Will wheat ever
rediscover forward gears?
The grain, which has closed lower for 15 out of the past 16
sessions, on Friday had a crack at extending its losing run.
Month ends, after all, have a reputation for prompting
weakness in Chicago, and there appeared little reason, fundamental or technical,
to buck the trend.
"The Chicago wheat chart does not set the stage for much in
the way of bullishness heading into the last trading day of the week," said
Sterling Smith at Citigroup.
'Probably grasping at
Fundamentally, "heavy rains, up to 7 inches, over the last
week through the US southern Plains should halt further declines in their hard
red winter wheat crop, whilst rains through the Volga have alleviated early
concerns of potential Russian production setbacks," Australian broker Pentag
"With European crops well advanced and in good condition,
the only apparent bullish supply side story left for the northern hemisphere
milling wheat market in the next few months is the possibility of a weather
related wheat event as they hit the harvest slot," prompting quality
"But in reality, that's probably grasping at straws."
In Australia itself, Queensland-based Pentag said that while
problems remained in some eastern areas, the country "as a whole is in pretty
"It's been hosing down in the West Australian wheat belt, with
Narrogin, for example, picking up almost 100mm (4 inches) for the month to date."
Back in the US, a crop tour by the Illinois Wheat
Association of the winter wheat crop in the Midwest state, a major producer of
soft red winter wheat, showed an above-average yield of 64.68 bushels per acre,
up from 61.60 bushels per acre. (The average is 62 bushels per acre.)
Meanwhile, harvest has begun in southern areas of the US,
meaning a rise in supplies, handing some market power to buyers.
Chicago wheat for July stood down 0.4% at $6.30 ¾ a bushel
as of 10:00 UK time (04:00 Chicago time), down nearly 12% on the month so far,
on a front contract basis, leaving it looking at its worst monthly performance
since September 2011.
Minneapolis hard red spring wheat for July fell even further,
by 0.5% to $7.11 a bushel, bucking a relatively firm trend so far this month,
helped by the growing demand needs for higher protein supplies, given the
drought troubles which have affected the hard red winter wheat crop.
Furthermore, there are ideas of the loss of some 500,000
acres of northern US sowings to a planting season which was unusually wet and
cold early on, and has limited to 6% the loss in Minneapolis wheat this month.
Wheat's weakness was hardly positive for corn, which faces the additional pressure
of near-ideal growing conditions, extending on the forecasts well into June.
"Even if most of the negative news on an average to above-average
start to the 2014 US growing season is fully discounted, there is also the
possibility that the 2014 US corn yield could approach 170 bushels per acre,"
said Richard Feltes at broker RJ O'Brien.
This would add "another 420m bushels to the US Department of
Agriculture's US corn carryover forecast of 1.726bn bushels" for the close of
Sure, there is talk of a 500,000-acre loss in northern US
corn area too, and basis levels are firm, with the country's exports holding up
Still, corn for July added a modest 0.1% to $4.70 a bushel,
while the new crop December lot fell 0.2% to $4.62 ¼ a bushel.
'Slow Argentine sales'
This time, new crop November soybeans did not manage to exploit
corn's fall to its advantage, in lowering further the November soybean: December
corn ratio, which ended the last session at an elevated 2.69: 1, the highest
indeed for the spread for 2014 lots.
"This is very high for this time of year with the entire
growing season still ahead of us," one broker said, noting continued talk of slow
crop selling by Argentine farmers, in the face of a depreciating currency and
high inflation, against which dollar-denominated assets offer some protection.
"Some believe that the slow Argentine sales have something
to do with the strength in soybeans."
At Benson Quinn Commodities, Kim Rugel said: "The Argentine
farmer has turned defensive and is holding soybeans in face of government's
request they step up soybean sales in order to bring in much needed income to
"Argentina has agreed
to plan to repay the Paris Club $9.7bn in debts that had gone unpaid since the
country's 2001 default."
Furthermore, with 1m acres of northern US corn and wheat
lost, will some of that end up with soybeans, boosting production expectations?
Mr Feltes said: "Lower hard red spring wheat and corn area,
along with a historically high November soybean: December corn ratio,
collectively suggest a 750,000-acre gain in US soybean area," above the 82.25m
acres farmers intended to plant, according to a USDA report in March.
That would "add another 32m bushels to an already record
2014 US soybean crop".
Soybeans for November fell 0.3% to $12.40 ¾ a bushel, with
the old crop July lot down 0.1% at $14.97 ¼ a bushel.
Soft commodities saw some end-of-month selling too, giving
back some of the ground gained in the last session.
Sure, in sugar, Datagro
has cut to 560.5m tonnes its forecast for cane production in Brazil's Centre
But in Thailand, the world's largest sugar exporter after
Brazil, output will probably hit a record 12m tonnes, from 110m tonnes of cane,
in the year from November, a rise of 6.3% year on year, according to Thai Sugar
Raw sugar for July eased 0.2% to 17.45 cents a pound in New
And arabica coffee
for July 2.0% to 178.40 cents a pound, as the bounce in the last session
encouraged a little producer selling.