Grains headed reasonably resilient into a long US weekend/month-
end/ first notice day for September contracts, although whether they can stay
that way afterwards…
For wheat, there remains
good cause for investors to steer shy of heavy selling, with the Russia-Ukraine
tensions remaining heightened.
Nato officials are holding an emergency meeting to discuss
the crisis in eastern Ukraine, where pro-Russian separatists are trying to
capture the strategic port of Mariupol, on the Azov Sea.
And US President Barack Obama blamed Russia for the
escalation, if stopping short of terming its activity in Ukraine an invasion.
"There is no doubt that this is not a home-grown,
indigenous uprising in eastern Ukraine," he said.
"The separatists are trained by Russia, they are armed
by Russia, they are funded by Russia."
'Risk premium is
being added back'
With Russia and Ukraine both major exporters of
competitively-priced wheat, the wheat market has been something of a barometer
of regional tensions.
"Supplies of wheat in the world are ample, but risk premium
is being added back into futures prices as tensions in Ukraine escalate," CHS
Hedging said, adding that "the West is still reluctant to call the situation a
war, but things are moving in that direction".
Chicago soft red winter wheat, the world benchmark, added
0.6% to $5.75 a bushel for December as of 09:45 UK time (03:45 Chicago time),
cementing its place above its 50-day moving average, which it closed over in
the last session for the first time in three months.
Kansas City hard red winter wheat for December was 0.4%
higher at $6.47 a bushel, holding its place above its 40-day moving average.
And Minneapolis hard red spring wheat, the type under threat
from a wet US harvest, gained 0.5% to $6.35 ¾ a bushel, just below its 40-day
For row crops, however, there remains plenty of bearish
talk, with some suggesting that it is only the calendar that is preventing a
fresh lurch lower.
After all, month-end is often associated with position
closing which, given the extent of short positions in soybeans and wheat especially, might prove positive for prices.
Furthermore, the long weekend means an extra day without
being able to trade, at a time of year when weather remains crucial, with the
risk of a frost the last likely major setback to ideas of mega US crops.
In fact, the outlook is benign.
"Weather shows no threats of an early end to the growing
season," said Brian Henry at Benson Quinn Commodities.
Indeed, after the weekend, will markets be subjected to
forces suggested by a bearish crescendo?
Among downbeat recent statements are one from respected
commentator John Baize that soybean prices may fall to $8.50 a bushel, with
rail transport problems adding to the pressure on values from a strong harvest –
which he forecast coming in at a yield of 48 bushels per acre.
(The US Department of Agriculture has a figure of 45.4 bushels
"We'd have big exports off the West Coast but we don't have
rail capacity sufficient to move all the cargo," he said.
Prices rise – for now
At broker RJ O'Brien, Richard Feltes said that "US soybean
ratings are the highest since 1992, late August/early Sept weather is ideal,
there is no sign as yet of early frost and farmers are reporting great filling
on above average pod set.
"Bottom line- evidence is mounting that end-2014-15 US soybean
stocks may be closer to 600m bushels than 500m bushels, which suggests another $0.50-0.75-a-bushel
minimum downside on November futures."
In fact, the November contract added 0.3% to $10.31 ¾ a
bushel, failing, so far, to set a contract low for a third successive session.
EU corn import
quite muster the same strength, lacking the hefty fund net short position which
would mean that position covering drove prices higher.
The December contract dropped 0.3% to $3.68 ¼ a bushel.
Among negative talk for the grain, besides expectations of a
huge US harvest, is the idea that the European Union will never import the
11.0m tonnes of corn that USDA forecasts suggest, given the bloc's poor quality
wheat crop providing an ample alternative source of feed.
The rain which has hurt wheat quality has boosted yield
prospects for the EU's own corn harvest too.
"Analysts are increasingly questioning the USDA's EU corn
import forecast," Mr Feltes said.
"Large EU feed wheat supplies suggest EU corn imports closer
to 5m-7m tonnes which would trigger the EU's largest corn supplier [ie Ukraine]
to aggressively price corn into traditional US corn export markets."
That is, of course, assuming no disaster in Ukraine.