.
More on this will be known tomorrow, when the DBV producers'
group unveils a harvest report.
In fact, the November lot on the Paris Matif market closed
down 1.7% at a contract low of E175.00 a tonne - a fresh four-year low on a
spot contract basis – undermined by the better prospects for the neighbouring Ukraine.
In Chicago, the September contract closed down 2.8% at $5.20
a bushel, a fraction above its own four-year low, helped little too by the tumble in soybeans, the market leader of late.
'Lack of US export
Corn did the same
in ending down 1.7% at $3.61 ½ a bushel, with the best-traded, new crop December
contract nearly setting a contract closing low in closing down 1.5% at $3.71 a
And this despite the pondering that prices may have fallen enough, an idea which gained support with Goldman Sachs foreseeing futures stabilising at around $4.00 a bushel over the next year.
The weakness in fellow grain wheat hardly helped. Nor did
the improved US weather outlook.
"Lack of US export activity is still a burden to this
market," Mr Holaday said.
"In addition there is more talk about the fact that reduced
cattle on feed supplies will be a problem in moving this corn crop."
Data late on Friday showed placements of cattle for
fattening on US feedlots falling 6.2% last month, from June 2013, a figure
below expectations, although one which helped live cattle futures set a fresh record in the last session.
Among soft commodities, cotton
futures tumbled 1.3% in New York to 65.01 cents a pound for December delivery, a
fresh contract closing low, hurt by an improvement in the rating of the US crop
in overnight US Department of Agriculture data.
"Current conditions support good growth in Texas," the top US cotton producing state, Jack
Scoville at Price Futures said, adding that "Brazil conditions are reported to
be good in Bahia with warm temperatures and a few showers", even if Mato Grosso
is a bit damp for harvest.
"Conditions are called good to very good in India and
Pakistan as better rains are being reported."
Raw sugar futures
for October dropped 1.9% to 16.62 cents a pound, despite the Brazil rains seen
as slowing the Brazil cane harvest too, with the market seen as showing
increased technical weakness, as lows take it to territory not seen for five
"The short term trend seems to be continuing lower and we
seem to be breaking out from the recent range lower," Sucden Financial noted.
In London, robusta
coffee ended up 0.3% at $2,034 a tonne, continuing to show a relatively
mild reaction to inventory data, and open interest statistics, indicating that exchange
stocks of the bean could be in for a sharp drawdown.
Will they? The run up to the expiry of the July contract on Thursday
is looking ever-more interesting.