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Morning markets: grain, soy extend slide. But palm recovers

The grain market is going pretty much to schedule.

Research on seasonal patterns had suggested ahead of time (as reported) that corn futures in August would show some resilience, if losing ground against wheat, before starting a new lurch lower in September toward a harvest low perhaps next month.

That seems to be what is playing out, with prices, after their tumble of the last session, falling further on Thursday, if at a slower pace, amid a debate about just how low the harvest nadir will be.

"December corn is eventually expected to trade down near the $3.25-a-bushel area," Terry Reilly at Chicago broker Futures International said.

Another broker said: "We expect the downtrend to resume for corn, wheat, and soybeans especially now that new contract lows have been made after a consolidation period.

"Post Labor Day, markets can also be rather weak so we have to take into account the seasonal pressures of harvest."

(Harvest time typically sets a low in prices for a crop as it allows the removal of the last vestiges of risk premium and brings a spike in supplies which shifts some market power towards buyers.)

Frost threat

In fact, there remains one foreseeable threat frost - to the ideas of ultra-high yields being talked about, of well over 170 bushels per acre for corn, and 47 bushels per acre for soybeans.

At Benson Quinn Commodities, Brian Henry said: "Forecasts for the last couple of sessions have hinted at a potential frost/freeze event in western Canada, which was the first of that kind of talk for this year."

Some weather models "are trying to move the potential for freezing temperatures into the Dakotas and northern portions of Minnesota for late next weekend," he said.

Still, "at this point, confidence in this forecast can be questioned", although forecasts "will be watched closely to see if the potential system continues to shift south".

Futures International's Terry Reilly said: "The chance for frosts across western Canada is not out of the question for later this week, but the events are viewed as non-threatening."

'Endangered species'

Meanwhile, early harvest results, from the US South, remain strong, if the rumour mill is to be believed.

"Reports from the US Delta and major southern growing areas are indicating large yields with favourable conditions," CHS Hedging said.

Nor are there strong enough signs on demand to prompt investors to think twice for now about selling, although the day will bring weekly US ethanol production data.

At RJ O'Brien, Richard Feltes said that "end users are becoming more confident in sustaining hand-to-mouth buying mode".

Mr Henry said: "Demand for corn is routine. Supportive fundamentals are an endangered species."

Prices fall

Early deals saw fresh selling, albeit not on the scale of the last session, with December corn easing 0.1% to $3.51 a bushel as of 09:30 UK time (03:30 Chicago time).

November soybeans fell 0.4% to $10.15 a bushel, although the lot has at least yet to set a fresh contract low.

The January contract on China's Dalian exchange offered little support, falling 0.8% to 4,585 yuan a tonne.

'Aiding harvest'

With Ukraine and Russia apparently on a move towards peace, wheat dropped too, by 0.5% to $5.33 a bushel in Chicago for December delivery.

With Russia and Ukraine both major exporters of competitively-priced wheat, the wheat market has been acting as something of a barometer of regional tensions.

There is also some talk of the US spring wheat harvest making better progress, as northern areas dry up a little.

"Weather patterns for the Midwest are expected to improve, aiding harvest in some areas," CHS Hedging said. 

Mr Henry said: "The current forecast indicates a better chance to make progress into the end of the week, weekend and likely into early next week. However, the pace will remain slow."

Palm up

Unusually, palm oil was a haven for bulls, adding 1.6% to 2,009 ringgit a tonne in Kuala Lumpur for November, looking for its first close since June above its 10-day moving average, on a continuous chart.

Investors expect Malaysia Palm Oil Board data scheduled for Tuesday to show Malaysian palm inventories at a seven-month high of 1.96m tonnes, lifted by seasonally strong production, and soft exports.

However, has this been priced in, with futures remaining near five-year lows?

There is talk too of demand picking up at these lower prices, particularly for energy use.

Corn price hits 4-year low on 'bountiful bear news'
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