Many risk assets made a firm start to the week, boosted by
hopes that European and US central banks will act to boost economic growth.
Both the European Central Bank and the Federal Reserve hold
monetary policy meetings this week.
But grain and oilseed prices were especially firm, as hopes
for a turn more benign in the Midwest faded, raising fears for further damage
to corn and, particularly, soybeans, which are only now going through
their most vulnerable stage of development, pod-filling.
Some areas did receive rains over the weekend, including parts
of Illinois and Indiana, where crops are in particularly poor shape, and Iowa, the
top growing state, where they have shown a later, but rapid, deterioration.
However, official crop condition data later are nonetheless expected
to show a further drop in crop condition ratings for the week to Sunday, of
some 1-2 points in the "good" or "excellent" categories.
And hopes for further rain this week appear meagre,
according to latest forecasts, particularly in more western areas.
"The forecast this week will continue to feature hot and dry
areas over the western half of the country into the Rockies and the Plains,"
There will be "some areas of showers and thunderstorms over
the next five days over the Dakotas and the Midwest.
"But this stuff activity will be widely scattered and for
the most part the rainfall amounts will be under 1.0 inch," the weather service
At FCStone, Rory Deverell said: "The week ahead is cooler
but very little in the way of rainfall.
"Last week some drastic cuts in US yield forecasts. This
week's weather outlook supports these pessimistic expectations."
Lanworth cut its forecast for the national corn yield to
122.0 bushels per acre, while the Doane crop tour put the Iowa result at 117
bushels per acre, down from a harvest result of 172 bushels per acre last year.
MDA EarthSat, after a tour of Iowa, Illinois, Indiana and
Ohio, came up with a yield estimate of 118 bushels per acre, while Informa came
in with a relatively upbeat figure of 134 bushels per acre.
'Makings of a total
"This has the makings of a total disaster in the US corn
crop," Mike Mawdsley at broker Market 1 said.
While the US Department of Agriculture pegs the US corn crop
at 13.0bn bushels, "production numbers as low as 10.0bn bushels are being
discussed. And they could be right.
"If production was down near 10.0bn bushels, we don't need
any exports next year. And someone will not get to use corn. It's not available
at any price."
Not that this ruled out further attempts to ration through
Chicago corn for September rose 2.6% to $8.19 ¼ a bushel as
of 09:10 UK time (03:10 Chicago time), earlier hitting $8.21 ¼ a bushel, coming
within six cents from matching the record high for a spot contract set on July 20.
The better-traded December lot gained 2.8% to $8.15 ¼ a
bushel, after managing its own contract high, of $8.17 ¼ a bushel.
Soybeans for August gained 1.6% to $17.10 ¾ a bushel, while the
better traded November lot added 1.9% to $16.32 ½ a bushel.
Corn vs wheat
Wheat made headway
too, boosted by increasing concerns for its stocks will hold up amid a large
switch of grains use expected by corn consumers.
"With corn prices having soared by 55% since earlier this
year, livestock farmers may consider switching to low-grade wheat for animal
feed," Lynette Tan at Phillip Futures said.
"However, grains growers in major wheat exporting countries,
such as Australia, had elected to turn away from wheat plantings this season
amid sinking prices earlier this year and projections of ample global supplies.
"Existing wheat supplies are tight, and traders are
speculating that drought in Russia's Black Sea region may result in the country
blocking wheat exports again this year."
Ideas over wheat supplies have hardly been improved by a
caution by Argentina's farm ministry late on Friday that its crop was being
tested, albeit in the early stages, by dryness.
Prospects for the wheat crop in Argentina, the sixth-ranked
exporter, already look poor enough, with growers cutting sowings to a
multi-decade low, a decline blamed on export restrictions which curtail returns
from the crop.
Chicago wheat for September delivery added 2.2% to $9.17 ¾ a
Outside Chicago, palm
oil gained a pull from soybeans, adding 1.4% to 2,967 ringgit a tonne in
Kuala Lumpur for October delivery.
With Europe a major importer of the vegetable oil, its
prices are also highly responsive to European economic sentiment.
And raw sugar
gained a lift from positive market sentiment, plus continuing concerns over
Brazilian and Indian weather.
New York's October contract added 0.4% to 22.62 cents a