Among all the downbeat talk on prospects for corn and soybean prospects, there are a few factors offering bulls hopes of prices,
while already through the floor, not disappearing into the basement.
Among them are China's drought?
It is a sensitive topic for agricultural commodity markets, given
the country's huge population, meaning that any shortfall in domestic
production could have a large impact on import needs.
Corn watchers have a particular interest in Chinese output.
The country has, for years, been heralded as a huge importer of the grain, but
managed to keep output growing enough to meet largely its needs, if only by curtailing
industrial use too.
(The Pro Exporter meeting this week actually pegged ethanol
exports as the next source of demand growth for US corn, foreseeing the country's
output of the biofuel at 16.25bn barrels in 2023, compared with the 14.1bn
barrels expected to be manufactured this year.)
The official Chinese CNGOIC think tank on Friday pegged the
forecast corn losses of 3.5m tonnes to dryness in the big two north eastern
producing provinces, up from a previous estimate of 1m tonnes.
That is not actually a huge figure in the scheme of things,
with the country sitting on huge inventories.
But if the drought gets worse – although rains are actually
on the cards – then, well, it is something the market is keeping an eye on.
Sudden death syndrome
For soybeans, an
emerging issue is talk of the spread of sudden death syndrome, a fungal disease
which, while not generally quite as serious as its name, can bring large yield
reductions, and is seen as being a greater risk in years with wet and cold
planting seasons, and with strong summer rains.
Like, for the US, 2014.
"It is interesting the blogs and tweets are starting to come
alive this week with sudden death syndrome issues in soybeans," said Mike Mawdsley
at Market 1.
"We need to keep our ears perked to this story should it
become a bigger problem."
The University of Tennessee, for instance, has recorded outbreaks
in its home state, saying that the "cool, wet season Tennessee has experienced,
similar to last season, has been conducive for the disease to develop in susceptible
This is not a recipe for a big rebound in prices.
And, indeed, the market will get a reminder of huge US crop
prospects later today when ProFarmer unveils the final results of its Midwest
The overnight in its full-state estimate for Iowa (the top
corn and soybean growing state) pegged the corn yield at 178.75 bushels per
acre, up from the tour average last year of 171.94 bushels per acre.
For Minnesota, the corn yield was estimated at 170.76 bushels
per acre, down from 181.09 bushels per acre, last year, although this state has
been seen among the few blemishes on the good picture for US production.
For soybeans, the Iowa pod count was estimated at 1,173.59
pods per square yard (3 feet by 3 feet), up from 927.30 last year, with the Minnesota
figure at 1,031.54 pods per square yard, up from 869.42 last year.
'It gets hard to be
Still, the likes of soybean disease and Chinese drought,
besides the threat yet of US crop damage should an early frost occur, have
offered bulls some hope for price resilience setting in.
And indeed corn for December added 0.3% to $3.70 a bushel in
Chicago as of 09:40 UK time (03:40 Chicago time), managing thus far a ninth
successive session without setting a contract low, which may not sound much,
but is quite a feat after its tumble from May to mid-July.
"The market feels comfortable near the mid-point of the
range it has been in for the last month," said Brian Henry at Benson Quinn Commodities.
"If you can't make money being short, it gets hard to be
short," he said, adding that "one could argue that the technicals don't
indicate heavy buying, but they really aren't telling folks to offer into lower
For soybeans, headway has proved harder to come by with the
passing of August as it the key month for the US crop, bringing pod-setting,
which appears to be occurring without too much in the way of weather threat.
That is allowing investors to withdraw risk premium.
Still, with soybeans getting extra help from tight near-term
supplies, which is sending the US cash market soaring, September soybeans added
1.2% to $11.49 ½ a bushel, helping the benchmark, new crop November contract
add 0.4% to $10.42 a bushel.
It is an extra help that Indian monsoon rains have proven
poor of the last week, running 25% below average, and questioning ideas of a better
performance in the second half of the rainy season, which ends next month.
The complex managed to ignore the poor performance,
elsewhere in the oilseeds complex, of palm
oil, which dropped a further 1.0% to 2,018 ringgit a tonne in Kuala Lumpur
and setting a fresh near-five-year low.
Morgan Stanley was the latest in a series of commentators to
issue a price forecast for the vegetable oil, agreeing broadly with Sipef's
assessment on Thursday.
"Whilst the recent collapse in pricing has the feel of a
selling crescendo as producers appear to be liquidating stocks built in the
second quarter at distressed pricing, we believe pricing is unlikely to stage a
meaningful recovery before the fourth quarter," the bank said.
Back in the US, wheat
extended its gains of the last session, supported by weaker-than-expected Canadian
outlook and quality concerns now over the US spring wheat crop.
Indeed, Minneapolis spring wheat outperformed, adding 0.7%
to %6.20 a bushel for September delivery.
That reduced below 5 cents its discount to Kansas City hard
red winter wheat for September, which added 0.4% to $6.24 ½ a bushel.
Chicago soft red winter wheat gained 0.4% to $5.48 ½ a
Among soft commodities, raw
sugar managed to extend its gains, adding 0.2% to 16.02 cents a pound for October
delivery, despite India raising its import duty to 25%, from 15%, in a move to
protect the interest of local mills.
That said, sugar traders have not been relying on selling
sugar into India, which has had more than enough domestic production to cover
its needs of about 23m tonnes a year.
Arabica coffee for
December edged 0.4% lower to 188.85 cents a pound.
Costa Rica, where plantations are recovering from coffee
rust, forecast a 4.5% rise to 1.56m bags in its production in 2014-15.