It wasn't so long ago that ideas of dryness were lifting wheat futures, and of wetness sinking corn.
In a sign of the changed fundamentals, Kansas City hard red
winter wheat, which had traded 1.4% higher earlier, gave back nearly all its
gains as a drier turn in the outlook for its growing belt, in the central and
southern Plains, was seen as reducing the threat of moisture damage to crops.
"Wheat futures have sold off primarily as a result of
weather models that are indicating a solid weekend of wheat harvest before rain
moves into the Kansas harvest area early next week," Darrell Holaday at Country
Rains, which would have been so welcome earlier in the growing
season, are now regarded as something of a threat, in potentially promoting
sprouting in ripe wheat, risking a downgrade and so squeezing further supplies
of acceptable milling quality grain.
Hard vs soft
Not that all indicators for wheat are negative, with the US
cash market for wheat proving firm, as it is for corn and soybeans too.
"Basis levels have a firmer tone for wheat and spreads are narrowing.
Pipeline supplies have dwindled and winter wheat harvest is slow," CHS Hedging
And weekly wheat exports were reasonable, at 372,600 tonnes
for the newly-started (for US wheat) 2014-15 season, just within the range of
Still, it was Chicago soft red winter wheat, the world
benchmark, which actually performed better, enjoying a late bounce to close 1.1%
higher at $5.93 ½ a bushel.
Kansas City hard red winter wheat for July ended 0.2% higher
at $7.29 ½ a bushel
That was in part down to the extent of the hard red winter
wheat premium, with CHS noting that "the Kansas City-Chicago wheat spread is
historically wide", raising concerns of the former being "priced out".
Furthermore, even if concerns over hard red winter wheat
have eased a touch with the weather outlook, those for soft red winter wheat,
grown in the increasingly wet Midwest, have not.
Allendale's Paul Georgy noted a University of Illinois
report "that head scab of wheat, Fusarium head blight, is now showing up in
portions of southern Illinois", a major soft red winter wheat state.
This is an observation which would tie-in with a sharp
downgrade in the state's official wheat crop rating earlier this week.
"The early soft red winter wheat crop does have plenty of
quality problems," Benson Quinn Commodities said.
'Large amounts of rain'
Meanwhile, the concerns over increasing Midwest damp proved
an even bigger prop to corn futures.
"Some buying, mostly short-covering, is tied to concern
about too much rain in parts of the Midwest," Country Futures' Darrell Holaday
said, adding that the rains were "also supportive for the soybean complex".
CHS Hedging said: "Large amounts of rain continue to fall in
many parts of the Corn Belt.
While worries were thus far "minimal, continuation of these
rains will most likely raise the level of concern".
And the rains are indeed expected to continue, with MDA
noting a "wetter" tone to the Midwest forecast for Sunday.
"Rains should be active across north western, north central
and south eastern areas through Saturday," with falls up to 3 inches and 90%
coverage, the weather service said.
Futures also got a help from technical factors.
"Much of the buying in corn is tied to the technical support
at $4.35 a bushel on the December corn contract holding earlier this week," Mr
The contract got as low as $4.36 ¼ a bushel on Tuesday, but not
to $4.35 a bushel, the contract low set five months ago.
Furthermore, the contract closed for the first time since
May 8 above its 10-day moving average, in jumping 1.8% to $4.47 ½ a bushel.
Ditto, the July contract, which ended up 2.0% at $4.50 ½ a
bushel, shrugging off poor weekly US export sales data, at 109,000 tonnes for
2013-14, "down 73% from the previous week and 79% from the prior four-week average",
according to the US Department of Agriculture.
their recovery too, helped by the wet Midwest weather.
There is a market saying that "soybeans don't like wet feet"
which has yet to emerge this year, but is it only a matter of time?
Wetness further north in Canada is proving an issue too for
the oilseeds complex, in hampering sowings of canola, the rapeseed
"Wet weather may prevent some intended canola area from
being planted in parts of Saskatchewan and Manitoba," Anne Frick at Jefferies
Bache said, although more may be known after Statistics Canada data on Friday.
Canola futures for November rose 0.3% to Can$465.50 a tonne
in Winnipeg for November delivery, extending nearly to 4% their recovery from
last week's low
Soybeans also got help from US export sales of 97,900 tonnes,
a figure which, while not huge in itself, was positive, stretching even further
the tight US balance sheet.
The US has now sold for export or already shipped 45.16m
tonnes of soybeans for 2013-14, 1.6m tonnes more than the USDA forecasts for
the whole of the season, which has more than two months left to run.
Of course, there are ideas that the US has underestimated
the size of last year's domestic crop meaning there are more left to sell.
"We continue to sell old crop soybeans. The trade must feel
comfortable the supplies are there," CHS Hedging said.
Still, the broker also noted that "South American basis
levels continue to firm with prices up $0.40-0.60 a bushel over the past three
weeks", boosting prospects for rival exporter the US.
Soybeans for July ended 0.8% higher at $14.20 ¾ a bushel,
with the new crop November lot adding 1.2% to $12.27 ¼ a bushel.
Among soft commodities, sugar
found winning ways too, for reasons discussed elsewhere on Agrimoney.com.
But cotton had a
strangely mixed day, with the new crop December contract closing 0.1% down at
77.13 cents a pound, while the old crop July lot tumbled 3.1% to 88.36 cents a
And this despite decent US weekly US export sales which
might have been expected to lift the July contract.
"Net upland sales 153,100 running bales for 2013-14 were up
noticeably from the previous week and 4% from the prior four-week average," the
Funds move house
Still, new crop cotton had two factors in its favour, the
first being the drier outlook for the southern Plains which hurt wheat, with
Texas the top US cotton producing state.
Drier weather, while good for harvesting, is a setback for
spring crops requiring moisture to grow.
The second is a technical boost, with funds clamouring to switch
positions to the December contract from July, which expires on July 9. (New
York's October contract is little traded.)
"Funds want to get
out of July and get into the December lot – there is no place else to go,"
Sterling Smith at Citigroup told Agrimoney.com.
Back among grains, Paris wheat underperformed its Chicago peer in shedding 0.1% to E188.25 a tonne for November delivery.
That was in part related to the lateness of the rally in Chicago, the world benchmark, with the rebound occurring only after Paris trading had closed.
Furthermore, Strategie Grains lifted its forecast for the EU wheat crop by 2m tonnes.
Weekly European Union exports were in fact respectable for the time of year, at 348,000 tonnes, taking the total for 2013-14 to a record 27.5m tonnes with a couple of weeks to go.