Just as month ends, by repute, often prove weak for grain
markets, month beginnings are supposed to bring in fresh cash.
And corn, at
least, managed to hold its ground in early deals on Friday, and wheat made early headway.
As to whether resilience can last, there is one other calendar
factor that may help futures hold onto positive territory until the weekend,
with Fridays, and the prospect of two days without trading, often bringing some
profit-taking, especially when weather and every change in the forecast carries
Benson Quinn Commodities said that "there's a chance the
trade wants to cover a few shorts ahead of the weekend.
"Investors may be leery of adding to short positions in the
off chance next week's US rains to not materialise as advertised."
Midwest weather is proving a little less benign, with MDA
noting that "dryness will continue to build in south west areas through early
next week", although "some improvement is still expected later next week".
Not that there is much of an expectation of a sustained
rally in prices, for corn and soybeans
RJ O'Brien highlighted "no change in our long-term bearish outlook"
for prices, of $3.25 a bushel for Chicago corn futures, and $9.50 a bushel for soybeans,
once harvests are in the bag and risk premium further reduced.
However, the prospect of the US Department of Agriculture's
Wasde report on August 12 gives another cause for sellers to hold fire, given
that it often comes in with lower US harvest estimates than expected.
"Row crop markets may be reluctant to push dramatically
lower until after the historically high-risk August crop report—especially
given the trade's tendency in each of the last three years to overestimate corn
and soybean production prior to the crop report," Richard Feltes at RJ O'Brien.
'Buyers can find
Demand is giving bulls some cause for hope too, with some
decent weekly US export sales data on Thursday for grains.
For corn, "weekly export sales were marginal on old crop and
pretty good for new, which indicates the traditional buyers can find value near
the current levels", Brian Henry at Benson Quinn Commodities said.
Certainly, investors remained reluctant to send the December
contract quite back to levels reached last week, with CHS Hedging noting that "support
seems to be within pennies of contract lows".
Corn for December delivery was flat at $3.67 a bushel as of
09:10 UK time (03:10 Chicago time), reducing a touch its spread to new crop
November soybeans, which fell 0.8% to $10.73 a bushel.
Many investors have forecast that the November soybean:
December corn ratio, currently at a heady 2.92:1, will retreat assuming US
weather stays benign for soybeans' sensitive pod-setting period this month,
having already appeared ideal for corn's vulnerable pollination phase.
more of a wild card, in being freed from downward pressure from the US winter crop
harvest, which is nearly over, and with some concerns over supplies of quality
wheat after drought in the southern Plains, and harvest-time rains in the EU.
There has been particular comment over the result, on
Wednesday, of the latest tender By Gasc, the Egyptian grain authority, including
over a lowball offer of US supplies, and the price paid for orders from Russia.
"The Egyptian tender showed US is competitive, only out on
the freight rate," Gleadell, the UK grain merchant, said.
"And the fact that Gasc paid $2 a tonne more for Russian
wheat, over a time when Chicago futures had retraced $2 a tonne, reflects the
continued tightness of quality wheat."
Furthermore, only 2 cargoes of wheat were offered from Romania
- a favoured origin for Gasc, but which has seen its crop hurt by rains – "and
off the pace, leaving officials in Cairo crossing everything possible that no
disruption to Black Sea exports occur as a result of the increased US and EU
sanctions placed on Russia", Gleadell said.
'One of the few bullish
Mr Feltes, while downbeat on corn and soybean price prospects,
said that "demand for US hard red winter wheat" – as traded in Kansas City, and
higher protein than the soft red winter wheat traded in Chicago - "could rise
further as EU quality deteriorates".
Citigroup's Sterling Smith, while also downbeat over the row
crops, flagged wheat "quality concerns", and said that the spread between
Kansas City and Chicago wheat "is one of the few potentially bullish items in
the grain space".
The area around $0.90 a bushel "is showing itself to be
solid support" for the spread.
In fact, the spread held at more than $0.95 on Friday, with
Kansas City hard red winter wheat for September up 0.6% at $6.29 ¾ a bushel,
while its Chicago peer gained 0.8% to $5.34 ¼ a bushel (with both contract
rising 4 cents a bushel).
In New York, cotton,
however, remained out of favour 0.5% to 62.58 cents a pound for December delivery,
continuing to feel pressure despite some decent US weekly export sales for new
"The weather is still good" in the US, the top exporter, "and
the Chinese stocks are still enormous", Mr Smith said, saying prices appeared
to be targeting 60.00 cents a pound.