There was a potential opportunity last night for grain
markets to get enough of a bullish injection to sustain some kind of rally.
If weekly US Department of Agriculture US crop progress data
showed even some hint of setbacks, futures might get the ammunition they needed
to rally for two successive sessions, something they have not done since last
But the USDA's report showed no such setbacks. Most crops
held their fine condition and where there were ratings changes, such as in corn, they improved, with the proportion
of the US seen as in "good" or "excellent" health rising by 1 point to 76%.
That vies with 1999 as the best condition rating of the past
The one exception was cotton,
for which the rating fell by 2 points to 53% good or excellent.
Crops in Arkansas and Texas declined.
Not that this was enough to boost New York cotton futures,
which for December eased 0.1% to 68.21 cents a pound as of 09:15 UK time (03:15
Chicago time), lacking yet the return of end-user bargain buying which helped revive
them in the last session.
Data from the China Cotton Association showed China
importing 218,600 tonnes of the fibre last month, down 19.1% year on year,
although decline had been expected, given reforms to the country's cotton
Month on month, imports rose 13.9%.
Still, back to grains and oilseeds, where there was change
in condition, it was for the better.
hold at 75% rated good or excellent disguised a one-point shift from good to
Ditto spring wheat,
which retained overall a good or excellent rating of 70%.
As for the winter wheat harvest, progress to 69% complete,
up 12 points week on week, was enough to take it back above the average pace.
Corn pollination is also marginally ahead of the average,
with 34% of the crop silking, giving no sign of any hangover from the spring
sowing delays, and indeed meaning it is occurring during current weather deemed
This was hardly the kind of environment to encourage price
"The problem for corn [bulls] is that we have already
entered the critical stages and it will be hard for any meaningful losses to
occur during the remainder of the growing season," one US broker said.
Citigroup's Sterling Smith said: "The crop conditions report
does paint a bearish picture as conditions continued to improve.
"Excellent pollination weather is expected, and while it is
still too early to call this crop made we are rapidly approaching that point."
Price headway looked especially difficult with it being a
Tuesday, a day which by Chicago lore reverses the trend of the previous day,
implying falls this session.
Certainly, Chicago corn for December was trading 0.5% lower
at $3.86 ¼ a bushel, while the old-crop September lot, in its first day as the
spot contract, was down 0.6% at $3.79 ¼ a bushel.
Earlier, the September lot touched $3.78 ½ a bushel, setting
a four-year low for a spot contract.
That got the gloomy price talk started again. Brian Henry at
Benson Quinn Commodities said that the "next downside objectives are in the
neighbourhood of $3.55-3.60 a bushel".
In fact, there is a growing idea that values may be close to
finding some kind of bottom.
After Macquarie talked of corn futures trading in the
$3.75-4.00 a bushel area, the University of Illinois said that an "average
price in the year ahead near $3.75 would be consistent with similar
supply-consumption scenarios of the recent past.
"It appears that the market has already priced in an average
yield of at least 170 bushels an acre."
Furthermore, there is even some worry they the weather might
be proving so perfect that it will leave US crops ill placed to cope should
weather turn poor later in the growing season, a threat in particular to soybeans, which have yet to go through
their sensitive pod-filling stage.
"Given the extent of the across-the-board sell-off in ag
markets since mid-May, reports of shallow rooted crops and fear of an abrupt
change in mid-summer weather pattern at a time of peaking water usage
requirements, ag markets are understandably vulnerable to short term raids by
die-hard bulls," Richard Feltes at Chicago broker RJ O'Brien said.
Soybeans vs corn
Still, for now, soybeans for November were 0.6% lower at
$10.80 a bushel, just above the contract low set on Friday, while the August lot,
in its first day as the spot contract, was down 1.0% at $11.85 ¼ a bushel.
That is the lowest for a spot contract since January 2012.
The new crop November contract is maintaining its strong
rating vs December corn of 2.80:1.
However, that may be about to change, with Moore Research
analysis revealing that the ratio typically eases into mid-August.
'Should be concerned'
As for wheat, it
dropped 0.5% to $5.35 a bushel in Chicago, staying under pressure from
expectations for decent crops in many major producing countries, besides the
improved US results as harvesting of winter crop moves north.
As an extra bearish point, the Australian Bureau of Meteorology
said on Tuesday that the El Nino weather pattern, should it arrive, looks
increasingly unlikely to be a severe one, with cooler Pacific temperatures
hinting at only a modest iteration.
That bodes well for Australia's east coast not receiving
Meanwhile, Benson Quinn Commodities highlighted the potential
for Ukraine to undermine values on export markets.
"Ukraine continues to deal with a dicey political situation
and should be concerned about the lack of corn and wheat sales they have on the
books," the broker said.
"Slashing price may be their best option."