It took something a bit special to avoid selling in the
agricultural commodities complex.
It was not just some recovery in the dollar which undermined prices, in making values of dollar-denominated
exports, such as many ags, less affordable to buyers in other currencies.
(In fact, commodity prices overall, as measured by the CRB index, edged 0.1% higher.)
The weather turned against corn and soybean bulls a
bit, in putting more rain in the Midwest forecast – at least on early runs.
"A little wetter run this morning pulled the market off the
high," said Darrell Holaday at Country Futures.
"This morning's run was much wetter for the last half of
That said, the latest "midday run is not a as wet in Iowa
and Illinois in the last half of next week as the morning run", Iowa and
Illinois being the top two corn and soybean growing states, where dryness has
remained a worry.
"But it still is indicating a system moving through in that
region late next week," Mr Holaday added.
'Distinct trend for
Indeed, looking a week ahead, WxRisk.com said that "we can
clearly see a distinct trend for wetter conditions developing over the eastern
half of the central and upper Plains and all the western Corn Belt after August
"In fact, the data turn quite wet after August 18 and
continue into the first week of September."
The weather gave a more negative bias to trading, which proved
somewhat volatile amid positioning ahead of the US Department of Agriculture's
Wasde briefing on Thursday on world crop supply and demand, a key a event on
the ag investors' calendar but particularly closely-watched this time.
The USDA is expected in the Wasde to cut estimates for US
soybean and, in particular, corn yields this year, thanks to dry weather last
month for the western Corn Belt (with some eastern areas saddled with too much
On our analysis, China cash soybean crush margins were
running at positive 93 cents a bushel versus 66 cents late last week, and
compare to 2 cents at this time a year ago.
And chart factors hardly helped corn either.
Benson Quinn Commodities noted earlier that "the corn and wheat markets are being challenged by
key moving averages near this morning's highs.
"Trade above these levels may trigger additional short-covering."
However, corn futures for December never got to break above their
100-day and 200-day moving averages, at $3.88-3.99 a bushel, with that failure
contributing to a 0.9% fall at the close to $3.83 ¾ a bushel.
Chinese import surge
For Chicago soybeans, it was the 40-day line, which has been
less closely watched, and at some $9.76 a bushel November basis, which proved difficult
to breach successfully.
Still, the November soybean lot managed to close up 0.3% at $9.73
¼ a bushel, given support by record Chinese import data for July, crossing 10m
tonnes for the first time, a 30% surge year on year.
"January-July soybean imports have now totalled 54.9m
tonnes, which is up 17% year on year, and likely means the USDA is still
underestimating Chinese import growth," said Tregg Cronin at Halo Commodity Company.
That said, he also noted that the figure "helps square the
stories of recent Chinese soybean cargo cancellations as port stocks pile up".
'No reason for
Indeed, it has to be noted that there was a somewhat mixed
response to the data among commentators, with Commerzbank saying that the
import surge was "no reason for excessive euphoria".
"Part of the July imports were probably making up for the
weak June," when imports were held back, a dynamic attributed to a drop in China's
VAT on soybean imports from the start of last month.
Furthermore, "Chinese oil mills have been suffering from
negative processing margins since February, with the exception of just a few
days," the bank said, quoting Reuters data.
"The reason for this is high stocks of soymeal that
is used in the country for animal feed – they are at their highest level since
the data series began six years ago."
The bank flagged reports that "in isolated cases soybeans
are already being re-exported at a loss – soybeans that may previously have
been ordered without sufficient financial cover through loans".
So exports "in the coming months are likely to prove
However, Terry Reilly at Futures International offered at
least a more positive spin on Chinese soy processors' profitability, saying
that "on our analysis, cash crush margins were running at positive $0.93 a
bushel versus $0.66 late last week, and compared to $0.02 at this time a year
ended up 0.8% at 34.22 cents a pound in Chicago for December, chasing a 2.1% surge
in futures in rival vegetable oil palm
oil overnight in Kuala Lumpur, ahead of Malaysia palm data on Thursday
which some observers suspect will show a weak seasonal rise in output.
'Wheat upside may be
Back in Chicago, wheat
for September tumbled 1.4% to $4.57 a bushel, hurt by its own chart failiure,
with the contract proving unable earlier to hold above its 100-day and 200-day
moving averages at around $4.67 a bushel.
Richard Feltes at RJ O'Brien said that "wheat upside may be
limited with European Union and Russia harvests accelerating with better-than-expected
(It has to be said that rains have ground the UK harvest to
'Millers are not as aggressive'
Meanwhile, Halo's Tregg Cronin flagged the perils of
extending the last session's gains for too long.
"US wheat has made itself competitive into the export grids
for many destinations, but can't afford to rally away from current levels or
risk pushing that business right back out the door," he said.
Indeed, there are signs of softness in the domestic market too,
with Country Futures' Darrell Holaday noting that "wheat basis levels have
weakened as the millers are not as aggressive as they were a month ago.
"They got their supply needs filled through a lot of the
fall and there a significant amount of wheat needing to find a home before the
Among soft commodities, cotton
managed to outperform its fellow row crops, adding 0.8% to 71.13 cents a pound
for December delivery, amid ideas that a strong export performances means a
downgrade to the estimate of US stocks of the fibre at the close of 2016-17
Furthermore, cool conditions in Texas, the biggest producing
state, are worrying investors.
However, raw sugar
for October eased 0.6% to 13.78 cents a pound, with the market "on the
defensive as an absence of hard fresh news is acting as a weight on values,"
said Nick Penney at Sucden Financial.
"The action late last week and early this week has suggested
that producers continue to sell into any rally and the 15-cent level has attracted
much price fixing from this quarter."
In fact, the selling in sugar could be worse, were it not for
the residual ideas of India potentially cutting tariffs to zero to encourage
imports of, it is believed, 300,000-500,000 tonnes – although potentially of
white sugar rather than raws.
"The rumours circulating about potential reduced or zero tariff
imports by India may be holding the market back from a further meltdown," Mr
However, from a chart perspective Jack Scoville at Price
Futures, while saying that the market was "now liquidating" after failing at "some
big resistance areas last week", added that "the charts show that futures
remain in an overall trading range.
"The range should probably hold."