The tumble in grain prices showed signs of having passed
over, at least for now.
Not that there was much but downbeat talk around, after
Friday's US Department of Agriculture Wasde crop report, which raised both US
and world stocks estimates for corn, soybeans and wheat.
Nor was the US weather outlook anything but benign.
For the Midwest, "crop conditions should be generally favourable
through the next 10 days as cool temperatures remain in place," weather service
Looking ahead, "the 6-10 day outlook is wetter throughout
the Midwest corn/soybean belt and slightly warmer versus Friday's outlook".
But markets have lost so much that they are deeply oversold,
favouring the prospect of at least a holiday from selling for a while.
There were signs of demand around on Monday, with Israeli
groups tendering for 108,000 tonnes of corn
and 50,000 tonnes of feed wheat,
And it has to be said that the reaction on China's Dalian
market to the latest lurch downward in Chicago futures prices, in the last
session, was muted.
Corn for January closed today lower by a modest 6 yuan a
tonne at 2,303 yuan a tonne.
Soybeans - for
which Chinese prices are particularly closely watched, given that it is the
biggest importer – also lost 6 yuan a tonne to end at 4,315 yuan a tonne.
As Macquarie reminded on Friday, prices cannot go down for
ever, as the bank said that fair value analysis indicated a cash corn price of $3.75
a bushel in Illinois, implying futures trading at $3.75-4.00 a bushel.
Corn actually looked intent on testing the lower side of
that range, shedding a further 0.4% to a fresh contract low of $3.83 ¼ a bushel
for December delivery as of 10:00 UK time (04:00 Chicago time).
That grain was little helped by separate data released late
on Friday showing that hedge funds actually raised their net long positon in
corn futures and options in the week to July 8, implying more potential for further
selling that had been thought.
The net long returned over 200,000 lots, contrasting the net
short of 180,000 contracts held in October last year, and implying some
headroom yet for liquidation.
Still, for soybeans, hedge funds came within an ace of a
rare net short position in the oilseed, cutting their net long position by more
than 20,000 contracts, taking the total selldown over the past six weeks above
Soybean futures for November gained 0.4% to $10.78 ¾ a
bushel, with the potential for minimal second-crop sowings (planted after winter
wheat) in the US, thanks to market weakness, adding some extra support.
Wheat for September gained 0.4% t $5.28 a bushel in Chicago,
with hedge funds already holding a net short of more than 44,000 contracts,
within range of the record levels above 70,000 reached earlier this year.
'Trend is your friend'
Not, it has to be said, that there is much bullish talk out
there, nor apparent expectation of a price recovery entrenching.
Is the cacophony of bearish comment such that it may
represent a contrary, and price positive, indicator, short-term?
"Bearish. There is no other way to describe current weather,
current fundamentals, and the outlook for world supplies of grain," said Mike
Mawdsley at Market 1, proving particularly downbeat over soybean prospects.
"They have been in their own world so long, they are finally
joining the rest of the grains.
"Potential carryout and world supplies would suggest lower
prices than current levels… The trend is your friend."
At Citigroup, Sterling Smith noted that corn, which in the
Wasde saw upgrades to inventory estimates for both 2013-14 and 2014-15, may see
"Feed numbers were reduced slightly for both old and new
crop and while we have no issue with the concept we do expect further
reductions," he said.
"The report left two key bearish issues unresolved as yields
can be moved higher and the feed usage can be decreased."
The Wasde surprised many commentators by failing to lift the
forecast for the US corn yield above the existing, record, estimate of 165.3
bushels per acre.
At RJ O'Brien, Richard Feltes said that "traders are
pondering whether the prior eight years of high prices, spawned by an ethanol
boom, emerging market growth and above-average crop failures, was an anomaly".
US and global grain oilseed stocks are accumulating enough "to
force board carries and more relaxed end-user buying behaviour.
"Traders that made money in bull markets are advised to dust
off strategies that paid the bills in bear markets."
More downbeat cocoa
Among soft commodities, cotton
followed its fellow row crops higher, adding 0.5% to 68.47 cents a pound for
Not that all commentators are too bullish here either, with
the Wasde raising further the estimate for record world stocks at the end of
2014-15, prompting Dr John Robinson at Texas A&M University to cut to 65-77
cents a pound, from 72-82 cents a pound, his forecast for New York prices.
Arabica coffee added
0.4% to 162.05 cents a pound for September delivery, helped by data showing a
51% slump, year on year, to 50,093 bags in exports from El Salvador last month,
a drop reflecting the impact of roya fungus on the country's production.
But cocoa fell
0.3% to £1,919 a tonne in London, undermined by data showing a 9.9% drop to
65.046 tonnes in Malaysian grindings in the April-to-June quarter.
Cocoa bulls have been hoping for strong data out of Asia to
offset weakness in European processing data, revealed last week.
Still, with Malaysia a fading power in the region, losing
out to Indonesia, the impact of the data was moderated.