Will the next few days turn out quite as dry as traders had
Soybean futures posted gains of more than 2% in the last
session after the GFS and European weather models backed off ideas of Midwest rain
in the six-to-10 day horizon, and indeed showed unusually hot temperatures
However, the outlook on Wednesday was not quite certain,
with Allendale noting "conflict" between models.
The GFS suggests "more rain and cooler temperatures", although "the
European and Canadian models are dry and much warmer with a ridge moving back
over the Corn Belt", Paul Georgy at broker Allendale said.
The impact on grain and oilseed markets was to inspires selling,
even in soybeans for which the current weather in particular is far from promising for yields. (Midwest corn is nearer maturity, and indeed harvest has begun in the US South.)
'Time starting to run
Indeed, "time is starting to run out for the US soybean crop,"
Kim Rugel at Benson Quinn Commodities said.
"Unlike last year at this time, the US soy crop is a way
from harvest and the crop is finishing under dry and hot conditions where as
last year's crop finished with best rains of the season."
Data overnight showed how the turn in the weather has hurt
soybeans, with the proportion of the crop rated "good" or "excellent" tumbling four
points in the week to Sunday to 54%, according to US Department of Agriculture data.
"Dry conditions across the state continue to have a negative
impact on the crop conditions, with many reports of firing in corn fields
across the state," USDA scouts in Illinois, the second-ranked corn and soybean
producing state said.
2013 vs 2012
Nonetheless, the decline in soybean condition data, and a
drop of three points to 56% in the proportion of corn rated "good" or "excellent",
was in line with market expectations.
"This had already been anticipated by the market, as plants
have been suffering from the excessively hot and dry weather," Commerzbank said.
"Iowa, for instance, which is the biggest growing state for
both corn and soybeans, saw its hottest week of the year last week."
Furthermore, as one US broker said, "we have to keep in mind
that this rating is 24 points above that last year at this time, and we ended
up with a 39.6-bushels-per-acre national average yield still".
That is not so far from where some have downgraded this year's
"We also weren't coming off of a bumper South American crop
at this time last year either."
Furthermore, there were some technical factors to think of.
One was from the charts, with the best-traded November soybean
contract in the last session topping out at around $14.09 a bushel for a third
time (once last week, and once in September last year).
Another was from the ratio of soybean to corn futures, which,
on a November soybean and December corn basis, hit 2.91: 1 in the last session,
a historically high level.
"Historically, the soybean:
corn ratio has exceeded 3.25: 1 on five occasions since 1970," Richard Feltes
at RJ O'Brien said.
"A 3.10 soy: corn ratio, with corn at $4.50 a bushel, would
imply soybean futures in the $14.00-a-bushel area, which suggests only limited
upside from current levels if one embraces fair value for corn in the $4.50-a-bushel
'Reports of big
And corn faces the threat to headway from prospects for a
strong rebuild in US inventories in 2013-14, unless there is a mega threat to
the crop over the next few weeks.
"We just can't find willing buyers in corn as harvest
approaches," Mike Mawdsley at Market 1 said.
In fact, harvest is already rolling in more southerly
states, with talk of decent results.
Benson Quinn Commodities noted a "steadily progressing
southern harvest and reports of big yields", as well as "softening cash markets",
as the onset of harvest supplies give buyers more market power.
December corn eased 0.8% to $4.71 ½ a bushel in Chicago as
of 07:00 local time (13:00 UK time), with November soybeans down 1.1% at $13.72
That was hardly auspicious for wheat, a market follower of late.
While Egypt's Gasc will later unveil the results of its
third tender in a week, US grain is seen unlikely to show.
One potential fillip for prices ahead is dryness as winter
wheat plantings approach, with Texas A&M University noting that "as we
prepare for fall wheat sowing, the [USDA] reports that 80% of Texas acreage has
moisture conditions described as very short or short".
Still, for now Chicago wheat for December dropped 0.4% to
$6.47 ¼ a bushel.
That dragged on Paris wheat too, which for November stood
down 0.1% at E186.75 a tonne.
Soft commodities did better, helped by a little strength in
the Brazilian real, which boosts the value in dollar terms of ags in which
Brazil is a major player.
added 0.9% to 118.25 cents a pound, with investors unwilling to bet too much
for now on prices falling further, after hitting a four-year low on Friday, and
with hedge funds already having a large net short on the bean.
Raw sugar, another
big Brazilian crop, edged 0.01 cent higher to 16.48 cents a pound.
December added 0.1% to 82.80 cents a pound, helped by a two-point drop to 45%
in the proportion of the US crop rated good or excellent.