overcook crop fears, injecting a little too much risk premium, and encouraging "buy
the rumour, sell the fact" price corrections.
But that may not be
the case with wheat.
Wheat futures set
course for an eighth positive session, as data from crop tours indicated that yield
prospects for the US hard red winter wheat crop are even worse than had been
It has been some
comfort to wheat bears that, while the US hard red winter crop has been
negotiated severe drought in much of its southern Plains heartland, it did for
much of last season too, and results beat many expectations.
However, this year,
while official crop ratings for the likes of Kansas, the top winter wheat
state, may not be much worse than a year ago, the much-watched Wheat Quality Council
crop tour of the state is indicating a poor yield outlook.
The first day, on
Tuesday, found a yield of 34.7 bushels per acre, down from 43.8 bushels per
acre in the same part of the state a year ago.
reporting from south western Kansas, scouts pegged the yield at 30.8 bushels
per acre, down from 37.1 bushels per acre a year ago, and the lowest figure for
the second day of the tour on records going back to 2000.
'Not a pretty picture'
The data, and
comments from scouts, "aren't painting a pretty picture", said Brian Henry at
Benson Quinn Commodities.
"The Kansas crop
looks to be well below 300m bushels."
And given that forecasts
show further hot weather, and remote chances of rain relief, "a crop of 250m
bushels might not be off the table".
meanwhile, the crop has been estimated at 70.3m bushels, down 35m bushels year
said: "As the tour works west, we have seen some lower yield estimates, and the
market is taking them seriously.
"Wheat is in a
precarious situation because it hasn't had the best growing conditions in the
US," even if in many growing countries abroad weather has been "rather
winning price streak, of nearly $0.50 a bushel, has boosted futures' technical appeal
Sterling Smith noted that in the last session, "the most active Chicago July
contract did push through resistance as reports from the Kansas wheat tour are
yielding more disappointing results".
He also noted that
the spread between Kansas City-traded hard red winter wheat, at the centre of
the concerns, and Chicago soft red winter wheat "continues to widen out", given
the dry weather "playing havoc with hard red winter wheat yields".
Hard red winter
wheat for July stood 0.3% higher at $8.15 1/4 a bushel as of 08:30 UK time (02:30
Chicago time), when Chicago soft red winter wheat for July was up 0.2% at $7.22
1/4 a bushel.
New month, new money?
An extra support
may also be the influx of new money into the market.
believe that month-ends are often a negative period for crop prices because
funds pull money out to pay the likes of bonuses and client redemptions, with
month beginnings seen bringing in fresh cash.
Still, there was
not too much heading the way of corn,
for which weather concerns, in terms of the wetness and cold delaying US spring
sowings, do not seem to be strong enough to attract much extra risk premium for
One broker said
that "corn planting is not expected to significantly progress" by the time of
the US Department of Agriculture's next weekly crop progress report, taken on
(The last one
showed sowings 19% complete, behind an average of 28% by then.)
But "the six-to-10
day forecast is a little bit drier, which should promote more fieldwork next
Softer demand signs
Also for investors
to ponder are some signals of slower demand, with weekly US ethanol production
data on Wednesday coming in at 898,000 barrels a day, down 12,000 barrels a day
week on week, and behind the pace needed to meet the USDA forecast for corn use
in making the biofuel in 2013-14.
(That figure is
942,000 barrels a day, according to Benson Quinn Commodities.)
Stocks grew to
17.2m barrels, from 16.5m barrels the week before.
In terms of poultry
sector demand, the USDA also reported a decline in chick placements to 164.1m,
from 166.4m the previous week and 164.7m a year before, with egg sets falling
week on week by 1.7m to 203.0m.
is a bit of a battle going on too, with Mike Mawdsley saying that corn futures
had reached a "crossroads" in reaching a potential resistance levels to further
"April price highs
have not been exceeded, although we have come close," he said, noting that for
July corn the high was $5.24 1/4 a bushel.
delays are real, but summer weather will determine what we actually get."
Still, there are the
important weekly US export sales data due later, and expected to come in at
450,000-675,000 tonnes old crop, which could give futures fresh direction.
And with fellow
grain wheat higher, for now, July corn was 0.2% up at $5.20 a bushel.
Soybean futures too
are at a "crossroads", Mr Mawdsley said, near April highs, which for the July
contract is $15.21 a bushel.
And this when US
imports are believed to be hotting up, undermining price prospects.
"More vessels in
port in Brazil are said to have been switched to US destinations," from Chinese
ones, "and will be loading and steaming to the US in short order," Benson Quinn
Still, there is
some better feeling regarded Chinese processors, the world's top importers, whose
poor profitability spurred talk of the switch in orders to US buyers.
industry is seen improving moderately, with letters of credit reportedly being
issues this week as negative crush margins ease of recent lows," the broker
Chinese markets were,
though, closed. The revival in Dalian soybean futures, of some 3% in the
previous five sessions basis September, has been a big support to sentiment in
for July were 0.2% down at $15.10 a bushel.
commodities, cotton also failed to
enjoy any start-of-the-month buying, standing 0.1% lower at 94.21 cents a pound
in New York for July delivery.
Luke Mathews at
Commonwealth Bank of Australia noted that "worries about US new crop production
prospects continue to mount," with dryness in Texas, the top US producing
However, there is
also talk of some producers proving keen to sell at prices amongst the highest
in two years.