"Was this just a fear trade and the trend resumes lower?"
one US broker asked, heading into the weekend, referring to the fact that support
that support to grain prices from the Ukraine air disaster was already
The answer appears to be "yes" given the continued erosion
to prices on Monday.
Sure, the rumpus from the downing of a Malaysia Airlines
plane on Thursday continues to cause waves at a political level, with France,
Germany and the UK warning of further sanctions against Russia unless Vladimir
Putin uses his influence over pro-separatist Ukraine rebels to ensures accident
investigators full access to the crash site.
But, with no sign of disruptions to former Soviet Union
grain shipments, there was little support for grains, which tend to rise in
line with Ukraine tensions.
Indeed, investors turned their attention fully back to US
weather, which remains benign.
Rains over the weekend for the Midwest were "near
expectations", MDA said, producing scattered showers.
While there will be a spell of warmer temperatures this
week, a potential threat to corn pollination in that it is a heat sensitive
process, the heatwave will be "brief", the weather service said.
And in fact the 6-10 day outlook "is cooler throughout the
Midwest corn-soybean belt versus Friday's outlook", a positive for yield
Sure, the latest weekly data on hedge fund positioning,
released late on Friday, offered bulls some hope in in showing a reasonably
sizeable reduction in the hedge fund net long in Chicago corn futures and
option, of 14,500 contracts, indicating less pressure from this positional overhang.
(That said, hedge funds last year achieved a net short above
For soybeans, hedge funds went net short for the first time
since December 2011.
But that was only a small support compared with the prospect
of US Department of Agriculture data later on Monday expected to show the
strong condition of US corn and soybean crops at least remaining stabile, and
potentially improving further.
Corn for December fell 1.5% to a fresh contract low of $3.73
a bushel as of 09:35 UK time (03:35 Chicago time).
(The decline also introduced in the chart a small gap, which
tends to excite technical analysts, between $3.76 ½ a bushel and $3.77 ½ a
The old crop September lot was 1.4% down at $3.66 a bushel,
introducing a gap between $3.69 and $3.70 a bushel.
Soybeans were 1.2% lower at $10.72 a bushel for the new crop
November contract, not yet setting a fresh contract low, with the August lot
down 0.5% at $11.71 ¼ a bushel.
'Export business is
There was some Chinese import data showing OK volumes, of
6.39m tonnes, but this had already been factored into the market.
China has been more active in forward purchases of late,
with a succession of orders from the US last week, and the market will be on
the look out for more announcements later.
"While this is normal business for new crop given the large
amount of soybeans we export to China, it still is a sign that export business
is picking up after a large break," one US broker said.
Soybean futures on the Dalian market were little changed,
ending down 6 yuan at 4,322 yuan a tonne.
In Kuala Lumpur, palm
oil was 0.6% lower at 2,296 ringgit a tonne despite data showing Malaysian
exports holding up, gaining 7.8% in the first 20 days of July, compared with
the same period of June.
The strength of the ringgit - which gained a little ground
against the dollar, making Malaysian exports that much more expensive for buyers
in foreign currencies – was seen as undermining prospects for future exports.
Too wet, too dry
Back in Chicago, wheat
for September eased 0.7% to $5.28 ½ a bushel, pressured by the ongoing harvest
in the US, but with at least some weather concerns elsewhere in the globe to
offer support to prices.
In Europe, rains are raising concern over the quality of production,
if not the quantity, with harvest-time rains encouraging sprouting and
imperilling milling characteristics.
Farmers "remain anxious concerning this grain's quality
since germination still is an issue", Agritel said.
(Still, "rains that are delaying winter wheat harvest in the
EU are likely benefiting corn production, with the exception a little bit of
flooding," Brian Henry at Benson Quinn Commodities said.)
And there will be further rains "across central areas" of
Europe this week, which "will stall wheat harvesting", MDA said.
Meanwhile, in Australia, the weather service said that only "isolated
showers are forecast in eastern areas and dryness will continue to rebuild".
In New York, cotton
futures did better, edging 0.3% higher to 67.96 cents a pound for December delivery,
with Chinese import data for June coming in not too bad.
At 218,246 tonnes last month, China imported 19.1% less than
in June last year, but a decline has been expected. Indeed, the June figure was
well below the average rate of fall, of 42%, so far in 2014.