The early retreat in grain markets extended into a rout as
improved US weather forecasts added to the reason to withdraw risk premium from
prices, following larger-than-expected supply data unveiled in the latest Wasde
Investors late to put in long positions were "scrambling for
the exits, as traders contemplate possibility that usual growing season weather
rally has come and gone," said Richard Feltes at broker RJ O'Brien.
The Midwest weather outlook "leans negative [for production]
with less severe heat next week, and for shorter duration, while areas labouring
under short moisture fade from 20-25% to 10-15% over next 10 days".
And this after unexpected rainfall this week too.
Tregg Cronin at Halo Commodity Company, based in North
Dakota, noted "rains on the radar again this morning, which look to be dropping
decent totals in eastern Nebraska, southern Iowa, northern Missouri and just
making their way into western Illinois.
"Separately, there is also a system dropping moisture in
Ohio and south eastern Michigan.
"Heavy rain has already fallen in northern Missouri, with
totals there based on radar showing returns of 1.0-6.0 inches."
Certainly, that took the edge off data from the US
Department of Agriculture showing spreading drought in Iowa, the top corn and soybean producing state, where 16.2% of area was rated in drought,
up 7.3 points week on week.
In northern Plains spring wheat country, North Dakota was
rated 72.8% in drought, up 6.0 points week on week, with South Dakota 72.4% in
drought, a rise of 14.7 points.
"The combination of unexpected rains in the western reaches
of the Corn Belt this week along with a lack of bullish surprise in yesterday's
USDA reports seem to be combining to give the ag markets a one-two punch," Mr
Certainly, grain futures were floored, with spring wheat futures, the figurehead
for the recent rally, plunging by 4.3% for September delivery to $7.49 ½ a bushel,
their weakest close of July so far.
Chicago winter wheat
futures for September plunged by 4.2% to $56.11 ¾ a bushel, also a July low (and,
pleasing for technical purists, closing a gap in the chart dating from July 3).
Corn futures slumped
by 3.8% to $3.69 ¾ a bushel for September delivery, slicing through a clutch of
moving averages around the $3.80-a-bushel mark, and now down 7.7% in two
December futures ended down 3.8% at $3.83 a bushel, also
below all major moving averages.
"The trade questions just how much weather premium is needed,"
said Benson Quinn Commodities, adding that the "technicals in corn are severely
"Technicals in wheat had already rolled over."
And funds "have plenty of room to sell in all three markets"
having worked off plenty of short bets during the rally.
'Nothing to brag
Meanwhile, weekly US export sales data, while overshadowed
by the focus on weather and the estimates in Wednesday's US Department of
Agriculture Wasde report, were "nothing to brag about in wheat and corn", at 357,500
tonnes and 279,700 tonnes respectively for 2017-18.
Corn export sales were 161,000 tonnes for this season, well
below market expectations for at least 300,000 tonnes. (For wheat, 2016-17 is
"Corn export sale numbers were weak this morning," said CHS
CHS Hedging added that "soybean
export sales were decent in the new crop year", at 455,000 tonnes, with 2016-17
sales at 228,000 tonnes.
"The combined old and new crop soybean number was decent,"
said Benson Quinn Commodities.
Still, soybean futures were trampled too in the stampede for
the exits, and for November ended down 2.5% at $9.87 ½ a bushel although,
thanks to their longest winning run in 37 years preceding the selling of the
last two session, the contract remains above major moving averages.
August soybeans dropped 4.4% to $9.75 ½ a bushel.
By contrasts, soft commodities enjoyed a strong session, helped
in part by further firmness in the real,
which raises the value in dollar terms
of assets, such as coffee and sugar, in which Brazil is a major
futures for September jumped 2.8% to 131.20 cents a pound – closing back above
its 50-day moving average for the first time in nearly three months - amid
further talk of disappointment at Brazil's harvest, now past the halfway mark.
Earlier this week, Judith Ganes-Chase noted "worries over
smaller bean sizes and the final crop coming up short from projections.
"Reasons for the disappointing screen sizes vary from the
heavy stress of last year, a brief episode of dry weather earlier in the year
and untimely rains prior to that," she said, if seeing weather for flowering
ahead as a more important market focus.
Sugar, cocoa sweeten
Meanwhile, raw sugar
for October soared 4.8% to 14.14 cents a pound, amid talk of the weaker prices of
late spurring demand.
And New York cocoa
for September settled up 2.8% at $1,872 a tonne, helped by Nielsen data, reported
by chocolate giant Barry Callebaut, showing a return to growth in chocolate markets
in Europe and the Americas.
Barry Callebaut also showed healthy industry cocoa
processing margins, boding well for demand for the bean, especially with prices
not far from decade lows.