PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 09:16 GMT, Tuesday, 6th May 2014, by Agrimoney.com
Morning markets: China data sink soy. But wheat holds firm

Tuesdays by repute bring turnarounds in Chicago of the price trend the previous session.

And that was just about the way of it for corn futures.

Data overnight on the progress of US corn plantings showed sowings still lagging behind the average pace.

Sowings were, at 29% as of Sunday, short of the typical 42% by then, besides below trade expectations of a figure of 33%.

But, in proving well ahead of last year, when growers had sown just 11% by now yet ended up with a record harvest, the delay proved inadequate to get investors too excited.

'Round-the-clock planting underway'

"The trade knows round-the-clock planting will be underway in many areas," Richard Feltes at RJ O'Brien said.

Another US broker said: "Even though corn is behind the average it is not expected to have a measurable impact on yield. 

"There could be a negative response for corn futures, as this is a classic set-up for 'buy the rumour sell the news' trading."

'Planting window closing'

In fact, corn's fall was measured, with Chicago's July contract down 0.5% at $5.05 a bushel as of 09:20 UK time (03:20 Chicago time), although this was enough to take it back below its 20-day moving average.

Planting conditions are not all going farmers' way, with Sterling Smith at Citigroup noting that the "planting window for a lot of the Midwest will be closing" thanks to wet weather, "and heavy field work is not expected to resume until Thursday".

(Others, such as Benson Quinn Commodities and Richard Feltes have the planting window open until Thursday, but the idea of a non-perfect outlook remains.)

Furthermore, demand remains strong, with US exports at 1.23m tonnes last week, well ahead of the pace of a little under 900,000 tonnes a week needed to meet the US Department of Agriculture forecast for the whole of 2013-14 of shipments of 1.75bn bushels (44.5m tonnes).

Besides, a key USDA report on Friday is expected to trim to 1.31bn bushels, from 1.33bn bushels, the estimate for domestic stocks at the close of 2013-14, reflecting largely bigger use in ethanol manufacture, well below figures above 2bn bushels floating around in the trade earlier in the season.

'Increasingly worrisome US crop conditions'

"There are still enough concerns to keep the market propped up here as long as wheat continues to be strong," Mr Smith said.

And wheat indeed maintained its poise, hanging on to gains of the last session, if struggling to add to them.

One major prop for wheat prices, tensions in Ukraine, a major grain exporting country, remain extant.

And another, concerns over the condition of the winter crop, remained alive too.

"Wheat markets continue to draw support from increasingly worrisome US crop conditions, freezes and drought, and ongoing Ukraine-Russian tensions," Luke Mathews at Commonwealth Bank of Australia said.

Crop deteriorates

USDA crop progress data overnight cut further, by 2 points to 31%, the proportion of US winter wheat rated in "good" or "excellent" condition.

This includes cuts to ratings in Kansas, the top producing state, of 4 points, in Oklahoma of 3 points and in Nebraska of a heady 10 pints, if to a relatively high 46%.

And there is little hope of the crop improving for now, with a heatwave adding to problems for a crop stressed by drought.

Crop estimates

Temperatures in the southern Plains hard red winter wheat belt are expected to be hot, again, today and "before cooler temperatures return on Wednesday", Benson Quinn Commodities said.

"Chances for rain through the latter half of the week and into the weekend should offer some localised relief, but the overall condition of the region isn't expected to see significant improvement."

In fact, investors are already expecting the US hard red winter wheat crop to come in at 762m bushels this year, according to a Bloomberg survey, a rise of only 18m bushels year on year, and the third-weakest result in 15 years.

Informa's 840m-bushel estimate on Friday has been widely been viewed as too optimistic.

Kansas City hard red winter wheat or July was 0.5 cents higher at $8.32 a bushel, holding near a 15-month high for a nearest-but-one contract, while Chicago soft red winter wheat for July lost 0.25 cents to stand at $7.28 a bushel.

Import questions

The wild card has been the soybean pit, which has been torn between concerns over Chinese crushing margins, and reduced orders from the top importing country, and expectations of thin inventories in the US, the top exporter.

In fact, the market foresees the USDA on Friday, in its monthly Wasde crop report, trimming further, to 134m bushels, its forecast for US stocks at the close of 2013-14, a figure potentially a record low compared with consumption.

Still, as CHS Hedging noted, "chatter continues on just how many soybeans are bound for the US from South America" to help fill the void.

Benson Quinn Commodities said that "some private analysts are now raising import estimates to 85m-90m bushels, versus the USDA's April estimate at a record 65m bushels".

China tumble

Still, for 2014-15, investors are expecting stocks to stage quite some rebound, hitting 307m bushels, boosted by a expectations of record US plantings.

And as a big downer, China's ministry of commerce cut its expectations for April soybean imports to 6.51m tonnes, from a previous estimate of 6.9m tonnes.

Imports in May are seen falling further, to 4.85m tonnes.

On China's Dalian exchange, September soybeans dropped 1.2% to 4,418 yuan a tonne, having recorded a drop of 2.2% earlier to 4,374 yuan a tonne.

In Chicago, soybeans for July were 0.4% down at $14.57 a bushel.

China's ministry of commerce forecast a tumble in palm oil imports this month to 73,600 tonnes, from 441,7000 tonnes in April, fuelling a decline of 0.7% to 2,566 ringgit a tonne in Kuala Lumpur futures in the vegetable oil, now trading around three month lows.

An improvement in South East Asian production prospects, thanks to seasonal factors and better weather, has undermined sentiment, although all eyes remain on the prospect of an El Nino weather pattern setting in this year, which tends to cause undue dryness in major growing areas.

'Continued drought conditions'

Among soft commodities, cotton eased despite the USDA crop progress report confirming continued delays in sowings, with the crop 16% sown as of Sunday, up only 3 points week on week, and behind the typical 25%.

The figure was also 1 point behind on last year, a notoriously poor planting year.

"Continued drought conditions in west Texas are fuelling worries over US cotton yield prospects this season," CBA's Luke Mathews noted, with Texas being the top US producing state.

Still, cotton for July eased 0.2% to 94.54 cents a pound in New York, while the new crop December lot lost 0.1% to 84.47 cents a pound.

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