A pretty poor quarter for grain futures ended on a miserable
note after the US shifted confidence in supplies up a gear or two.
History had suggested that the US Department of Agriculture's
estimates for domestic corn and soybean inventories, as of June 1 – a report
with a history of surprises - would beat expectations, as Agrimoney.com reported
And so it turned out, even though soybean inventories were,
at 405m bushels, actually at their lowest for the start of the month since at
least the 1980s.
As an extra kick in the teeth for grain bulls, a separate
report, on US crop sowings, turned out bearish too, in estimating soybean
acreage more than 3m acres above market forecasts.
Furthermore, "total all crop planted area is up a stunning
5.7m acres versus last year to 330.5m acres – the largest all-crop area in
recent history," said Richard Feltes at broker RJ O'Brien.
'Bearish across the
The outcome of the double whammy, in terms of both stocks
and acreage data pointing to higher supplies, was, well, carnage. Funds sold 25,000 soybean and 19,000 corn contracts.
The data were "bearish across the board", Mr Feltes said.
"All of the numbers across the board were bearish," said
Darrell Holaday at Country Futures.
"Bearish across the board," was the verdict of CHS Hedging.
Perhaps the only doubt was which crop would fall furthest.
That dubious honour fell to soybeans, which in Chicago ended
down 5.8% at $11.57 ¼ a bushel for the best-traded, new crop November contract.
That was a four-month low for the contract, and also its
biggest decline since it was first traded in late 2010, besides taking it below
its 100-day and 200-day moving averages.
But then Monday's data was, besides being downbeat in terms
of pegging domestic stocks higher than had been thought, seeing the large
increase in acreage.
The increased sowings were in part viewed as down to the wet
spring in some regions of the US, which prompted farmers to switch from corn to
the oilseed, which has a later planting window.
Furthermore, markets have been offering a signal to plant
soybeans rather than corn, with the new crop November soybean futures: December
corn futures ratio topping a historically high 2.8:1 last week.
(It ended on Monday at 2.71:1.)
'Debate is over'
Meanwhile, the unexpectedly large soybean inventories as of
June 1 appears a signal that last year's harvest was unexpectedly large, rather
than as a reflection of weak demand, many brokers said.
"The soybean stocks number at 405 million answered a key
question that has been asked – 'why had the soybean basis not responded like
last year if soybean stocks are so tight?'" Country Futures' Darrell Holaday
"The reality is that last year's soybean crop was underestimated
by 40m bushels."
"The stocks number answers that question. That debate is
In fact, weekly US export data released separately showed
shipments continuing to beat expectations, hitting 72,804 tonnes last week, up
from 61,919 tonnes the week before, and taking the total to 42.50m tonnes so
far in 2013-14 (which ends in August).
Still, that was only a small fillip for old crop soybeans,
which ended down $13.29 ¾ a bushel for August, down 3.5%.
Chicago corn for
September dropped 5.3% to $4.18 ¾ a bushel, the lowest finish for
nearest-but-one contract since August 2010.
That was even more severe than the 4.9% fall to $4.25 ¼ a
bushel (the contract's lowest close) in the price of the benchmark new crop
December futures lot.
But then, the most bearish news for corn was in old crop,
with the rise in corn stocks above market expectations.
The acreage number was, in fact, a little below
expectations, although not enough to tip the needle that much.
US exports, for what it is worth, came in at 872,960 tonnes
last week, down from 988,080 tonnes the week before.
Wheat was the
relative outperformer among Chicago's big three in closing down 2.7% at a four-month
low of $5.77 ½ a bushel for September delivery.
US wheat stocks data actually came in slightly below
However, sowings, at 56.5m acres, were some 700,000 acres above
forecasts, a reflection of higher-than-estimated seedings of spring wheat.
And , besides the negative pull from other crops, exports
last week were poor too, at 335,389 tonnes, down from 628.451 tonnes the
previous week, and 728,500 tonnes in the same week of 2013.
US wheat exports so far in 2014-15, at 1.84m tonnes, are
down more than 450,000 tonnes year on year.
The downswing extended to cotton too, for which the USDA estimated sowings this year at
11.37m acres, up 270,000 acres from its previous forecast, in March, and up from
10.41m acres in 2013.
With hopes for US yields continuing to be improved by decent
rains in the southern US, December cotton ended down 1.8% in New York at 73.51
cents a pound, down 8.1% for the quarter, and the weakest finish for the
contract since June 2012.
Elsewhere among softs, raw
sugar for October ended down 1.4% at 18.01 cents a pound, undermined by the
extent of positive positioning on futures and options that hedge funds have
In the week to Tuesday, they made, by far, their biggest bullish
move on raw sugar on records going back to 2006.
However, arabica coffee for September added 1.5% to 175.10
cents a pound, against a backdrop of continuing concerns over Brazil's
drought-hit crop, currently being harvested.
"Reports from on the ground are providing a steady narrative
of a diminished harvest and small, malformed beans," said Citigroup's Sterling