Where have all the wheat
Chicago's July contract, which has already notched up six
successive negative closes, set course for a seventh one on Thursday, as
investors who have spent most of the time since late January trying to find a
ceiling to prices have turned to trying to identify the floor.
Without fresh impetus to the Ukraine crisis, and with a
large allowance having already been made in US Department of Agriculture
estimates for damage to winter wheat crops from the drought in the southern US
Plains, focus has turned as to whether indeed futures needed to be at their
highest level in nearly a year.
Indeed, have prices at recent levels over-rationed supplies,
sending buyers to alternative origins or grains?
'Exports may be hard
"US wheat has priced itself out of the export space for the
time being and the board will need to correct that," said Sterling Smith at
At Iowa-based broker Market 1, Mike Mawdsley said that "exports
may be hard fought going forward as we are the highest priced wheat in the
After all, the US, while expected to cede to the European
Union for the first time the title of world's top wheat exporter in 2014-15, is
still expected by the USDA to ship 25.9m tonnes of the grain.
And demand from importers out there appears less than
buoyant at the moment.
"EU new crop values have narrowed the spread to a Black Sea
market that is also having trouble finding a bid," said Brian Henry at Minneapolis-based
Benson Quinn Commodities.
Mr Mawdsley added: "Yes, Kansas City hard red winter wheat
has issues, yes hard red spring wheat is behind in plantings, but remember,
some wheat contracts have rallied nearly $2.50 since early February."
Besides, "seasonally we are in the time frame where prices
can erode into harvest", with the prospect of a jump in supplies eroding values.
And, chart-wise, the grain has issues too, with Mr Henry
saying that the "effortless fall" by Chicago's July contract below its 50-day
moving average, beneath which it closed for the first time since February, was "a
negative technical input".
"I look for the trade to be more active sellers of rallies
Certainly, investors hardly had their buying shoes on in
wheat, with the July contact shedding a further 1.0% in Chicago to stand at
$6.83 a bushel as of 09:20 Chicago time (03:20 Chicago time).
In Kansas City, hard red winter wheat for July was 0.7%
lower at $8.00 ½ a bushel, testing its 20-day moving average.
Minneapolis hard red spring wheat was 0.8% down at $7.71 ¾ a
bushel, struggling for now to fulfil ideas that it at least outperforms in the
period to late June, not being in thrall to the same harvest pressure as winter
Movement later may depend in part on US export sales data,
expected to come in at 100,000-300,000 tonnes for old crop wheat, and 150,000-300,000
tonnes for new crop.
Still, as far as data go, the bigger focus may be in soybeans, which face not just US export
sales statistics – forecast a small net cancellations for old crop but a
positive 200,000-350,000 tonnes for new – but monthly numbers on the US crush.
The figure from the NOPA industry group is expected to come
in at 130.2m bushels of the oilseed crushed last month, up 8.4% year on year,
if below the 153.8m bushels in March.
The prospect of a decent figure has been voiced as one
reason why soybeans have maintained a gentle recovery this week even as grains
That said, can it last?
The strength in the run-up to the data "could result in a
buy the rumour, sell the fact trade", Mr Henry said.
For now soybeans for July edged a further 0.2% higher to $14.89
= a bushel in Chicago, helped also by another decent performance overnight by
The September contract on the Dalian settled up 0.9% at
4,593 yuan a tonne, taking its gains for the week to 3.5%, centred around a
Chinese auction from state reserves which showed nearly all supplies bought,
and at better-than-expected prices.
Palm oil did its
bit too in Kuala Lumpur to help the oilseeds complex, adding 0.6% to 2,622
ringgit a tonne, helped by data from cargo surveyor Intertek Testing Services
showing Malaysian shipments up 23% month on month so far in May.
Canola's rally go
back on track too, with the July contact adding 0.9% to Can$497.00 a tonne in
Winnipeg, although it has yet to take another crack at a taking the
psychologically important Can$500.00-a-tonne mark, which it temporarily gained
in the last session.
'Chance to advance
Back in Chicago, corn
froze, caught between firmness in fellow row crop soybeans and decline in rival
Conditions are better for northern Midwest sowings, with CHS
noting that "the 1-5 day forecast looks to provide producers with a chance to
advance planting in troubled areas".
That said "temperatures remain much below normal", and there
has been a little concern over some frost reports.
Weekly US export sales are expected at 200,000-400,000 tonnes
for old crop, and 50,000-350,000 tonnes for new.
Among soft commodities, it was sugar's turn to feel a bit of weakness, with investors taking
profits after sharp rises in the previous two sessions on bullish forecasts
coming from New York sugar week
Raw sugar futures for July eased 0.1% to 18.23 cents a pound
in New York.
Arabica coffee in
turn felt a bit of buying after a weak performance so far this week, adding 0.8%
to 185.75 cents a pound for July delivery.
Far higher prices could be in the offing, if analyst Judith
Ganes-Chase is right.