There is plenty of bearish talk around on grain prices,
after Monday's surprise US data.
These showed larger-than-expected US stocks of corn and soybeans, and above-expectation sowings of wheat and, particularly, soybeans too.
"With the acres and weather, some in the trade feel corn
will have a $3 in front of it before long," said CHS Hedging.
Corn has not traded below $4.00 a bushel for nigh on four
years on a front contract basis.
'Price trend is lower'
For soybeans, Benson Quinn Commodities said that the "price
trend is lower, with harvest lows seen nearer the $10-a-bushel level than
And other commentators were even more downbeat.
"If we avoid any issues with the weather in August, sub-$10.00-a-bushel
soybeans are a very real possibility," said Citigroup's Sterling Smith.
For soybeans, their last visit below $10 a bushel was in
Still, prices did not seem in that much of a hurry to get
Sure, a rule of thumb dictates that shifts in pricing
tectonics usually go in three-day trends.
"The aftershocks of a report this large can last a few days
which means we could see another weak day from liquidation on Wednesday," one
US broker said.
"The managed money doesn't usually change their positions
overnight, they build and liquidate positions over time."
However, there are some other trader guidelines too, such as
new months bringing in new money, or of long weekends provoking profit-taking,
with the prospect of an extra day without being able to trade encouraging
investors to cash in.
This at a time of year when changes of weather forecasts can
wreak a big impact on market sentiment.
And this week is indeed foreshortened, by Friday's July 4 US
independence day holiday.
And holiday periods themselves often prove marker posts for
changes in sentiment.
Mike Mawdsley at broker Market 1 said that "markets are down
sharply into the fourth of July thus a post-holiday rally is possible.
"We could see some type of turnaround after the fourth of
But many investors were not even waiting to get that far,
allowing futures to avoid setting fresh multi-month lows, if not to go as far
as actually recovering, although soybeans managed that.
There were some other reasons too to question whether bears
have everything in their favour.
"Technically, the market is still oversold and due for a
correction," CHS Hedging said, thinking in particular of corn.
For soybeans, Mr Mawdsley noted that the best-traded
November contract had hit its 76% retracement point, a key level for followers
of Fibonacci analysis.
"Nothing says that has to stop the November contract sell-off,
but it is a target for shorts to cover and take quick profits," he said.
'Quality issues a
For wheat, there is the issue of rains delaying the US winter
wheat harvest and threatening the quality of the crop – moisture and ripe
kernels are not an ideal mixture.
"So far, the soft red winter wheat harvest has been slow and
quality issues remain a real problem," said Brian Henry at Benson Quinn Commodities.
"It appears a large portion of the crop will have to find a
way into the feed ration over the next few years or be blended very slowly over
the course of many more years."
Soft red winter wheat makes the grade for lower-protein
milling uses, such as making biscuits, if it is not directed to feed mills.
There are some concerns over quality in some other areas
too, such as eastern European Union, including Romania, a country which, while
a relatively small producer, packs a big punch in exports, being the top
supplier in 2013-14 to the grain authority in Egypt, the world's top wheat
Some parts of Ukraine have had rains on advanced crops too.
Meanwhile, back on soybeans, there is talk of Argentine
farmers renewing stockpiling if the government is unable to reach agreement
with holders of its sovereign bonds and avoid a default.
That would be likely to accelerate weakness in the peso, and
stoke inflation, making dollar-denominated assets such as crops ever-more-valuable.
This all fed through into an atmosphere of controlled descent
for grains, and gains for soybeans, which added 0.4% to $13.33 a bushel for the
August contract, and 0.2% to $11.49 ¼ a bushel for the November lot as of 09:40
UK time (03:40 Chicago time).
It helped that soybeans ended higher on the Dalian exchange
in China, the top importing country, too, up 0.3% at 4,361 yuan a tonne for
Also in Asia, and in oilseeds, Kuala Lumpur palm oil added 0.3% to 2,427 ringgit a
Back in Chicago, corn for September was 0.5% lower at $4.14
a bushel, while the September contract dropped 0.5% to $4.20 ½ a bushel,
remaining above multi-month lows.
Soft red winter wheat for September was 0.4% down at $5.70 ¼
a bushel, while hard red winter wheat for September was 0.4% lower at $6.86 a
In fact, cotton
futures did far worse, falling 1.0% to 72.65 cents a pound in New York for
December delivery, undermined by a further downgrade by the International
Cotton Advisory Committee to its forecast for prices in 2014-15.
The ICAC added 500,000 tonnes to its forecast for stocks at
the end of that season, taking them to 21.4m tonnes.
But arabica coffee
made a better start, adding 0.6% to 171.95 cents a pound for September delivery,
offered some support by generally supportive comments from Rabobank.