The weather forecast for the US turned a bit drier.
That helped grain prices to a strong start to the week, even
Chicago corn futures, which gained
0.5% to $3.64 a bushel in Chicago for December delivery as of 09:45 UK time
(03:45 Chicago time).
The lot earlier matched its contract low of $3.61 a bushel,
but couldn't fall below it, as the certainty over rains spreading through the Midwest
later this week was challenged.
In the 6-10 day outlook "The forecast has trended drier in
the North-Central Midwest and Canadian Prairies," MDA said.
"Temperatures are slightly warmer in the Midwest and Delta."
In the 11-15 day outlook too, not that this attracts so much
attention given the increased potential for it proving wrong, "the forecast has
trended drier in the western Midwest, northern Plains, and Prairies," the
weather service said.
"That said, the temperature forecast is cooler in the
And this when weekly US Department of Agriculture data due is
expected to show the condition of US corn, and soybean, crops deteriorating a touch last week, by 1-2 points in
the proportion rated "good" or "excellent".
"Ratings should stabilise and work higher into late August
if rains late next week materialise," Richard Feltes at RJ O'Brien said late on
So without the rains…?
Weather conditions are especially important for soybeans,
which are undertaking their vulnerable pod-setting period, with corn largely past
its sensitive pollination stage, although still requiring moisture to maximise
its yield potential.
Hedge fund selling
It has to be restated that US corn and soybean crop ratings
would still count as strong even with a couple of points knocked off the good
and excellent figures.
Nonetheless, as an extra support for bulls, regulatory data
late on Friday showed hedge funds extending their reduction of their net long
position in agricultural commodities, at least meaning less long positions now
In soybeans, they actually reduced short positions by nearly
10,000 lots, but remained net short, a rare occurrence, and one which has a
habit of proving short-lived.
In corn, speculators cut their net long position by more
than 7,000 contracts to a five-month low of 63,024 lots.
Strong Dalian prices
Soybeans for November added 0.4% to $10.63 a bushel,
recovering from a contract low of $10.54 a bushel reached in early deals.
On the negative side for the oilseeds complex, cargo
surveyor SGS estimated Malaysian palm
oil exports down 2.8% last month, sending prices of the vegetable oil down
1.0% to 2,262 ringgit a tonne in Kuala Lumpur.
Rival vegetable oil soyoil
lagged a touch in Chicago, adding 0.1% to 35.74 cents a pound for December
Meanwhile, Strategie Grains raised, again, its estimate for
the European Union rapeseed crop, by
400,000 tonnes to a record 22.9m tonnes.
However, extra support for soybeans came from the Dalian
exchange in China, the top importer, ending 1.0% higher at 4,497 yuan a tonne.
Still, back in Chicago, wheat
did better, adding 1.8% to $5.43 ¾ a bushel for September delivery, looking for
its first close above its 20-day moving average since May.
Besides being helped by the boost in corn and soybeans,
concerns over the quality of Europe's production remain alive thanks to harvest
time rains which, in encouraging sprouting, threaten quality.
Indeed, there is the prospect of further damage, with MDA
noting that "rains across central areas this week will slow wheat harvesting
and lower quality".
And while concern has focused on France, the EU's top wheat
producer and exporter, it is "not the only country to suffer quality problems",
traders at a major European commodities house said.
"There are still question marks over the Hagberg levels in
southern Germany and, overall, the German crop seems to be about 0.5 percentage
points lower in protein than the norm."
Hedge fund selldown
As an extra support, hedge funds' negative positioning is
particularly notable in the grain, with the net short in Chicago futures and
options down 17,000 contracts in the week to last Tuesday to nearly 72,000
That is the second lowest on records going back to 2006,
questioning the extent of unfulfilled appetite for selling.
For Kansas City hard red winter wheat, the selling has been
less marked, a reflection of the quality concerns in Europe, and a drought-hit
crop in the US.
Although, at a bit under 13,000 lots, the net long is the smallest in
five months, Kansas City wheat for September underperformed in adding 1.2% to
$6.40 ½ a bushel.
Among soft commodities, arabica
coffee started strong, adding 1.3% to 194.90 cents a pound for September
delivery, with a profit-taking wave on Friday deemed overdone, given the
growing confirmation of a poor Brazilian harvest.
But raw sugar did
better, soaring 2.1% to 16.70 cents a pound after another fire at sugar
facilities at the Brazilian port of Santos.
This time, it was two warehouses owned by Cosan, the listed
sugar and ethanol giant, with capacity of holding 550,000 tonnes of the
sweetener which were damaged. In October, Copersucar's export terminal was
The bigger concern is
what this means to sugar exports from Santos, which has capacity for selling 12m
tonnes of sugar a year.