Crop report day has arrived.
That is, the day when the US Department of Agriculture, in a
highpoint of the agricultural commodities calendar, unveils its monthly Wasde
briefing on world crop supply and demand.
There had been some thought that the slump in grain prices -
pressed by expectations of huge US corn
and soybean crops expected to be confirmed
in the Wasde - would take a breather in the run up to the briefing.
Such ideas were finally realised in early deals on Friday, when
soybeans actually rose, looking for their first positive session in 10, and
grains showed reluctance to shed yet more ground.
In fact, there is some idea that the extent of selling ahead
of the report might provoke buying if the Wasde data
prove not as bearish, or even match, investors' expectations.
"Given the oversold conditions, recent fund liquidation and offers
heavily outweighing bids with the trend prevailing in the absence of supportive
news, one can't rule out a 'buy the fact' moment once the report is released,"
said Brian Henry at Benson Quinn Commodities.
"Sell the rumour, buy the fact," or vice versa, is an adage
common to many markets - the concept that investors, being forward looking, have
factor in bad/good news in advance, and take profits when it appears, causing
apparently contrary price moves.
There is certainly broad agreement that futures are
At Citigroup, Sterling Smith said, of wheat, that "there is a technical bounce looming out there
somewhere for this market", but added that "a test of the $5.30-a-bushel mark
may be required to spark some buying".
And that is still a
while away for Chicago's September contract, even after its latest losing
streak, which dragged the lot in the last session to the lowest in four years
for a nearest-but-one contract.
The lot stood 0.1% higher on the day at $5.49 ¼ a bushel, as
of 09:00 UK time (03:00 Chicago time), managing to overcome further talk of a not-so-bad
CHS Hedging noted talk that the "hard red winter wheat
harvest continues to find better-than-expected yields".
Mr Henry said that "reports indicate hard red winter wheat yields
are improving as the harvest moves deeper into Nebraska", although "this wasn't
entirely unexpected", with the state not suffering drought as severely as the
likes of Oklahoma and Texas further south.
"Harvest reports for soft red winter wheat indicate better
quality, and big yields continue," he added.
In fact, Chicago soft red winter wheat continued its
outperformance of Kansas City hard red winter wheat, which fell 0.1% to $6.46 ¾
a bushel for September, the gap between the two falling further below $1 a
Whatever the fundamentals, Kansas City wheat is feeling
extra pressure from the large net long position that funds maintain, at a time
when they are bent on liquidation.
Hedge funds have been net short on Chicago wheat futures and
options for a month.
'Hasn't surfaced yet'
As for fellow grain corn
- which has like soybeans fallen for nine successive sessions, over which the
best-traded December contract has lost some 12% - it too stabilised, for now at
The lot was down only 0.25 cents at $3.92 ½ a bushel, with
the September contract also 0.25 cents lower, at $3.86 a bushel.
Not that selling has disappeared for ever.
"Lower prices are supposed to buy demand, it hasn't surfaced
yet," CHS Hedging said.
In fact, there is something of a debate going on about corn
demand, as well as yield, ahead of the Wasde, with broad idea that feed consumption for 2013-14
has been overstated, a factor which may have a knock on effect to the 2014-15 figure
This has been given credence by the surprisingly large US
corn stocks revealed in a June 30 report, seen as a signal that less is
disappearing down animals' mouths than had been thought.
"Trade is looking for 2013-14 US corn feed use of 5.20bn-5.25bn
bushels, versus the USDA's June forecast of 5.30bn bushels," Richard Feltes at
RJ O'Brien said.
Citigroup's Sterling Smith said that while the USDA may hold
fire in lowering its feed use number this time, "we do however think that the
number will be adjusted lower at some point and the current levels are
"Demand is beginning to improve. However, the improvements will
be slow and incremental."
The corn feed slowness is "just one more ingredient in the bear
stew that is brewing here".
DDG bargain hunting
The US Grains Council attempted to add a bit of bullishness
into the recipe by flagging the fresh buyers for distillers' grains (DDGs), a
corn-based feed ingredient, being lured out by the lower prices prompted by Chinese
rejection of cargos, amid a fuss over a genetically modified corn variety grown
in the US but as yet unapproved in Beijing.
"Among the first to seize the opportunity was Taiwan, which
boosted imports of DDGs to 27,919 tonnes in June, of which about 13% was
re-exported from China," said the council, which promotes US grain exports.
"Almost every feed mill in Taiwan is alert to the
opportunity to purchase US DDGs rejected from China, because of the price
"Increased interest is also surfacing across Europe, the
Middle East and North Africa."
rose, with the new crop November contract adding 0.2% to $10.95 ¼ a bushel, and
the old crop August lot recovering 0.3% to $12.36 ½ a bushel.
This time, they received little help from the vegetable oils
market, with palm oil reverting to
the decline despite yesterday's bullish Malaysian stocks data.
Palm oil for September was 1.0% lower at 2,362 ringgit a
tonne in Kuala Lumpur, a decline blamed on profit-taking, encouraged by a
weaker crude oil price, with Brent
back at $108 a barrel, and close to losing that.
Vegetable oils are linked to energy markets through their
use in making biodiesel.
Meanwhile, on China's Dalian exchange, soybean futures
proved relatively resolute, ending down just 4 yuan at 4,321 yuan a tonne.