Which way will it go this time?
Once again, soybean
and wheat futures started strong, although
corn was struggling a bit to join
But will Thursday prove like Tuesday, which saw early
headway evaporate, or the last session when gains snowballed?
'It's been a dry July'
As ever, much may depend on the updated weather run, which
is proving the seat of what unease there is over US crop prospects.
While the central and south eastern Midwest is expected to
see further rains this weekend, precipitation "will remain limited in the south
western Midwest through next week, which will allow moisture there to decline",
"This will mainly affect Missouri and south western Iowa," a
state which has already some dryness concerns.
At Iowa-based broker Market 1, Mike Mawdsley said: "There is
a chance for rain for us on Thursday and we need to get something out of that
"It's been a dry July thus far around here."
"Dry, although cool, forecast across the western half of the
Midwest through month end may be supportive to late-week trade in ag markets,"
Richard Feltes at RJ O'Brien said.
"Veteran farmers note that soaking rains seldom accompany abnormally
cool summer temperatures," he said, adding that weekly official US crop rating
on Monday could show "nominal declines" in condition.
Dryness is more of an issue for US soybeans, which have
largely yet to go through the key pod-setting period, rather than corn, which is
well through its vulnerable pollination period.
"The drier outlook for the western half of the Corn Belt has
drawn all the attention as the soybean crop moves toward key pod-setting stage,"
Kim Rugel at Benson Quinn Commodities said.
That said, even if a drier pattern does develop," stressed
areas and impact at this time seems to be modest at best".
A drop of 1.0 bushels per acre in the soybean yield would
still leave the US "with a healthy carryout over 300m bushels", Ms Rugel said.
Still, November soybeans added 0.4% to $10.81 a bushel in
Chicago as of 09:30 UK time (03:30 Chicago time), with the contract earlier
touching its 10-day moving average at a little under $10.82 a bushel.
Old crop August soybeans cemented their position above their
10-day moving average by adding 0.4% to $12.06 a bushel.
The gains came despite a drop in futures on the Dalian
exchange in China, where January soybeans eased 0.2% to 4,352 yuan a tonne.
And this despite some apparently positive local data,
showing total Chinese crush volume at 1.46m tonnes last week, up 10.2% week on
week, and lifting crush capacity to 50.4%, up 4.7 points for the week.
Stocks of imported soybeans eased a bit, to 5.98m tonnes
from 6.06m tonnes the week before, and representing a 7.0% decline year on
Back in Chicago, corn struggled to follow, with hot weather
less of a threat, given pollination is already advanced.
Furthermore, unlike soybeans, in which hedge funds have taken
a net short position, ie already betting more on price falls than price rises,
speculators retaining a sizeable net long position in corn futures and options.
That leaves the grain more open to further price pressure
from liquidation, although Benson Quinn Commodities urged caution with values
already depressed, saying that, given the "oversold nature of the corn market
and technical studies coming out of Wednesday's session and there is a case for
not being short".
"Rejecting lower trade early in the [last] session and
closing near the highs side of the range are both positive inputs," he said.
Still, corn for December eased 0.3% to $3.69 ½ a bushel this
time, with reports from Midwest crop tours still coming out with strong results.
Fellow grain wheat,
however, did manage some gains, even if only of 0.1% to $5.31 ½ a bushel in Chicago
for September delivery.
Data from the North Dakota spring wheat tour by the Wheat
Quality Council were still coming out strong, pegging yields at 48.4 bushels
per acre, up from 45.0 bushels per acre a year ago and a five-year average for
the tour of 44.7 bushels per acre,
However, the crop is viewed as behind on development,
leaving it reliant on decent summer weather to fulfil its potential.
Furthermore, concerns remain about the rain-hit European
Union harvest, particularly in France, the bloc's top producer and exporter,
and Romania, a notable shipper too.
"Recent rains in France have millers concerned the quality
of French wheat has deteriorated too much to be used for milling," CHS Hedging
"Low falling numbers, high levels of sprout damage has
milling quality premiums moving sharply higher."
And there are signs of demand around, with Egypt buying
235,000 tonnes of wheat yesterday, and Iran seeking 50,000 tonnes, while Jordan
has retendered for 100,000 tons of hard milling wheat, even if Black Sea
origins are mopping up high profile trade.
Among soft commodities, robusta
coffee rose 1.0% to $2,013 a tonne in London for September delivery, rising
back above its 50-day moving average, and playing catch up after New York arabica coffee's strong close to the
last session, after an INTL FCStone report revived nerves about Brazil's
"The reports off the ground consistently report damage to
the crop, and a strong likelihood that next year's crop will be compromised as
well," Citigroup's Sterling Smith said.
"There have been some early rains which have resulted in
some premature flowering, and this will add further to production issue for the
Arabica coffee for September added a further 0.2% to 176.95
cents a pound.