Trading on Chicago's grain markets got off to a late start,
after a glitch delayed the opening of the Globex electronic dealing platform.
Grain bulls may have wished dealing hadn't started at all, with
hopes being dashed that prices may start firm, after results of last week's Pro
Farmer crop tour.
The tour, late on Friday, revealed an estimate for the US
corn yield of 169.3 bushels per acre and for soybeans at 45.3 bushels per acre –
record highs, but towards the lower end of the range of figures that the market
has got used to.
"After all the hoopla of the Pro Farmer tour and big crops
getting bigger, Pro Farmer's production estimates released after the close were
not that much out line with US Department of Agriculture's August estimates,"
Kim Rugel at Benson Quinn Commodities said after the results.
The USDA pegged the corn yield at 167.4 bushels per acre and
the soybean yield at 45.4 bushels per acre.
"While the data is clearly not bullish with Pro Farmer
noting mild September weather forecast bodes well for better production, the numbers
do offer support as corn and bean yields were just not as bearish as market has
been thinking they would be out of a tour that talked about some pretty amazing
crops throughout the heartland."
However, December corn stood 0.5% lower at $3.69 ½ a bushel
in Chicago as of 08:40 UK time (02:40 Chicago time).
Soybeans for November were down 0.7% at $10.35 ¼ a bushel,
touching a contract low of $10.32 ½ a bushel earlier.
It little helped that weather forecasts indeed remained
upbeat for row crops, with no sign of frost which would warrant the reinjection
of risk premium.
In the Midwest, "widespread showers will favour central and
western areas this week," weather service MDA said.
In the six-to-10 day timescale, "showers in the north eastern
Plains and north west Midwest will continue to improve moisture for late growth
of the soybeans," if not proving quite so helpful for wheat.
"Moderate showers in the northern Plains will stall spring
wheat drydown and harvesting," MDA said.
As an extra setback for dollar-denominated
exports, including many commodities, the greenback's strengthening trend got an
extra boost from comments on Friday from Janet Yellen, Federal Reserve chairwoman,
which appeared to increase the chance of a rate rise sooner rather than later.
Crédit Agricole said: "Her remarks that subdued wage growth
might not necessarily imply low inflation pressure, due to so-called pent-up
wage deflation, in particular raised questions on the issue of earlier-than-expected
Fed [interest rate] hike."
And that could be seen as a negative too for economies in
many emerging markets, which are major players in agricultural commodity
markets, if they themselves raise rates to curtail being ignored by investors
favouring the US.
The dollar stood at its highest level against a basket of
currencies for nearly a year.
A stronger dollar undermines prices of dollar-denominated
commodities by making them less affordable to buyers in other currencies.
It has to be said that there were some bullish forces around
with rains for China, where farmers need moisture for their corn crop, coming
in "slightly below expectations", according to MDA.
That said there are still forecasts for rain this week.
"Expected rains in north east China will improve moisture
for corn and soybean late growth. Rains should increase a bit in North China
Plain during 6-10 day period," the weather service said.
Furthermore, data late on Friday on placements of grain-munching
cattle on US feedlots came in at a number which, while down 7.0% year on year, was
above the 9.1% drop that investors had expected.
Overall feedlot numbers were, at 9.84m cattle, down 2.0%
year on year, but bigger than the herd expected by investors, who had forecast
a 2.6% increase. And ex
For soybeans, there is continued comment over the strong US
And, indeed, Chicago's September contract added 0.6% to $11.73
However, elsewhere in the oilseeds complex, the influence
from palm oil remained negative,
with the November contract standing down 0.5% at 1,989 ringgit a tonne in Kuala
Lumpur, having earlier hit 1,954 ringgit a tonne – the lowest for a spot
contract since March 2009.
The latest lurch lower was fuelled by data showing from
Intertek Testing Services showing a fresh lurch lower in Malaysian palm oil
Volumes, having recovered a bit in mid-August, to narrow
their month-on-month decline to 5.4%, have performed poorly again since, with
the drop running at 15.3% as of August 25.
Chicago vs Kansas
Wheat was something
of a mixed bag, with Chicago's spot September soft red winter wheat contract
dropping 0.2% to $5.51 a bushel, while the December lot nudged 0.1% higher to
$5.62 ¾ a bushel.
There was little fresh on the Ukraine crisis which has been holding
market attention, and was behind a rise in prices on Friday.
Petro Poroshenko, the Ukraine president, on Sunday unveiled
an extra $3bn in defence spending, and warned that the country faced a
"constant military threat" for the foreseeable future.
Still, it was notable that Kansas City hard red winter wheat
was showing an opposite pattern, in the September contract outperformed, adding
0.2% to $6.35 a bushel, while the December lot showed a gain of just 0.5 cents.
It would be tempting to think of short-Chicago, long Kansas
City spreading going on, were it not for the fact that the contracts have only
another three weeks or so to go before they expire.
Certainly, latest hedge fund positioning data showed them
cutting their net short position in Chicago substantially, by more than 10,000
contracts – giving extra scope for fresh ones.