Tuesdays often, of course, bring reversals on Chicago's grains
market of a strong trend the previous session.
The so-called "turnaround Tuesday" idea beloved of traders
would dictate higher trading this time, after Monday's losses in soybeans
remained under the cosh in early deals, suffering from a variety of headwinds.
Some of these concerned the old-crop September contract,
which had been something of a beacon of hope for bulls, showing decent gains
last week attributed to a strong US cash market, as crushers scramble for what
few supplies are left from the 2013 harvest.
There are signs that a tipping point may be being passed, as
regards supplies from the newly-started US harvest becoming available, at much
lower price than the 2013 barn scrapings.
Cash market u-turn?
At Chicago broker RJ O'Brien, Richard Feltes flagged talk of
processors in Decatur, Illinois raising basis (the gap between cash prices and
futures prices) while basis in Mankato, Minnesota, where the likes of Archer
Daniels Midland and CHS have crushing plants, is "breaking".
"The break in soybean and soymeal spreads us related to a stepped-up southern soy harvest
and/or bull spreader profit-taking ahead of Friday's first notice day."
First notice day refers to the beginning of the expiry
process for September soybean futures, bringing them physical delivery
manifestations which drive speculators to close positions, if they have not
already done so, and can make for some volatile trading.
Profit taking by bull spreaders refers to the closing of long
bets on the September contract hedged against short positions on further ahead
And indeed, September soybeans, in falling 1.6% to $11.08 a
bushel as of 09:40 UK time (03:40 Chicago time), and bean-crushing-product soymeal,
in dropping 1.5% to $400.00 a short ton, underperformed later contracts.
But it was not as if the later contracts performed so well
either, against a background of strong US harvest expectations.
While US Department of Agriculture data overnight showed a
slight decline in the soybean crop rating, by 1 point to 70% rated "good" or "excellent",
that still left it as the best on data going back to 1994.
And there hardly looks much risk of it deteriorating, with
further Midwest rains in the forecast.
"Rains should continue to ease dryness in north east Iowa,
southern Minnesota, south west Wisconsin and north west Illinois this week,"
"Conditions and weather forecast for warmer temperatures through
the first week of September point to more downside [to prices]," Benson Quinn
Besides, results from the early US soybean harvest, from
southern areas, are already coming in strong.
and soybean yields have started to flow in," one broker said.
At Futures International, Terry Reilly said that he was "hearing
that harvest in Louisiana and the Far South is far better than expected".
November soybeans dropped 0.4% to $10.25 ½ a bushel, while
December soymeal fell 0.2% to $343.00 a short ton.
Soyoil, the other
main soy crushing product, performed poorly in falling 0.6% to 32.76 cents a
pound for December, feeling continued pressure from rival vegetable oil palm
oil, which tumbled 1.7% to 1,995 ringgit a tonne, albeit not getting back to the
five-year low of 1,954 ringgit a tonne reached on Monday.
In China, the top soybean importing country, soybeans for
January actually performed strongly, in adding 1.2% to 4,554 yuan a tonne,
although it was not clear if this was down to the prospect of a headwind to
As Mr Reilly noted, "there is growing concern some China
commodity import companies are finding it harder to secure financing".
Corn did manage a
bit of a turnaround, in adding 0.2% to $3.68 ¼ a bushel for December delivery,
despite an increase in the US crop condition rating, to 73% rated good or
excellent, promoting the crop to the best rated on data going back to 1994.
US weekly export data released on Monday were strong, at
And, looking to Ukraine, the top corn exporter outside the
Americas, dry weather earlier this month deemed by the European Commission's
Mars unit as "optimal for the harvesting of winter and spring cereals" were
less supportive for yields of autumn-harvested crops.
"Conditions are expected to negatively impact the yields of
grain maize," Mars said.
North Africa importer
Corn got help from fellow grain wheat too, which gained support on the demand side from the return
of Egypt's Gasc grain authority to purchasing, with a tender announced
The results, due later today, will give an insight into cash
market competitiveness of different origins, and while Russia will likely win
orders, its relatively firm prices could show its advantage reducing.
Furthermore, Algeria's OAIC, another major importer, said
that it would not accept imports containing wheat from mixed origins – a setback
to French traders, which have been looking to imported supplies to make-up for
the poor quality of a rain-affected domestic crop.
France is the default origin for Algerian wheat imports.
The quality of the US crop remains under the microscope too,
with the soft red winter wheat crop proving to have unusually high levels of
vomitoxin, a toxic fungal residue, which has been seen as a potential problem for
the US spring wheat crop too, in the early stages of harvest.
In fact, "based upon early harvest, vomitoxin does not seem
to be an issue with the spring wheat crop except for a few isolated areas or
fields where fungicide was not applied," CHS Hedging said.
But the quality of the crop is certainly in decline heading
into harvest, with the same rains boosting corn and soybean prospects a setback
for ripe wheat.
The proportion of US wheat rated good or excellent fell by 2
points to 66%, not a bad rating but below last year's 67%.
The rain is slowing harvest too, seen as 27% complete, well
behind the average of 49%.
Wheat for December rose 0.5% to $5.57 a bushel in Chicago.
Among soft commodities, New York raw sugar for October recovered 0.5% to 15.43 cents a pound, ahead
of the latest figure from cane industry group Unica on the Brazilian Centre
South cane harvest.
There has been talk of a slower harvest, and that Unica may
also reveal a downgraded forecast for the region's 2014-15 cane crop.