Sell in May and go away", that adage overused on financial
markets, is generally employed by stock market investors.
But it had been finding significant traction in grain
markets, before signs of demand emerged for wheat, to add to the production jitters in the US, and inject a
little calm into funds which certainly had their selling boots on during the
first day of the month.
Then, they sold an estimated 10,000 Chicago corn contracts, and 12,000 soybean lots, besides 4,000 each in wheat
and soymeal, and 5,000 soyoil lots.
"Funds threw in the towel and moved to the sidelines,"
broker CHS Hedging said, thinking in particular of their selling in the soy
The sign of demand in wheat came as Saudi Arabica issued a
tender to buy 550,000 tonnes of the grain, following on from a 715,000-tonne
purchase in January for April-to-June delivery.
(Today's tender is for delivery between late June and early
The tender, from Saudi Arabia's Grain Silos & Flour
Mills Organization (GSFMO), came hours after the Gasc grain authority in Egypt,
the top wheat buying country, issued a surprise tender too.
The results of this one will be announced later on Friday.
And although US wheat looks unlikely to feature in the Gasc
tender, the idea of end-user demand questioned how keen investors should be on
Wheat tour results
Furthermore, of course, there were the results of the Wheat
Quality Council Kansas wheat tour to factor in.
The tour estimated the wheat yield in Kansas, the top US
wheat-growing state, at 33.2 bushels per acre, the weakest projection since
Total output was pegged at 260.7m bushels, which would be an
Last year, the state achieved a 319.2m-bushel harvest on a
yield of 38.0 bushels per acre, according to the US Department of Agriculture.
"The poor yields that crop scouts discovered during the
annual tour are confirming fears we have in the wheat market, especially when
USDA has also been releasing declining crop ratings of the US winter wheat crop,"
Vanessa Tan at Phillip Futures said.
The USDA in its latest weekly briefing, on Monday, estimated
the proportion of US winter wheat in "good" or "excellent" condition at 33%,
with the Kansas figure at 21%.
And weather conditions do not look like improving.
"The winter wheat crop is likely to experience a heat wave
over the weekend which would further impact the crop adversely and weigh on
yields," Ms Tan said.
Nor do conditions look positive for spring wheat sowing in
the northern US, ironically because of too much rain.
"The Northern Plains area remains wet and cool through the
weekend and next week, leaving some thoughts of a reduction to the March
planting intentions for spring wheat," CHS Hedging said.
The dual push from signs of demand, and threats to supply,
helped Chicago wheat, which closed lower on Thursday for the first time in
eight sessions, renew its push, adding 0.7% to $7.12 ˝ a bushel as of 09:55 UK
time (03:55 Chicago time).
Kansas City hard red winter wheat, the type under threat from
drought, added 0.8% to $8.10 a bushel for July, extending its premium to $1 a
bushel for a time.
Spring wheat for July gained 0.8% to $7.67 ˝ a bushel in Minneapolis.
Old crop vs new
Movements in price spreads have been a big factor in other
crops too, a symptom, one broker said, of funds indeed taking the beginning of
May as an invitation to sell-up and head off.
In the last session, "the old crop contracts suffered the
largest setbacks, which makes sense since most of the speculative long
positions are stacked in the front months", the broker said.
That was particularly true in soybeans, in which in the last session the July contract lost
nearly $0.32 a bushel against the new crop November lot, a performance termed "staggering"
by Benson Quinn Commodities.
This time, the July lot was down 0.2% at $14.58 ˝ a bushel,
while the November contract dropped 0.4% to $12.21 a bushel.
And there is some fundamental cause for investors to sell
soybeans, with growing talk of the US resolving its tight balance sheet with imports,
of which latest talk is of 18 cargoes on their way, including two unloaded
China, the top soybean importer, estimated its buy-ins in 10
years' time at 73m tonnes, well below the USDA estimate.
"That is only 4.0m tonnes over what the USDA says they will
import for this year," CHS Hedging noted.
And latest weekly US export sales data, meanwhile, were weak,
with cancellations exceeding new orders for old crop.
Not over yet…
That said, more in the way of net cancellations will be needed
to resolve the USDA's conundrum, in estimating shipments in 2013-14 at 43.0m
tonnes, 1.6m tonnes less than the country has committed too.
Indeed, on actual exports, shipments last week, at 10m
bushels, were well above the 2.1m bushels a week needed to meet the USDA forecast
for the full season.
Furthermore, the domestic demand squeeze is not resolved
Kim Rugel at Benson Quinn Commodities noted that soybean crushers
in the western Midwest were "doing everything in their power to keep beans from
moving east of the Mississippi while the eastern processor continues to firm
its cash basis bid".
At RJ O'Brien, Richard Feltes advised buying the
July-to-November soybean futures spread at $2.00-2.35 a bushel, saying that the
factors that drove it to $2.77 a bushel in early April, "a tight cash market,
attractive crush margins, dwindling farm ownership, are unlikely to be
undermined during May".
Sowings speed up
Corn posted only
a modest decline too, down 0.1% at $5.06 ˝ a bushel for July delivery, helped
by wheat to overcome the bearish impact of an improved Midwest weather
forecast, with extra dryness and heat, implying speedy sowings.
This after a slow start to plantings, with 19% completed as of
Monday, down from 28% normally, according to the USDA.
One benefit at least may be a, temporary, drop in farmer
sales as planting keeps them busy.
CHS noted that on Thursday, "some areas reported an increase
in grower selling from those who were not able to work in the fields".
In fact, Benson Quinn Commodities, writing from Minneapolis,
termed producer selling "largely absent".
Strong export sales have also helped the market, with the
latest weekly figure at 937,900 tonnes for old crop alone.
Among soft commodities, cotton
for July added 0.4% to 94.57 cents a pound, receiving some support from a
170,000-tonne downgrade by the International Cotton Advisory Committee to its
forecast for world stocks at the close of 2014-15.
Even so, at 20.87m tonnes, the stocks will be record large.
The market has also seem able to shrug off poor US weekly
export sales data, at 31,400 running bales, down 75% week on week.