If the wheat
rally has seen one of its main engines, the Ukraine crisis, go into idle mode
for now, another one, the poor condition of US winter wheat, received a bit of
extra fuel overnight.
US Department of Agriculture scouts revealed a further
decline in the condition of seedlings in southern Plains states where dryness
has been an issue, not just in terms of a lack of moisture for the soil but
also a dearth of snowfall in some areas to protect crops against a bitter
In Kansas, the top wheat producing state, the condition of
winter wheat rated "good" or "excellent" dipped by three points to 34%, and in
Oklahoma by two points to 18%.
In Texas, the decline was a humongous 15 points to just 13%
rated good or excellent, although the week-before figure was suspect. Compared
with a March 3 rating, the drop was 2 points.
"Concern still mounts regarding the state of the US winter
wheat crop with dryness persisting through the southern Plains," Luke Mathews
at Commonwealth Bank of Australia said.
And winter has not given up its grip on US wheat either.
"The temperature anomalies for the 6-to-10 day outlook are truly
impressive for late March," David Tolleris at WxRisk.com said.
"There are no other ways to describe this outbreak of cold
"Obviously it's not going to be as cold as what we would see
in January or early February, but relative to normal the blast of cold air
coming in on all the models in the 6-to-10 day looks pretty darn impressive."
And the cold is not going to bring much moisture either, "so
the precipitation anomalies look way below normal as well".
'More questions than
As an extra support for wheat prices, Egypt, the world's top
importer, appeared overnight with its latest tender.
Not that the US looks like winning much with, for instance,
the weak rouble making Russian exports that much more competitive, as SovEcon
noted on Monday, raising its estimate for the country's grain shipments in
2013-14 from 23.1m tonnes to 24.0m-24.4m tonnes.
Wheat futures nonetheless rose in Chicago by 0.2% as of
09:45 UK time (04:45 Chicago time), taking the May contract to $6.78 ¼ a
And there was some feeling that a collapse was unlikely.
"There are still many more questions than answers [over the
Crimea crisis] and the trade has to protect against a situation that would
limit the amount of product coming out of the region, to some degree," Benson Quinn
Corn futures, as it
their wont of late, moved in line with wheat, rising 0.6% to $4.81 ¾ a bushel
The good correlation between the two grains is not
Crimea is a big factor in the corn market too, with Ukraine the
third-ranked exporter of the grain.
And the US weather is a big influence too, now the corn
sowing season is approaching for the Corn Belt and begun further south.
"There has been increased field action for southern US
farmers as they gear up for pre-planting prep work," CHS noted.
In fact, the USDA crop reports overnight showed Texas plantings
continuing their slow start, with just 15% completed as of Sunday, up 5 points
week on week but well behind the five-year average of 31% by then.
"Weather patterns remained unsettled throughout the week,"
USDA scouts noted.
And as an extra factor linking corn and wheat, focus is
increasingly turning to the March 31 quarterly US grain stocks report, a key event
in the agricultural commodity investors' diary.
The last report signalled
a huge extent of switching to corn, from wheat, in livestock rations, provoking
a period of underperformance by wheat prices.
While corn and wheat have had a tendency to move in the
opposite direction to soybeans of
late, in part down to spreading between oilseed and grain pits, this time they
were more closely aligned, with May soybeans adding 0.7% to $14.01 ¼ a bushel
It helped that Chinese contracts enjoyed a better session, given
the continued talk of the top soybean-importing country cancelling import
orders from Brazil especially, with question marks over US orders too.
Dalian soybeans for September settled up 0.2% at 4,360
remninbi a tonne, with September soymeal up 0.3% at 3,220 remninbi a tonne.
In fact, China is "said to have resold 2 to 3 cargoes over
the weekend of Brazilian beans to the US for import into the south east, and is
looking to resell several more cargoes for April-May arrival," Kim Rugel at
Benson Quinn Commodities said.
Chinese crushers are seeking to "offload some of their
deferred double-booked Brazilian business with ports backing up and domestic
crush margins moving into the red".
'China still taking
However, export data on Monday showed China still taking the
stuff from the US, with 55% of the 34.5m bushels of American soybean shipments inspected
last week heading for China.
"Looking at US export inspections, China is still taking US
beans," Ms Rugel said.
And, domestically, there was some decent US crush data too,
with 141.6m bushels of soybeans processed last month, above expectations of
some 140.9m bushels, and the February 2013 figure of 136.3m bushels.
"This was surprising as several plants were physically
closed for production for more than a day during February," CHS Hedging said.
Ms Rugel said: "Strong margins offset talk crush could be
lower due to cold weather hampering logistics."
'We remain bullish'
Soymeal was stronger by 1.5% to $453.10 a short ton for May
But soyoil could
not keep up, edging 0.3% lower to 41.76 cents a pound for May, with Monday's
crush data not quite so strong from a soyoil point of view.
US stocks of the vegetable oil, at 1.892m pounds were, while
down 32% year on year, up 5.5% on January.
Furthermore, palm oil
was having a mixed day, continuing to feel some pressure from data at the
weekend showing a 21% slump in Malaysian shipments, month on month, in the
first half of March, but continuing to find support from concerns over damage
to yields from dry weather, and from ideas of stronger consumption in producing
"The major trend for this year will be a year of growing
domestic consumption in Indonesia and Malaysia, as opposed to one of increasing
exports," Edward Hugo, at VSA Capital, said.
"Despite the recent pull-back in pricing we remain bullish
on palm oil prospects for 2014 and expect the European benchmark to break
through US$1,000 a tonne in coming months."
In Kuala Lumpur, palm oil for June was up 1 ringgit at 2,742
ringgit a tonne.
New York soft commodities, however, failed to find their
feet following declines in the last session, with arabica coffee, which tumbled more than 3%, dropping a further 0.8%
for May delivery to stand at 189.90 cents a pound.
That was just above its 20-day moving average, which the
contract has remained above since late January.
Raw sugar for May
eased 0.3% to 17.00 cents a pound, holding just above its 100-day moving average.
"Physical demand remains subdued – evidenced by the decline
in Thai premiums – and the Brazilian 2014-15 cane crush is just around the
corner," Luke Mathews at Commonwealth Bank of Australia said, with production
seasons tending to see lower prices, as fresh supplies weigh on the market.
Indeed, Mr Mathews warned on Monday that sugar may be in a
seasonal decline, with prices falling "in the month of March for each of the
past seven years, with an average losing margin of 13%.
"Values have also declined in five of the past seven Aprils,
and five of the past seven Mays."