Will wheat futures
choose today to fall back below $6 a bushel in Chicago?
There are many who believe it will.
"Price action continues to be poor and we can readily put a $5
in front of the July Chicago futures contract to close out the week," said
Sterling Smith at Citigroup, noting that "while the export wire is busy, little
of the action is translating into US business".
Most high profile wheat import orders continue going to Black
Sea origin, including the purchase by Pakistan of 100,000 tonnes or so of wheat
for August-September shipment, and Turkey's purchase of 165,000 tons of milling
wheat Black Sea origin for July- August shipment.
On Friday, Indonesian millers bought 200,000 tonnes of
However, an order by Thailand, for 50,000 tonnes, did go to
the US, although the country is a bit of a North America-phile when it comes to
its wheat purchases, buying from Australia too.
Still, as of 09:20 UK time (03:20 Chicago time) the decline in
futures hadn't got too far, with the July soft red winter wheat contract down
0.2% at $6.04 ½ a bushel.
The contract was also offered something of a lifeline by its
peer Kansas City hard red winter wheat, which has found some support from
For farmers in the southern Plains, where hard red winter
wheat has suffered drought for much of its growing season, the recent rains
come as something of a mixed blessing.
Sure, they will boost prospects for spring crops, but for
many farms, the rain has not just come too late to rescue winter wheat, but
could actually harm the quality of what is there, with harvest-time moisture
sapping protein levels and encouraging sprouting – cutting milling
'Issue of heavy rains'
Benson Quinn Commodities flagged the "issue of heavy rains
in hard red winter wheat growing regions as harvest approaches".
"Some concern has surfaced around rain in hard red winter
wheat regions," CHS Hedging said.
At Market 1, Mike Mawdsley said: "Heavy rains in Kansas could
affect the wheat quality for hard red winter wheat this week."
For spring wheat, rains are an issue too, in slowing remaining
plantings in some areas of the northern US and Canada.
Kansas City wheat for July added 0.1 to $7.14 ½ a bushel.
'Tide is finally turning'
meanwhile, the issue is not whether selling will end, but whether buying
As Citigroup's Sterling Smith said, "good weather in US growing
areas is negative, and the fund longs have become burdensome".
The notable drop in the last session fuelled by technical
selling, as the July contract dropped below its 50-day moving average for the
first time in four months
At Benson Quinn Commodities, Kim Rugel said that "it feels
like the tide in the bean market is finally turning lower, with positive weekly
export sales garnering selling this time around rather inciting a fresh bout of
"Technical selling from the fund community developed across
the soy complex."
'Lots of volatility to
Still, there remains the issue that US stocks are tight and
not being eased by a greater-than-expected pace of exports, and slower-than-expected
rate of imports.
Indeed, when the US Department of Agriculture next week
unveiled its monthly Wasde report, "trade is looking for USDA to raise exports by
some 10m-20m bushels", Ms Rugel said.
"Crush usage is also expected to be increased," after data
from industry group Nopa indicated a "high crush rate through April".
The extra use could be resolved through lower stocks, or
through a negative "residual" - a somewhat amorphous number which, when
negative, typically indicates an underestimate of the previous harvest, for
which a late upgrade can be expected.
"There is still lots of volatility [in prices] to come as we
work through these next reports, with the Wasde on June 11, Nopa crush data on
June 16, and then planted acres and quarterly stocks on June 30."
Not that much of it was evident in early deals, when
soybeans for July were 0.3% higher at $14.64 ¾ a bushel, while the November
contract was 0.1% down at $12.09 ¾ a bushel.
That relative calm in fact defied some weakness in external
markets, with soybean futures on the Dalian exchange in China, the top
importing country of the oilseed, falling by 1.1% to 4,475 yuan a tonne for
Elsewhere in the oilseeds complex, palm oil for August dropped 0.6% to 2,402 ringgit a tonne, with a
strengthening ringgit and ideas of rising Malaysian inventories, putting a drop
to the latest attempt at a recovery.
'Another day in
Corn, meanwhile, extended its own decline into a seventh
session, undermined by continued ideas of benign US growing weather.
"It is just another day in paradise as weather is nearly
ideal for crop development," CHS Hedging said.
"Good weather combined with weak technical structure
continues to force funds out of a net long position," Benson Quinn Commodities
said, noting that "good weather combined with weak technical structure
continues to force funds out of a net long position".
Another broker said that "the weakness still revolves around
the fact that too much risk premium was added early in the year and now it is
coming back out from favourable growing conditions".
As an extra potential pressure, demand for corn declined at China's
latest weekly auction from state reserves.
The country sold 1.05m tonnes of corn, 30% of the volume
offered, compared with 53% of the 3.5m tonnes offered at the previous auction,
That said, the price this time, at 2,206 yuan a tonne, was
23 yuan a tonne higher.
In Chicago, corn for July eased 0.1% to $4.48 ¾ a bushel,
with the new crop December lot down 0.2% at $4.46 ½ a bushel, in territory it
has not trod since January.