Grain markets opened weak, but not inordinately so, increasing
their impression of consolidating close to, in some cases, four-year lows.
In fact, the day brought one potential reason for gains, with
the Ukraine situation back on the agenda, as the US extended sanctions against
Russian companies to some banks and energy companies including Rosneft.
fell more than 2%, with European stockmarkets also opening soft, while the safe
haven of gold ticked higher, to return
above $1,300 per ounce.
However, grains did not react so favourably. And, after all,
sanctions are hardly likely to be applied against Russian grain exports, and
there has been so real sign yet of disruption to .
For ag investors, the bigger concern is the increasing
estimates for the crop, upgraded on Wednesday by the country's farm ministry
and analysis groups Ikar and SovEcon, to levels ranging from 92m-100m tonnes or
Besides, the "Russian harvest is expected to accelerate and
this will add more physical pressure to the market", Citigroup's Sterling Smith
And Russia has, as typically happens at harvest times, been
beginning to flex its muscles on export markets, producing the cheapest offer,
of $308.58 on ciffo basis, to an Iraqi wheat tender.
US wheat was offered at $362.96 ciffo.
"US wheat is still non-competitive in the global market and
this only adds to the bearishness that pervades the market," Mr Smith said.
'Little harm to
Furthermore, CHS Hedging noted that "US winter wheat harvest
continues to creep north, with results appearing to improve as late season
rains apparently aided crop development with little harm to quality".
Further south, the rains came in many cases too late,
encouraging detrimental sprouting.
Meanwhile, "warmer forecasted temperatures next week will
benefit crop development in the US and Canada," CHS added.
And this just as crop scouts undertake a much-watched tour
of US spring wheat.
Wheat futures eased in Chicago, if by a modest 0.1% to $5.37
¼ a bushel for the benchmark September contract as of 09:40 UK time (03:40
'Few issues with pollination'
Corn fared worse,
falling 0.5% to $3.85 a bushel for the benchmark December contract.
But then, it gained more in the last session.
And the consensus remains overwhelming that the US is on for
a huge crop, even if there is a debate about what that actually means in terms
of current pricing, and there is some small concern over heat in the Midwest forecast
for next week, during the critical pollination period.
"Weather models indicate few issues through the balance of
pollination for the bulk of this corn crop," Brian Henry at Benson Quinn
Commodities said, but did raise a caution over "temperatures in the mid-90s
Fahrenheit into mid next week".
One factor of particular interest for investors today will
be weekly US export sales data, with export announcements seen as a big support
to prices in the last session, suggesting that values have dropped low enough
to attract buyers.
(Rising weekly US ethanol production supported ideas of whetted
For corn, export sales are seen at 250,000-350,000 tonnes
for old crop and 350,000-450,000 tonnes for 2014-15.
For soybeans, the figures are expected to show net
cancellations of 50,000-75,000 tonnes for 2013-14, but net sales of 500,000-700,000
tonnes for next season.
For wheat, for which 2014-15 has already started, sales are
expected at 400,000-550,000 tonnes.
In fact, there is an idea that the decent one-off data seen
yesterday on US corn and soybean exports will not set a long-term trend,
although there is plenty of chatter that more sales in the oilseed are pending.
"There was constant chatter throughout Wednesday that even
more soybean business was being booked," CHS Hedging said.
But at RJ O'Brien, Richard Feltes said that while spikes in
export demand "are typical following prior periods of sharp price declines, the
initial wave of value shopping will slow.
"End users will grow increasingly reluctant to aggressively
extend forward coverage until the magnitude of the 2014-15 US row crop supplies
Commodity Weather Group did its bit to help by pegging the US
corn crop at a record 14.3bn bushels, 440m bushels above the US Department of
Agriculture estimate, on a record yield of 171 bushels per acre.
The USDA has the yield at 165.3 bushels per acre, itself a
As for soybeans,
Mr Feltes also flagged the negative of "improved" monsoon rains in Indian soybean
growing areas, after a slow start, and growing estimates for South American
Still, he also noted some cause for keeping risk premium in
prices, with the sensitive period for US soybeans, pod-setting, yet to come.
"Unlike corn, where favourable pollination is virtually a
lock, the soybean market is readily carrying risk premium," awaiting the August
weather outcome, he said.
November soybeans dropped 0.7% to 10.94 ½ a bushel, but
maintained their unusually strong ratio of 2.85:1 against prices of new crop
'Very heavy rainfall'
Among soft commodities, cotton
at least managed some gains, adding 0.03 cents to 67.67 cents a pound, giving
an impression it too may be consolidating, near contract lows.
Rains in the key US southern producing belt have been a big
driver of a decline in the contract from levels above 84 cents a pound in May.
But is the precipitation getting too much?
"Very heavy rainfall is predicted in a wide swath of the
Deep South from Oklahoma and Texas to the lower Mississippi Valley," Gail
Martell at Martell Crop Projections said.
"At least 1.5 inches of rain is predicted, but up to 4 -5
inches with locally strong thunderstorms," meaning that a "flash flood watch
has been issued starting Wednesday evening, and continuing through Friday."