Grain prices froze in early deals in the headlights of oncoming
There are some statistics later on today, in the form of Canadian
crop sowings estimates from Statistics Canada, which are expected to show a
drop of some 500,000 acres in wheat
area from the March forecast of 24.9m acres.
For canola, a figure is expected not too far from the 19.8m
acres revealed in March, although it will be interesting to see how much
credence investors will give these data, given the heavy rains in Canada, as
well as the northern US, which have prevented some sowings and threatened the
quality of some of what has been seeded.
Indeed, Citigroup's Sterling Smith said that "concerns about
the weather and crop development are lending support" to prices of canola, the rapeseed variant, which for
November delivery edged a further 0.2% higher to Can$471.70 a tonne in
Winnipeg, up more than 4% in the past two weeks.
In Saskatchewan, the top producing province, 61% of oilseeds
are rated by officials as showed delayed development, thanks to cool conditions.
"While the crops are generally in fair to excellent
condition, the slow development can make the crops vulnerable to frost later in
the season," Mr Smith said.
'Sets the stage'
Still, the big statistics that investors are concerned about
are the US Department of Agriculture reports on Monday on US crop stocks as of
June 1, and spring sowings.
As one broker said, these will prove "the major determining
factor for price action going forward.
"This is the final planted acreage estimate for the year and
an important stocks report as well.
"This sets the stage for how our stocks will end up in
September," as the 2014-15 crop season begins for corn and soybeans, "and
provides more credence for analyst estimates of 2014 crop size."
That said, there is an important uncertainty over the latter
in that the wet weather is seen as having cut a stack of corn sowings, and
meant losses of some crops of soybeans too already planted.
'Could signal the end
Indeed, sticking with the weather, Benson Quinn Commodities,
based in Minnesota, northern US, said that the latest round of the region's
wetness could prove a final straw.
"Rains in forecasted events for this weekend across South
Dakota, North Dakota and Minnesota have many regional elevator managers telling
us that, if realised, this could signal the end of this year's crops," Benson
Quinn's Kim Rugel said.
"Soils are just too saturated; beans are stunted; corn is
yellow; and wheat is just not growing, with all three crops experiencing very
shallow roots and in need of lots of sunshine and some heat."
Crop scout Michael Cordonnier said that as far as row crops
go, "even though there are more acres of corn planted in the US than soybeans,
I think the impact of the flooding may be more important for the soybeans than
for the corn because soybeans cannot take these wet conditions as well as corn".
At Chicago-based broker RJ O'Brien, Richard Feltes said that
he was hearing "more reports of soybeans labouring under excessive moisture".
Indeed, in USDA crop progress data, due late on Monday,
soybean condition ratings "could shrink further", he said.
However, is the moisture all bad for production prospects?
Many are mindful of the adage that "rain makes grain" (except
when it is making ponds, of course).
Mr Feltes also said that for, corn, the "continuation of the
active Midwest precipitation pattern into mid-July will push 2014 US corn yield
expectations to 170 bushels per acre", enough to push December corn futures
down to $4.25 a bushel.
Contract expiry ahead
Still, with the stocks and planting reports ahead, traders
were reluctant to let prices stray too far, with December corn down a modest
0.3% to $4.42 a bushel as of 09:40 UK time (03:40 Chicago time).
The old crop July contract, approaching the expiry process,
was down 0.2% at $4.41 a bushel.
For soybeans, the new November contract was the
underperformer, in falling 0.6% to $12.36 ½ a bushel compared with a fall of
0.3% to $14.31 ¾ a bushel for the old crop July lot. That said, the November
soybean: December corn ratio remained at a historically elevated 2.81:1.
Stability in July soybeans has been helped by a huge
selldown in fund positions ahead of first notice day on Monday, when futures
take on physical crop manifestations.
Benson Quinn's Kim Rugel said: "July open interest is now
down to manageable levels, with open interest in soybeans falling 15,340
contracts on Wednesday to 48,371 lots, meal open interest is down to 21,094 contracts,
and soyoil open interest is 17,867.
"There are no deliveries expected on Monday in the soybeans
or soymeal, while soyoil deliveries are expected to be light at 400-800
Russian harvest results
Wheat was down all of 0.25 cents at $5.84 ½ a bushel for the
September contract in Chicago, and down 0.1% at $7.14 ¼ a bushel for Kansas
City hard red winter wheat for September delivery.
Minneapolis spring wheat, the most vulnerable to the
StatsCan data due later, was down 0.1% at $6.97 ½ a bushel for the best-traded
There are plenty of other factors in the mix for wheat too
outside US weather, although this is also relevant in, besides affected spring
wheat (negatively or otherwise), hurting quality for ripe winter wheat.
The International Grains Council on Thursday lifted its
estimate for the world wheat harvest, while on Friday, officials in Krasnodar, the
major Russian region for growing wheat for export, said that yields from the
early harvest had fallen to 4.90 tonnes per hectare from 56.15 tonnes per
hectare a year ago.
That said, only 24,000 tonnes of winter wheat have been
harvested so far.
Meanwhile, on technical matters, Benson Quinn Commodities
said spread patterns between Chicago futures indicate that "a short has given
up hope on sizeable deliveries in that market.
"Perhaps it's a case of the short speculator overstaying
their welcome, but it appears to be concerns about the quality of the crop, and
finally some respect for where basis levels are trading."