Changes in grain market direction typically take three sessions,
at least, to act out.
It is telling that corn
futures went back to their losing ways after only one, marginally, positive
While the US Department of Agriculture, in its much-watched
Wasde crop report, did raise the estimate for the corn yield by far less than
investors had expected, there is little conviction that the new figure of 167.4
bushels per acre is anything but a milepost on the way to a higher figure,
above 170 bushels per acre.
'Not a major game
"Most think the production number will continue to grow,"
Mike Mawdsley at Market 1 said.
At Citigroup, Sterling Smith said: "It is entirely possible
that we will see yields bumped higher again in September."
Another US broker said: "The market already has an idea of
what it believes final yield is, regardless of what the USDA wrote down.
"This report was not a major game changer… the bear market
It little helped that the US Midwest weather outlook remains
benign, although "more rains are needed in north western areas", according to
The six-to-10 day and 11-to-15 day outlooks have in fact turned
And, looking abroad, the CNGOIC crop bureau constrained
disappointment over China's corn production prospects, which have been dented a
little by dryness on the North China Plains.
The official think tank foresaw losses of 1m-2m tonnes in
Henan province to drought, but still forecast some rise in national production
this year, to 222.3m tonnes.
In Chicago, December corn fell 0.1% to $3.68 ½ a bushel.
For soybeans, the
Wasde was undoubtedly negative, lifting the estimate for domestic 2014-15
carryout stocks to 430m bushels, a figure above market expectations.
For world inventories, the estimate was only nudged 310,000
tonnes higher to 85.62m tonnes, but this was still deemed by one broker the "biggest
soybean statistic to consider" given that it means that "the world stocks-to-use
ratio is over 34%".
"Consider that with the fact that South America still has a
major price incentive to plant soybeans over other products this year."
For growers looking at 2015, it may already "make sense to
get more aggressive on soybean hedging now".
Furthermore, the USDA did not trim the estimate for domestic
stocks at the close of this season (at the end of the month) as investors
expected, but instead hinted, through a negative so-called residual number, at
an upgrade ahead to the 2013 harvest.
"In essence, USDA is saying that last year's crop production
was understated by 94m bushels, or 1.3 bushels per acre nationally, which means
the 2013 yield was closer to 44.6 bushels per acre than the [current official
estimate of] 43.3 bushels per acre," said Kim Rugel at Benson Quinn Commodities
That said, while there are expectations too of further
upgrades to the soybean yield estimate, there are also ideas that the USDA is
being downbeat on consumption too.
"We do take issue with lack of changes in the US soybean
crush numbers in light of the very strong soymeal
exports," Citigroup's Sterling Smith said.
Indeed, the estimate for US soymeal exports in 2014-15 was
unchanged, at 10.7m tonnes, despite a strong pace of forward sales.
The US has already sold 4.14m tonnes of the feed ingredient
ahead for 2014-15, which starts for the commodity in October.
A year ago, it had sold 1.45m tonnes forward for 2013-14,
with the recent increase seen largely down to uncertainties over supplies from
Argentina, the top exporter of soybean products, where farmers are hoarding
crop as a hedge against a declining currency.
Soymeal for December added 0.2% to $344.00 a short ton in
Chicago, helping soybeans themselves for November edged 0.5 cents higher,
taking them to $10.60 a bushel.
Soyoil for December
eased 0.1% to 34.96 cents a pound, weighed by a fresh retreat in rival
vegetable oil palm oil by 0.4% to 2,179
ringgit a tonne.
Data showing annual industrial output growth in China, the
top importer of soybeans, running at 9% last month were a little shy of
expectations, and caused alarm in some industrial commodity markets.
However, Chinese soybean futures for January performed
strongly overnight, closing up 0.8% at 4,610 yuan a tonne.
'Let someone else buy
It was wheat
which managed notable gains in Chicago, adding 0.6% to $5.41 a bushel for
September, although only after notable losses in the previous four sessions.
And there is a touch of concern in Ukraine too, where
markets are awaiting to see what happens when a Russian aid convoy attempts to
cross the border into Ukraine.
Kiev officials have said that the convoy will be denied entrance,
amid concerns it is an excuse for further Moscow intervention in Ukraine.
Wheat prices have been acting somewhat as a barometer for
Russia-Ukraine tensions, given the region's status as a large source of
competitively priced supplies.
Sentiment otherwise on the grain remains soft.
"Wheat is bordering on being oversold, but the technicals
are weak and harvest of the US spring wheat crop will continue for the next
month and half. I'd let someone else buy it first," Benson Quinn Commodities