PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 09:35 GMT, Wednesday, 28th May 2014, by Agrimoney.com
Morning markets: soybean prices rebound, but grains struggle

There was some idea that grain and oilseed futures might stage some sort of a rebound today.

That they might undertake what might be called a turnaround Wednesday.

The "hard down" in the last session was "likely overdone", said Richard Feltes at RJ O'Brien, suggesting a "modest bounce" in early dealing.

(Indeed, "gains will be difficult to sustain without adverse weather" threatening crop production hopes, he added.)

And that was pretty much how the market was trading, albeit with Chicago wheat finding even a modest recovery difficult, as the reduced US weather threats kept speculators heading to the exits.

Dalian recovery

Soybeans staged the best bounce, adding 0.7% to $14.99 a bushel in Chicago for July delivery as of 09:30 UK time (03:30 Chicago time) although importantly, from a technical perspective, having trouble retaking and holding the $15.00-a-bushel mark.

But futures do have help from foreign markets with, elsewhere in the oilseeds complex, palm oil adding 0.3% to 2,512 ringgit a tonne in Kuala Lumpur, showing signs of stabilising after hitting its lowest level in nearly seven months on Monday.

The 2,500 ringgit-a-tonne mark is being seen as something of a key technical battleground.

In China, Dalian soybeans for January gained 1.8% to 4,636 yuan a tonne, a closing high for the contract, although soymeal was less enthusiastic, ending down 5 yuan at 3,794 a tonne for the best-traded September contract.

More order cancellations?

News from China, the top soybean importing country, is proving especially sensitive, with the talk last month of negative margins driving crushers to cancel purchases from Brazil especially.

And some of that has returned, with fresh rumour that Chinese buyers have cancelled two cargoes of Brazilian soybeans, and with a further 6-8 viewed at risk.

Still, soybeans had some help from the US with overnight US Department of Agriculture data showing that domestic sowings had progressed fast last week, but not as fast as the market had expected, with 59% of seedings completed, below expectations of a 60-65% number.

Farmers in the four northern states of Wisconsin, North Dakota, Michigan and Minnesota, where dampness and cold got sowings off to a slow start, remained behind in their pace, if proving fast off the mark last week.

New crop soybeans for November added 0.5% to $12.45 a bushel.

Sowings catch-up

Corn was a bit less enthusiastic, with 88% of US sowings completed, in line with expectations and the five-year average.

Sure, it looks like some acreage will be lost, given the closing seeding window, with North Dakota growers, for instance, 67% complete with seedings, with the prevent plant insurance date passed for some of it and with the May 31 deadline approaching for southern parts.

Even with the huge planting pace they managed last week, sowing 50% of acreage, considerable areas down to corn are still likely to be abandoned, or switched to other crops, such as soybeans, which can be later down.

Also on the negative side, China said it had imported a small amount of corn from Brazil since official approval for the purchases went into effect on March 31, a reminder of growing competition to the US on that route.

Corn for July stood down 0.3% at $4.68 a bushel, with the new crop December lot easing 0.1% to $4.65 a bushel.

Crop improvement

Chicago wheat could not even match that performance.

But at least, in edging relatively modest 0.4% lower to $6.38 a bushel for July delivery, it offered hope to bulls that the decline in prices is slowing, after 13 lower closes in the last 14 sessions.

The USDA crop progress report actually showed winter wheat condition improving last week, for the first time in eons, by 1 point to 30% rated "good" or "excellent".

And spring wheat sowings accelerated, with 25% completed last week to take the total to 74%, only eight points behind the average.

The extent of planting was, again, down largely to North Dakota growers working all hours, and getting 34% of their crop sown over the week.

Farmers in Canada are catching up too, including in Manitoba, where delays have been focused.

European upgrade

Also on the negative side for prices, China has started harvesting its winter wheat in the important Henan province, expecting a bumper crop, limiting scope for the country again to import large amounts, as it did in 2013-14, when it proved a major prop to prices.

Indeed, whatever the woes in the US, where drought has badly hurt winter wheat, crops elsewhere are generally in decent health, with Toepfer on Tuesday upgrading its estimate for the German wheat crop by 820,000 tonnes to 24.77m tonnes.

The overall EU soft wheat crop was pegged at 139.15m tonnes, above the Strategie Grains forecast for a 137.4m-tonne harvest.

Toepfer's estimate included a forecast of 8.26m tonnes for the important exporter of Romania, compared with 7.99m tonnes last year, while the UK harvest was pegged at 15.06m tonnes, up from 11.92m tonnes last year.

'Not priced anywhere near being competitive'

Indeed, there looks like being plenty of competition to the US in wheat export markets depending on Black Sea stability - questioning whether US prices need quite such a premium.

"Given that this year's poor US hard red winter wheat production follows a prior year of poor hard red winter wheat production, there is a strong possibility that there will be times when Kansas City futures have to rally to ration demand," Brian Henry at Benson Quinn Commodities said.

"However, US wheat futures on all three classes [soft red winter, hard red winter, hard red spring] are not priced anywhere near being competitive on the global market.

"Additionally, cheap global offers continue to retreat."

Kansas City hard red winter wheat, the type under threat from US southern Plains drought, was actually only 0.25 cents lower at $7.38 a bushel for July delivery.

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