PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 09:38 GMT, Tuesday, 13th May 2014, by Agrimoney.com
Morning markets: ags gain, despite US corn sowings catch-up

Will the recovery in shares draw fund money from agricultural commodities?

Not yet, it sees.

Stocks made a decent start to Tuesday, ending up 0.9% in Sydney and 2.0% in Tokyo while making a firm start in Europe, helping the FTSE All-World share index to its highest since November 2007, only some 2% from a record high.

And this at a time when funds have already turned more negative on prospects for agricultural commodity prices, at least short-term.

Grain futures were certainly finding headway somewhat tricky in Chicago in early deals, but soybeans, coffee and sugar did better, helped by a decent performance overnight on China's Dalian exchange.

'Corn planting about wrapped up'

The big news for grain investors to trade, of course, was the overnight data on US crop progress from the US Department of Agriculture.

For corn, the report confirmed ideas that farmers had made heady progress on plantings, with sowings pegged at 59% complete as of Sunday, up 30 points in one week, and putting the pace narrowly ahead of the average.

"Corn planting is about wrapped up in much of the eastern Corn Belt," CHS Hedging said, adding that "corn is emerged, and focus has shifted to side dressing and soybean planting".

At Iowa-based Market 1, Mike Mawdsley noted that "the 'I' states made significant progress, with Iowa 70% and Illinois 78% completed".

North vs south

That was, on the face of it, a negative for corn prices, although progress was towards the lower end of market expectations.

And bullish investors took some comfort in the deepening of a north-south split between northern Midwest states where seedings remain behind, and those in the core Corn Belt where sowings are now back in line or in front.

"Rains in moderate amounts have been very good for the newly planted crop in the southern plains – however, farther north the wait continues for a break in weather," CHS said.

Brian Henry at Benson Quinn Commodities said: "The late corn planting issue is quickly becoming an issue of the last one-quarter to one-third of the crop."

After all, the ideal sowings window is beginning to close – at a time when Minnesota corn is 31% sown, Michigan corn 20% planted, and just 3% of North Dakota corn in the ground, compared with a typical 33% by now.

And with the Midwest slated for rain later this week – good for crops in the ground, but frustrating for farmers yet to complete seedings.

Corn for July stood 0.3% higher at $5.01 a bushel as of 09:40 UK time (03:40 Chicago time), with the December contract up 0.2% at $4.92 ¾ a bushel.

Hard vs soft

For wheat, there is an evident divide too, with the soft red winter wheat crop grown in the Midwest improving in condition last week.

In the major soft red winter wheat-growing state of Ohio, for instance, the proportion of winter wheat rated "good" or "excellent" rose by 5 points to 55%.

In Illinois, the proportion rated good or excellent increased by three points to 63%.

Meanwhile, in the southern Plains hard red winter wheat areas, drought continued to sap crop health, with the proportion of the Kansas crop, America's biggest, seen good or excellent falling by four points to just 13%.

For Texas, the figure was 11%, down 2 points week on week.

Price divergence

The contrasting fortunes were reflected in prices, with Chicago soft red winter wheat for July down 0.2% at $7.13 ¾ a bushel, while Kansas City hard red winter wheat was up 0.1% at $8.25 ½ a bushel.

Minneapolis hard red spring wheat rise too, by 0.1% to $7.91 ½ a bushel for July.

With spring wheat grown largely in the US north, it was hardly surprising that sowings of this crop are behind as well. The USDA rated progress at 34%, behind an average of 53%.

And there is some concern over prospects for catch-up.

"The best prospects for planting spring wheat are at least a week out," Mr Henry said, if adding that "portions of western North Dakota should make some progress this week".

Sowings progress

Still, it was soybeans which performed best, recovering some of their losses of the last session.

Better progress in corn sowings of course means less chance of farmers switching to sowing the oilseed, which can be later seeded.

And while US seedings of soybeans themselves were rated at 20%, around about average, it was a figure at the low end of expectations.

Again, sowings are behind largely in the north, with rains delaying seedings in some of the Delta region, notably Mississippi itself.

Chinese auction

However, perhaps the biggest boost came from China, where the government set the price for its auction of soybeans from state reserves at 3,920 yuan a tonne, higher than investors had expected, and implying less interest from buyers and a low take-up.

Soybeans for September gained 0.8% to settle at 4,420 yuan a tonne on the Dalian exchange.

Furthermore, soybeans continued to take some glow from weekly US export data on Monday which, at 8.82m bushels, were above market expectations, and mean that the US has shipped 1.53bn bushels so far, not far short of the upgraded figure of 1.60bn bushels for the whole of 2013-14

In Chicago, soybeans for July added 0.6% to $14.73 ¼ a bushel, while the new crop November lot added 0.5% to $12.17 ¾ a bushel.

Coffee revives

Soft commodities were broadly higher too, with arabica coffee futures shrugging off a relatively optimistic estimate of Brazil's crop from the US Department of Agriculture attaché in Brasilia to gain 0.2% to 189.70 cents a pound.

However, investors have gained confidence from technical factors, with the area around 183 cents a pound continuing to provide a floor in the last session.

Furthermore, investors will be watching more closely data from Conab, the Brazilian crop bureau, later this week, expected to give a more downbeat assessment of coffee production prospects.

And raw sugar futures for July added 1.1% to 17.48 cents a pound, although this rally will be tested later by data from Unica on cane harvest progress in Brazil's Centre South.

Cotton catch-up

Cotton for December was down all of 0.01 cents at 83.56 cents a pound, with US planting progress data overnight showing a pick-up in plantings, with 14% of the crop seeded last week, taking it to 30% sown in all.

Still, that is four points behind the average pace.

And drought remains a worry in Texas, the top US cotton producing state.

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