might have expected there to be a reasonable chance of futures in the oilseed
recovery a touch.
After all, Tuesday's are by repute in Chicago turnaround
days, witnessed reversals of a strong trend in the previous session, when the best-traded
November soybean contract make a weak showing.
Crop rating declines
And there were some supportive fundamentals too – chiefly a
reduction in the condition of the US soybean crop, as revealed by weekly US
Department of Agriculture data overnight.
The proportion of US soybeans rated good or excellent fell
by 1% to 70%.
OK, that is still an extremely healthy figure, and not one
to suggest anything but a bumper yield.
But this crop is no longer the best in the last 20 years,
being overtaken by 2004, and the figure fell short of market expectations of at
least a stable reading.
"The trade's expectations for improving crop ratings after
last week's rain coverage was seen nearing 65% of the Corn Belt were
unfulfilled," said Benson Quinn Commodities.
As an extra support, soybean futures rose a touch on the
Dalian exchange in China, the top soybean importing country, adding 2 yuan to 4,573
yuan a tonne.
That latest auction of soybeans from state reserves fared a
little better, with 23% of 357,598 tonnes sold, up from 19.2% of 361,588 tonnes
sold last week.
And elsewhere in the oilseeds complex, palm oil for October rebounded a touch, albeit only after setting
a fresh one-year low for a benchmark lot of 2,162 ringgit a tonne in Kuala
The contract recovered to stand up 0.1% at 2,178 ringgit a tonne
at 09:00 UK time (03:00 Chicago time), as lower prices attracted bargain
Still, the improvement did not feed through to Chicago soyoil, which for December eased 0.8%
to 34.93 cents a pound, setting a contract low of 34.89 cents a pound earlier.
For soyoil, "oversold ideas should begin to provide better
support," Anne Frick, senior oilseed analyst at broker Jefferies Bache, said.
However, she added that "we likely need to get beyond the US
Department of Agriculture report and the immediate reaction before support
The USDA report in question is the monthly Wasde briefing on
world crop supply and demand, a highpoint of the agricultural commodities
calendar, of which the August edition is due later today.
The trouble for soybean bulls is that the briefing is
expected to raise the estimate for the US soybean yield from an already-record
45.2 bushels per acre to 45.6 bushels per acre.
That said, August Wasdes have a habit of disappointing, in
soybean production terms.
"In only two of the past 15 years was the August crop
estimate above the July [USDA] estimate," Ms Frick said, adding that only in
these two years was the August Wasde figure above market expectations.
Nonetheless, soybeans for November eased 0.4% to $10.69 ½ a
bushel in Chicago, in expectation of a soft Wasde figure.
The August contract nudged 0.25 cents higher to $13.15 a
bushel, continuing to feel support from position closing ahead of forthcoming
expiration, on Thursday.
"The strength on the front end of the market is related to
the lack of receipts delivered against the August contract," Ms Frick said.
"As a result, market shorts have to even positions in the
futures market, pulling fresh buying to the market."
For corn, there
is less of a record of disappointment in production estimates in August Wasdes.
Gains in the grain last session were seen down to short-covering
by investors cashing in gains on what has been a profitable bet, with the grain
down some 28% since the end of April, although the losing streak has tailed off
in recent weeks.
There is actually a touch of positive fundamental news
around on the grain too, although not from weekly US crop ratings, which showed
corn holding firm at a strong 73% good or excellent.
"Crop conditions continue to amongst the best ever seen and
this does to point to bearish numbers and a bearishly construed Wasde report,"
Citigroup futures specialist Sterling Smith said.
But the Chinese crop is faring a little less well, thanks to
drought in the North China Plain, and potentially on course for a fall from
last year's record crop, in what would be the first decline in
Chinese corn dynamics have a large hold on Chicago
sentiment, given the country's huge consumption, making it potentially a large
Still, fears are easing over the Russia tensions with Ukraine
and the West, concerns which, while in the main a boost for wheat markets, are a factor for corn
And the prevailing idea is that corn prices face further
falls ahead, if only as harvest approaches and the last risk premium, from
Corn for December fell 0.5% to $3.66 ¼ a bushel, dropping
below its 10-day moving average.
For wheat, the dearth
of fresh tensions surrounding Russia-Ukraine, both major origins of
competitively priced supplies, was a negative for values.
Indeed, Russia may provide an extra weight to prices through
the Wasde, with some talk of a large upgrade to country's wheat harvest in the
"Russian wheat production should increase 5m-6m tonnes from
the USDA's 53m-tonne July forecast," Richard Feltes at RJ O'Brien said.
"Larger Russian wheat exports will compensate for smaller EU
wheat exports," prospects for which are being undermined by a poor quality crop,
damaged by harvest-time rains.
'Could be hard day'
And this when Algeria, a major buyer of French wheat, looks
like having strong import needs too.
Laid Benamor, chairman of the Algerian cereal committee,
estimated the North American country's grains harvest at 3m tonnes, down from
the typical 5m tonnes.
Still, Citigroup's Sterling Smith warned of some spillover
to wheat from likely upbeat Wasde production numbers for US corn and soybeans
"The numbers for the row crops should prove to be bearish
and unless we have some sort of serious issue with Ukraine, Tuesday could be
hard day for all of the wheat markets," he said.
Wheat for September stood down 1.0% at $5.41 ¼ a bushel in
Among soft commodities, New York cotton for December extended its gentle recovery, adding 0.2% to 64.52
cents a pound, helped by data showing a further deterioration in the US crop.
The USDA condition rating fell 1 point to 52%, not a
disaster, but indicating a very middle of the range crop.
Ratings figures fell for states including Texas, where
Societe Generale has raised some question marks over crop condition.