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
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.
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.
"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
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
"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
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
Soybean futures themselves could only manage a 0.2% gain to $9.32
½ 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.
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
"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.
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.
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
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
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.