PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:48 GMT, Tuesday, 13th Jun 2017, by Mike Verdin
PM markets: grains get a pull from tearaway spring wheat

Talk about a turnaround Tuesday.

Grain traders have an adage of the second session of the week reversing a strong trend on the first.

And this time the u-turn took place in top gear, at least for Minneapolis spring wheat futures, whose surge is discussed elsewhere on Agrimoney.com.

Hard vs soft

Other grains could not manage quite the same pace of reversal, but tyres squealed nonetheless as Chicago-traded soft red winter wheat for July zoomed 2.5% to $4.45 a bushel, not quite taking back all ground lost in the last session.

The contract found it tricky to close back above 100-day and 200-day moving averages.

Still, Kansas City-traded hard red winter wheat for July fared better in jumping 3.22%, through these moving averages, to end at $4.57 a bushel a three-month closing high on a spot contract basis.

This despite the spreading winter wheat harvest, which would normally suggest pressure on prices.

Spring springs

However, the tug from spring wheat proved too much, with the spread between Minneapolis spring wheat and Chicago winter wheat, the world benchmark, soaring above $1.80 a bushel.

That beat the "last high back in 2014 at a little over $1.70 a bushel", said Mike Zuzolo at Global Commodity Analytics.

And the pull on Kansas City wheat, as the higher protein of the two winter wheat varieties, proved particularly strong.

Spring wheat is higher protein still, and worries over the US crop have exacerbated shortages of high grade milling wheat.

Pricey protein

"As has been the trend over the last 2-3 years, the world is having no problem producing wheat, but raising high quality, high protein wheat has been quite the challenge," said Tregg Cronin at Halo Commodity Company.

"Producers with high protein wheat of any variety look to be in the driver seat once again this year."

Indeed, reports of low protein in the hard red winter wheat harvest, besides the spring wheat woes have "not been lost on the cash market", Mr Cronin added.

Hard red winter wheat of 12.0% protein is achieving $1.30-1.40 a bushel above Kansas City July future, compared with $1.00-1.10 a bushel a week ago.

For 13.0% protein, buyers are paying $1.90-2.00 a bushel above the futures price up from $1.45-1.55 a bushel a week ago, Mr Cronin said.

"This despite the fact harvest is expanding across the southern Plains and should be pressuring cash markets."

'Need a drink'

With wheat a competitor with other grains for uses such as feed, the rise in winter wheat values in turn spread to the likes of corn, which in Chicago closed up 1.1% at $3.81 a bushel for July, not doing quite so well at reversing the last session's losses.

Still, corn had some supportive features of its own, with the northern Plans a significant, if not vital, grower of the grain, compared with te Corn Belt - where there some worries over dryness too.

"The GFS model turned significantly drier in the western Corn Belt overnight and this morning," said Darrell Holaday at Country Futures.

"The one thing that is not in question is that virtually all of the Plains and Corn Belt need a drink."

He added that Chicago itself has "experienced five days in a row over 90 degrees Fahrenheit, and will likely be 6", a run which is not unprecedented but "unusual" for June.

While the heat has provided benefits for corn, and soybean, crops it has boosted the need for rains.

Soybean condition

Soybean futures themselves could only manage a 0.2% gain to $9.32 a bushel for July delivery,

This despite the USDA crop progress report coming in with a relatively lowly initial rating of 66% good or excellent for the US soybean crop, below most trade estimates.

"This puts us 7 points below last year at this time and doesn't bode well for a 48-50 bushels-per-acre yield," Mr Zuzolo said.

'Lacklustre demand'

Still, on the negative side for prices, the USDA, in a separate report, also flagged the weakness in domestic demand for soymeal, which it termed "lacklustre".

"Early in the marketing year, US soymeal demand was well ahead of last year's pace," the USDA said.

"By spring, however, meal use abruptly slackened. End users of soymeal may now be feeling more confident that they can draw down their current inventories and replace them later this fall with even cheaper supplies."

Soymeal futures for |July edged 0.1% lower to $301.50 a short ton, not far from one-year lows for the contract hit last month.

Soyoil actually fared better, adding 0.6% to 32.09 cents a pound, amid rumours of an imminent announcement on the US mandate for biodiesel (made from vegetable oils), and defying weakness in palm oil prices, which dropped despite ostensibly bullish Malaysian stocks data.

Sugar tumbles

Among soft commodities, raw sugar had a poor session, dropping 1.6% to 13.79 cents a pound for July delivery, returning close to the 15-month lows reached last week.

The tumble followed the release by Unica of data for Brazil's key Centre South region showing that while the volume of cane crushed by mills in the second half of May, at 31.58m tonnes, was markedly below the 38.46m tonnes in the first half of the month, the decline was not as large as expected by investors.

A survey of the trade by Platts Kingsman had suggested a figure of 29.58m tonnes, based on ideas of the loss of five days or more to rain.

Production of sugar, at 1.75m tonnes, was above trade expectations too, despite Centre South mills dedicating, at 45.2%, a little less cane to making the sweetener (as opposed to ethanol) than the 46.2% figure investors had expected.

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