The somewhat better sentiment which prevailed in grain
markets late in the last session hung on into this one.
Even corn gained
this time - helped by the better performance in soybeans and, latterly, wheat
The performance of the oilseed was particularly notable, as
its gains drove the much-watched ratio between new crop November soybeans:
December corn ratio to 2.60:1 - a new high, and well above a low below 2.4:1
Why the strength in soybeans?
That is puzzling many investors, with the sowing delays in
the northern US, after all, only adding to the chances of farmers switching
from corn to soybeans, which can be later planted, only adding upward pressure
to the already-record estimate for US seedings of the oilseed.
"The northern Plains is weighing options of switching corn
acres over to beans, with the insurance planting date for corn fast approaching
on May 25," Benson Quinn Commodities said, referring to the deadline when
growers can claim for so-called prevent plant.
And, after all, the world is looking at record soybean
inventories at the close of 2014-15, on the US Department of Agriculture's initial
One broker, terming soybeans' performance "somewhat perplexing",
said that "November soybeans are extremely high for this time of year - we
usually don't see these prices unless there is some sort of weather scare".
The soybean:corn ratio "is uncharacteristically strong given
the supply outlooks projected by the USDA".
One explanation for the high ratio could be technical with "traders
getting squeezed out of that spread" now that it has passed contract highs.
"There are also a lot of natural sellers of December corn
right now since the majority of it has been planted where soybeans doesn't have
that yet," the broker said.
Still, there is also talk of a return of demand too, notably
from China, the top importer of the oilseed.
"China is slowing creeping back into the market, with talk
they bought upwards of seven cargoes of US new-crop beans late last week and
are quietly shopping for summer South American beans as forward crush margins are
now nominally in the black," Kim Rugel at Benson Quinn Commodities said.
Soybean prices in China itself have staged a recovery,
helped by strong demand noted at an auction from government stocks last week,
with the best traded January contract on the Dalian adding 1.1% to settle at
4,557 yuan a tonne, its best close in nearly 10 months.
The contract is now up 6.4% in six sessions.
Record tight stocks?
Meanwhile, back in Chicago, old crop soybeans are doing
their bit, helped by continued demand, with US exports continuing at a pace
stronger than investors had expected.
Indeed, there is one market estimate that US soybean stocks
could fall to 100m bushels at the close of 2013-14, below the 130m bushels
estimated by the USDA, and which would represent by a margin the tightest inventories
on record compared with use.
(It should also be noted that there is talk too that last
year's harvest was bigger than the USDA has reported, with Jefferies Bache, for
instance, flagging the potential "understatement of the 2013 crop".)
On Tuesday, old crop July soybeans added 0.3% to $14.90 ¼ a
bushel as of 09:30 UK time (03:30 Chicago time), firmly back above major moving
averages bar the 40-day line.
The new crop November lot gained 0.4% to $12.44 ¼ a bushel.
'Acreage shifted away
It has to be said that November soybeans actually gave back a
little ground against December corn, which added 0.8% to $4.79 ½ a bushel, taking
the soybean:corn ratio back just below 2.60:1.
US corn sowings last week, while rising 14 points to 73%
completion according to overnight USDA data, were a little lower than the market
has been factoring in on Monday.
"Corn traded lower all day pressured by the expectation that
planting progress will exceed 75%," CHS Hedging noted.
While Corn Belt seedings are well on track, growers in the
northern Midwest are struggling and, although weather is improving, the ideal
sowing window has passed and prevent plant insurance dates are approaching.
"With rains through the weekend in the northern Plains
likely pushing many producers up against their insurance dates, expect to see some
acreage shifted away from corn," Benson Quinn Commodities said.
'Premature price fall'
At the University of Illinois, Professor Darrel Good said that
"there should be some concern about crop progress and yield prospects in
northern growing areas".
Indeed, the recent drop in corn prices "seems to be a little
premature given the strong pace of consumption and production uncertainty",
with the crop yet to be made.
As further solace for farmers, the sharp drop in December
corn futures over the last two weeks has taken them "within $0.15 a bushel of
the spring projected price for crop revenue insurance, limiting further
downside risk for the 2014 crop for those with high levels of revenue insurance
Old crop July corn gained 0.7 to $4.80 ½ a bushel, staying above
its 100-day moving average.
The overnight USDA crop progress data showed delays in
spring wheat sowings too thanks to the northern Plains wetness, with plantings
49% complete, 19 points behind the average.
Farmers in North Dakota and Minnesota were well behind the
As for winter wheat, it continued to deteriorate, with the
proportion rated "good" or "excellent" sinking 1 point to 29%, the lowest for
the time of year since 1996.
Again, it was southern Plains hard red winter wheat which
deteriorated. Just 5% of the Oklahoma crop was rated "good" or "excellent", down
1 point on the week.
'Worth keeping an eye
The extent of the decline has raised doubts over how much
good rains expected this week will actually do.
Furthermore, there is a growing focus on dryness in Russia,
which has a history of periodic droughts, causing market rallies, although it
has to be stressed that the current lack of rainfall is currently far from
"As temperatures in the Black Sea region warm, there will be
some attention paid to a few areas in the Black Sea region that have been
trending drier," said Benson Quinn Commodities.
"It's worth keeping an eye on."
Wheat for July, having on Monday closed higher for the first
time in nine sessions, rebounded 1.5% to $6.84 ¼ a bushel for July delivery.
Kansas City hard red winter wheat for July was up 1.6% at
$7.81 a bushel, and Minneapolis hard red spring wheat for July up 1.5% at $7.50
Among soft commodities, cotton
gained ground too, helped by its fellow row crops, despite an improvement in the
US planting pace.
US growers had sown 46% of cotton as of Sunday, up 16 points
week on week, and nearly catching up with the average of 48%.
Still, an acceleration in sowings in Texas, the top US cotton
growing state, by 12 points to 36% complete may be being fuelled somewhat by
hope of rains, rather than by an improvement in actual planting conditions.
"Cotton planting continued across the Panhandle and southern
Plains, though some growers were awaiting rainfall before planting dry land
cotton acres," USDA scouts in Texas said.
"Irrigated row crops were suffering in some areas as
producers were forced to stretch limited water supplies."
Cotton for July gained 0.5% to 89.59 cents a pound in New
But, back among oilseeds, Kuala Lumpur palm oil traded lower, down 0.8% at 2,517 ringgit a tonne, in part
on technical softness, after in the last session closing below its 100-day
moving average, on a continuous chart, for the first time in seven months.
Sure, Malaysian export data from cargo surveyors came in
strong, rising 19.1% month on month so far in May, according to SHS, with
Intertek seeing the increase at 18.5%.
But that was some deceleration from the pace earlier this
And the Malaysian Palm Oil Association growers' group
downplayed ideas of damage to Malaysian palm production, this year, from an El Nino
weather pattern, which typically causes dryness in South East Asia.
The association forecast a small rise, to 19.4m tonnes, in Malaysian
output this year, from 19.22m tonnes in 2013.