PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 09:46 GMT, Tuesday, 17th Jun 2014, by Agrimoney.com
Morning markets: grains stage weak turnaround. But not soy

Tuesdays by repute often bring reversals of a strong trend in Chicago's grain futures market.

Which would imply a bright start.

And corn and wheat futures at least followed the script to some extent, with the former rising 0.3% to $5.83 a bushel for July delivery as of 09:40 UK time (03:40 Chicago time).

Not that there was a huge amount in the US Department of Agriculture's weekly crop progress report overnight to get bulls too excited.

One potential fillip to soft red winter wheat, the type traded in Chicago, was a steep drop in the condition of the Illinois crop, one of the biggest producing states for this variety, of seven points rated "good" or "excellent".

It looks like a problem of too much rain - rather than too little, the issue which has held back the rating of the hard red winter wheat crop, as grown in the central and southern Plains.

Crop condition

Still, the overall winter wheat rating remained stable at an, albeit lowly, 30% good or excellent for a fourth week.

That of spring wheat edged 1 point higher to a lofty 72%, easing concerns over damage in its northern US growing areas from further heavy rains.

In fact, "the effects of continued rains in the northern plains are debatable," as many of the low areas suffering flooding "weren't planted to begin with", Brian Henry at Benson Quinn Commodities said.

And while winter wheat harvest remained behind - at 16% complete, four points behind the average pace the delay is not a huge worry beyond the potential damage from rain the market is already aware of, and this week is meant to bring drier weather which should allow some catch-up.

Demand signs

Indeed, is the revival in prices sustainable?

"At times, the oversold nature of the wheat markets limits offers, but the overall technical picture, namely weekly momentum studies, indicates lower prices before finding lasting support," Mr Henry said.

On the demand side, Lebanon bought 15,000 tons of wheat for July-August shipment, from Ukraine, and Jordan is seeking 100,000 tons of optional origin milling wheat for December-January shipment.

Citigroup's Sterling Smith said that "Taiwan was seen in the market for US wheat," for 96,180 tonnes in fact.

"However, more of that will be needed to get prices to stop going down."

'Ultra-favourable crop ratings'

For corn, the UDSA crop progress data pegged the domestic crop at 76% "good" or "excellent", a historically high figure matching the best in 20 years.

It was, however, a figure which investors had expected, allowing a marginal Turnaround Tuesday bounce of 0.25 cents a pound to $4.41 a bushel for July delivery, and of 0.2% to $4.42 a bushel for the December contract.

"Prices are battling with the ultra-favourable crop ratings that keep showing up week-after-week," one US broker said.

One positive aspect from the demand side was the Indonesian Feed Mills Association forecast national imports of 3.6m tonnes of the grain this year, up from 2.95m tonnes last year.

That is also a figure significantly above that implied by USDA forecasts, of 2.8m tonnes of 2013-14 and 2.6m tonnes for 2014-15.

'Steady market decline'

It was soybeans which struggled to mount a turnaround, with the July contract falling 0.5% to $14.15 a bushel and the new crop November lot down 0.2% to $12.14 a bushel.

And this despite a surprise decline in the good or excellent rate of the US crop, to 73%. While only a 1 point drop, and to a still-high figure, it contrasted with expectations of a 1-2 point increase in the figure.

Still, if the market was unimpressed by bullish data on Monday, in terms of decent US exports last week and a higher-than-expected domestic crush last month, the crop condition rating was unlikely to cut much mustard either.

"As long as weather is co-operative we expect trendline yields, or better, to prevail and an overall stocks build would mean current prices may not hold," one broker said.

"We have a record amount of soybean acres in the US, two years in a row of record production in South America, and a great start to the growing year.

"Without fresh bullish information we think it will be a steady market decline with soybeans outpacing corn lower."

Auction result

Nor did the oilseed gain much support from China, the top soybean importing country, where the best-traded January contract closed down 0.4% at 4,511 yuan a tonne on the Dalian exchange.

Soymeal for September tumbled 1.5% to 3,697 yuan a tonne.

The complex was undermined by soft results from the latest auction of soybeans from state stockpiles, with only 20.3% of the 358,558 tonnes put up for sale actually sold.

The price, at 4,064 yuan a tonne, was down 4 yuan a tonne week on week.

Palm up

Elsewhere in the oilseeds complex, palm oil was faring altogether better, adding 0.6% to 2,442 ringgit tonne in Kuala Lumpur.

The vegetable oil, a major raw material for biodiesel, is being supported by firm crude oil prices.

Oil World also underlined the role of a prospective El Nino, which tends to cut output in Indonesia and Malaysia, in supporting futures.

The slow progress of the monsoon through India, and less than generous amounts of rain so far, are also lifting prices, implying potential setbacks to the country's own oilseeds production.

The strength in palm oil has offered support too to canola/rapeseed, an oil heavy, rather than meal heavy, oilseed, although canola for November was 0.2% lower at Can$461.10 a tonne in Winnipeg.

Cotton catch up

Back to the USDA crop progress data, these showed US cotton plantings catching up with the average, at 95% complete as of Sunday, 1 point behind normal.

On condition, 51% was rated good or excellent, up 1 point week on week, helped by improvements in Louisiana and Texas.

However, with this factored in already through a USDA upgrade last week to its estimate for domestic production, the impact on futures was muted.

Indeed, with Abares trimming forecasts for the Australian crop in 2014-15 by 13,000 tonnes to 820,000 tonnes, prices edged 0.3% higher to 87.90 cents a pound in New York for July delivery, and by 0.2% to 77.26 cents a pound for the new crop December lot.

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