PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 09:42 GMT, Tuesday, 22nd Jul 2014, by Agrimoney.com
Morning markets: grain futures stage Turnaround Tuesday-lite

Tuesdays by repute stage turnarounds in Chicago grain and soybean futures.

Which would, this time, imply a strong start to the day, after the falls in the last session to contract closing lows.

And indeed that was the size of things, with futures broadly showing gains, if small ones a kind of turnaround-lite.

The one contract which did manage quite some elevation was August soybeans, adding 1.1% to $11.89 a bushel as of 09:40 UK time (03:40 Chicago time), helped by the sale on Monday to China of 120,000 tonnes of US crop for 2013-14 when US supplies are already running low.

'Plenty of yield cushion'

For new crop soybeans, there was the US Department of Agriculture's weekly crop progress data to digest, and a further increase, of one point to 73%, in the proportion of the domestic crop rated "god "or "excellent".

That makes the crop the highest rated of the last 20 years by a margin, of 5 points, lifting the chances of a record yield this year, on top of record sowings of 84.8m acres.

"Frankly we can't predict weather, but we do know that soybean acres are a record in the US and we have plenty of yield cushion to build a carryout," one US broker said.

In the southern states of Louisiana and Tennessee, 79% of the crop is rated good or excellent, with Arkansas lagging, on 60%, still a respectable rating.

'Slower pace of decline'

For corn, the rating stuck at 76% good or excellent, a narrow second best to 2004 in the title for the best-rated US crop of the last 20 years.

In 2004, by the way, the US corn yield jumped 12.7% year on year to a then record of 160.3 bushels per acre.

Still, one reassurance for crop bulls is that prices have already tanked, meaning they have factored in plenty of good news on supply, and may attract extra demand.

One broker said: "Since corn has already had phenomenal weather in July, we expect corn to have limited upside potential.

However, "given the profitability of end users," lifted by low prices, "we may also have a slower pace of decline".

At University of Illinois, Darrell Holaday said: "The low price of corn relative to livestock prices, relative to other feed ingredients, and relative to ethanol prices points to the potential for a surprisingly large consumption response."

The problem is that even if demand does improve, buyers may be in no hurry to purchase, knowing that prices typically bottom out at harvest time, as the weight of fresh supplies depresses values.

"While the export wire is improving, end user are confident enough of a good crop that they are willing to defer sales for the time being," Citigroup's Sterling Smith said.

'Void of soaking rains'

One other factor growing as a support for prices is that, horror of horrors, US weather might be turning less than ideal.

"Concern is developing that nearly one-half of the Midwest has been void of soaking rains in the last two weeks," Richard Feltes at broker RJ O'Brien said, if highlighting that soil moisture reserves remain strong, and cool temperatures are stemming transpiration losses.

At Benson Quinn Commodities, Brian Henry said that "crop stress in south western reaches of the Corn Belt will be more apparent", if also downplaying the overall impact of current hotter temperatures, saying that "actual crop stress will be limited to a few areas".

Still, Mr Feltes said that "we sense that ag markets may stabilise short term while awaiting the extent and coverage of late-week rains".

Another broker said: "We may be entering a trading range for corn until more is known about the final crop size."

In fact, Chicago corn for December gained 0.3% to $3.73 a bushel, while new crop November soybeans added 0.25 cents to $10.71 a bushel.

Harvest dynamics

Wheat futures showed small gains too, with the US harvest now 75% complete, in line with the average, meaning that pressure on prices from simple harvest pressure might be starting to ease off.

That said, results have improved dramatically as combines have headed north, meaning extra crop for farmers to sell.

Benson Quinn Commodities' Brian Henry flagged "continued hedge pressure as soft red winter wheat quality is improving and hard red winter wheat producers are finding good yields and workable quality in Nebraska and South Dakota.

"The word on the street is a decent portion of the harvest in many of these areas is being marketed."

'Premiums seen rising'

Also on the price negative side, thoughts about the Canadian spring wheat crop are recovering,with a turn warmer and drier in the weather there.

"There are areas in Alberta and south west Saskatchewan that wouldn't turn down a rain," Mr Henry said.

Still, there remain worries about the impact of harvest time rains on the European Union wheat crop, the world's biggest, where talk continues of sprouted grains.

"French wheat premiums were seen rising as there are quality concerns coming into the market," said Sterling Smith at Citigroup.

Wheat for September added 0.1% to $5.30 a bushel in Chicago.

Cotton gains

For a second week, the one US crop escaping crop improvement was cotton, for which the "good" or "excellent" rating fell by 1 point to 52%, a middle-of-the-range figure.

Cotton for December gained 1.0% to 68.35 cents a pound in New York.

Also in New York, raw sugar for October eased 0.1% to 17.27 cents a pound on profit-taking after strong gains in the last session.

That said, on the bullish side, Platts Kingsman cut by 500,000 tonnes to 10.8m tonnes its forecast for Thai sugar production in 2014-15, although it kept at 2.1m tonnes its estimate of the world production deficit.

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