Prospects did not look strong for agricultural commodity
prices, with a rising dollar adding
to the US Department of Agriculture's apparently bearish US crop upgrades as
reasons to sell.
Looking at corn,
for instance, Tregg Cronin at US broker Halo Commodity Company said it was "very
difficult to find positives [for prices] with market at the moment, as balance
sheets are oversupplied, export cash markets are weak and calendar spreads are
trading in excess of 80% of full-financial carry"
But upward movement was the trend nonetheless, with many ags
outperforming a 0.8% rise in commodities as whole, as measured by the CRB index.
The idea, as indicated by FocusEconomics research, of upbeat
analyst price estimates was some help, with futures in some contracts seen not
far from levels at which many investors would see downside risk as very limited.
Still, there was fundamental cause for investors to cling to
"What we do know is that China has stepped up soybean buying on breaks, that South
American and US farmers are holding tight [on crop sales], that South American
weather is worrisome and that market has had ample time to digest large
US/global supplies," Richard Feltes at RJ O'Brien said.
South American weather is certainly growing as a theme as corn and soybean plantings begin, Brazilian
sugar cane harvesting continues, and coffee
crops negotiate their weather-sensitive blossoming period.
While the US weather outlook looks a little "negative" for
prices, with warmer temperatures helping late row crop development in the Midwest,
where some areas will get helpful showers too, "foreign weather is positive,"
Mr Reilly said.
He flagged in particular excess rains in Argentina, and undue
dryness in Australia, Brazil and Ukraine.
'Likely to remain dry'
The Brazilian dryness worries, for instance, helped further
gains in arabica coffee futures,
which soared 2.1% to 137.85 cents a pound in New York for December delivery, closing
firmly about their 50-day and 100-day moving averages.
The contract is now up 5.5% this week.
"Brazil weather reports indicate that most of the main
coffee districts have had a dry week and it is likely to remain the same for
the coming week, with the exception of the possibility of some light rains due
for the most westerly areas across Bahia and the fringes of Minas Gerais," said
merchant I&M Smith.
"The warm dry days are contributing to some degree of
speculation over the threat to the sustainability of the early flowering that
came with the early rains during last month, over most of the main arabica
The worry is that without imminent moisture, fertilized
flowers will abort rather than set and grow into coffee cherries for the 2018
Raw sugar futures
gained too, adding 2.2% to 14.33 cents a pound in New York for October delivery,
even though dryness would be helpful for the Brazilian Centre South cane
That said, Unica data on Tuesday showed mills turning a
lower proportion of cane into sugar, 46.95%,in the second half of August – down
from a figure above 50% in the first half.
Jack Scoville at Price Futures noted that "the Indian harvest
could be delayed due to wet conditions that would delay sugar cane harvesting".
Still, even after Wednesday's gains, futures remain within
the trading range that has held them for the last three weeks, during which
they have appeared reluctant to rise too far above 14.30 cents a pound – which coincides
with many analysts' calculations of ethanol parity.
(Ie, the level which offers Centre South mills equal margin
from turning cane into either sugar or ethanol.)
On grain and oilseed markets, soybeans were a notable winner, adding 1.2% to $9.60 ½ a bushel for
November delivery, despite the USDA's surprise upgrade on Tuesday, in its
monthly Wasde crop report, to its forecast for the US harvest yield of the
Still, there are plenty of doubts that this yield will be
"Yield potential remains an issue for debate as many in the
trade are not fully onboard with record soybean pod weights and the increase in
the number of corn ears," as used in
the USDA yield calculations, said Benson Quinn Commodities.
CHS Hedging said that "it seems pod counts are lower, but
the USDA has implied that record heavy pod weights are enough to make up for the
lack of pod counts.
"Some traders question the pod weights due to the mostly low
recorded rainfall in August."
'Difficult to believe'
Darrell Holaday at Country Futures said: "The bottom line is
that when more people were able to spend more time with the numbers overnight,
they realised that the pod weight was a critical component of the USDA yield projection.
"Many have a hard time believing that 2017 pod weights will
be 4% above last year's record pod weight."
This is especially so amid talk, as Benson Quinn Commodities
flagged, "of very early harvest results not measuring up to expectations," although
the broker urged caution over taking too much notice of harvest reports "very
early in the process".
Contrasting with soybeans, soyoil - which emerged from the Wasde
with bullish credentials, with the USDA seeing cuts in biodiesel imports from Argentina
and Indonesia meaning more domestic output – fell by 0.2% to 35.09 cents a
pound for December delivery.
Corn futures found
headway difficult, but at least avoided losses, ending flat at $3.51 ½ a bushel
While there are doubts about the USDA's corn yield estimate,
they appear less entrenched than for soybeans.
Halo's Tregg Cronin, noting "the historical tendencies of
the USDA" in its yield estimate revisions, said that "hoping for a 3-5 bushels-per-acre
cut to national yields doesn't look like a solid proposition".
'Better correction to
Soft red winter wheat
futures, meanwhile, gained 0.5% to $4.43 ¼ a bushel in Chicago for December
delivery, marginally underperforming Kansas City hard red winter wheat, which added 0.6% to $4.44 ¼ a bushel, regaining
"Generally speaking, the fundamental picture isn't all that
supportive" for wheat futures, said Benson Quinn Commodities.
"However, the combination of the funds having added shorts
in Chicago or reduced shorts in the hard wheat markets and a typical seasonal
could allow a better correction to develop."
Russian export doubts
Halo's Tregg Cronin said that "wheat has performed well and
would certainly lead one to believe there is more in the market than we
currently have priced in.
"US wheat exports in 2017-18 are on the rise and could end
up meaningfully higher than the USDA has them," he said, flagging the
logistical challenges facing Russia's huge export programme.
The 32.5m tonnes of Russian wheat exports forecast in the
Wasde "would be up 17% from last year's record and would be 53% larger than the
"There are many who don't believe Russia can execute on such
a programme while still maintaining exports of corn of barley in the neighbourhood
of 10m tonnes."
Such thinking, and a boost from a weaker euro, now back below $1.19, helped Paris
wheat futures outperform, adding 1.1% 5o E161.25 a tonne for December delivery.
Indeed, France issued an upbeat wheat export forecast
despite Russian competition, with shipments outside the EU seen more than
doubling year on year to 10.2m tonnes.