"Markets were oversold and due for a bounce. Now the
question will be 'how far can we rally?'" Mike Mawdsley at broker Market 1
said, after the near 2% gains in Chicago grain and soybean futures in the last session.
The answer was, well, you've guessed it, "no further", at
least in early deals, with hopes of further gains smothered by data overnight
showing that US corn and soybean
crops remained in strong health.
OK, the proportion of the US corn crop rated "good" or "excellent"
by the US Department of Agriculture dropped by 2 points.
However, this decline was in line with market expectations and,
at 73% in the top two grades, the crop remains in strong shape, a figure beaten
only once in the last 20 years, in 2004, and matching the rating in 2000.
For soybeans, the rating did not decline at all, staying at
71% good or excellent, remaining, just, the best rating in the last 20 years,
narrowly ahead of 2004.
(For the record, 2004 produced an all-time high corn yield,
of 160.3 bushels per acre, with the 2000 result then the second strongest.
For soybeans, 2004 also saw a record, of 42.2 bushels per
acre, with the 2000 figure of 38.1 bushels per acre the fourth best at the time.)
'Should see this as a
"This report was seen as neutral to bearish since many
analysts were looking for a seasonal decline in condition," one US broker said.
At Citigroup, Sterling Smith said: "Crop conditions came in
as unchanged from last week and the market should see this as a bearish."
At RJ O'Brien, Richard Feltes said that "ratings updates,
taken collectively, are bearish as corn did not decline as much as some had
feared, while soybeans held steady".
It appeared that "cool temperatures played a major role in
offsetting dry July" weather.
'Rain was a
Sure, there remains a little concern about the Midwest
"Most areas would welcome a shot of rain as beans enter the
pod-filling stage," CHS Hedging said.
"Spotty, localised weekend rain was a disappointment to
traders and makes forecasted showers later this week a focal point going
However, even if rains are not forthcoming, the still-firm health
of crops offers them plenty of elbow room for disappointment before
expectations of huge yields are threatened.
Huge Brazil crop
Corn for December dropped 0.6% to $3.67 a bushel as of 09:30
UK time (03:30 Chicago time), while new crop November soybeans fared a little
worse, falling 0.9% to $10.69 ¾ a bushel, undermined by the better-than-expected
US crop rating.
Besides, AgRural reminded of the huge potential for South
American crops to be planted later in 2014, and harvested early in 2015, seeing
soybean sowings jumping 4.9% to 31m hectares (76.6m acres) - the same as US
growers planted last year.
The decline in crop prices has made soybeans, the default row
crop for South American farmers, more appealing than corn, a more input-heavy
"Under normal conditions, it could mean a crop of 94m tonnes,"
CHS said, noting that the USDA's has forecast a Brazilian crop of 91m tonnes.
Still, not all non-US influences were quite so poor, with
January soybeans ending 0.9% higher at 4,539 yuan a tonne on the Dalian exchange
in China, the top importing country of the oilseed.
This despite lower demand at the latest weekly auction from Chinese
state soybean reserves, with 19.2% of the 361,588 tonnes on offer actually purchased.
decline proved relatively modest, with Chicago's September contract shedding
0.2% to $5.42 ¾ a bushel.
CHS, like other brokers, noted "quality concerns connected
with too much rain in Europe, specifically France and Germany", the EU's top
two producing countries.
RJ O'Brien's Richard Feltes said that "in the short term,
there is growing concern about whether the EU and Ukraine will be able to meet
strict Egyptian import specifications", Egypt being the top wheat importing
And at an Egyptian tender last week, US wheat emerged as the
most competitive, excluding freight, with offers of Russian supplies, typically
the price leader at this time of year, actually nudging higher.
However, there are other reasons for wheat's outperformance
too, a factor typical at this time of year as it begins to emerge from the heat
of the northern hemisphere harvest, easing pressure from the temporary spike in
"The seasonal tendency for wheat to gain on corn in
mid-August is already underway," Mr Feltes said.
At Benson Quinn Commodities, Brian Henry noted a chart
support, as "technicals continue to shift to a more supportive stance".
In the last session, "Chicago and Kansas City wheat being
able to establish trade above their respective 20-day moving averages overnight
was key to wheat being able to trade to its highest levels in a couple of
"Short term, daily and weekly momentum studies have all
improved to the point that additional short-covering is possible."