PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:27 GMT, Monday, 12th Jun 2017, by Mike Verdin
PM markets: grains tumble alongside drop in US weather fears

Grain prices tumbled, alongside a drop in concerns about growing weather for US crops.

The weather over the weekend proved not as threatening as had been expected, with CHS Hedging saying that "temperatures failed to impress".

It has to be said they did reach mid-90s Fahrenheit in the western Midwest and 100s in the north central Plains, according to MDA, although the consensus seems to be that such highs were not as widespread as many investors had feared.

Furthermore, "this week's weather forecast makes a call for beneficial rains throughout much of the Corn Belt", said CHS Hedging.

Benson Quinn Commodities said that the "current forecast indicates a good opportunity for precipitation through much of the country during this week," although there are some areas of the western Corn Belt "that are expected to be missed.

"Temperatures are also expected to be a touch cooler this week."

'More rainfall needed'

Not that this means that the weather threat to US crops is over.

Sure, "showers will favour the northern Plains and northern Midwest today and tomorrow and will favour the central and eastern Midwest Wednesday through Friday," MDA said, adding that this precipitation will improve soil moisture.

"But more rainfall will still be needed, particularly across North Dakota, South Dakota, and Nebraska," largely spring wheat country, but important for corn and soybeans too.

MDA also flagged dryness threats in Australia, for wheat, and north east China, for corn and soybeans.

Data later

Meanwhile, on the demand side, the US Department of Agriculture unveiled the export sale for this season of 130,000 tonnes of corn (originally billed as soybeans) to an "unknown" import destination.

And US weekly export data were viewed as strong, at 1.04m tonnes for corn, 773,992 tonnes for wheat and 508,220 tonnes for soybeans.

Then there was the uncertainty over US data later on US crop condition to factor in which were expected to show a drop, thanks to hot and dry weather, of 1 point week on week to 67% in the proportion of corn rated "good" or "excellent".

The reading for spring wheat is expected to come in 2 points lower week on week at 53%.

'Damage is a fact'

But what if the figures come in lower?

"Damage to the corn and bean crop this past weekend is a 'fact' in my view, given the record high temperatures and winds all weekend long from Kansas to Indiana," said Mike Zuzolo at Global Commodity Analytics .

"How will the trade contend with crop conditions this afternoon if they see a marked drop?"

Still, that did not seem to be worrying investors on Monday, when corn futures for July tumbled 2.8% to $3.77 a bushel, back to the upper end of the trading range it had been within before last week's breakout.

The new crop December lot shed 2.7% to $3.95 a bushel, back below the psychologically-important $4.00-a-bushel mark which had, when futures were above it, been viewed as particularly important in switching on farmer selling.

'Increased harvest activity'

In the wheat complex, winter wheat for July dropped 2.6% to $4.34 a bushel, undermined by corn, but also some decent reports from the US harvest, which has been speeded by dry weather.

"Wheat prices being pressured by increased hard red winter wheat harvest activity," said Darrell Holaday at Country Futures.

CHS Hedging said that "the wheat markets are trading down today due to higher-than-expected yield numbers coming from the winter wheat harvest in the southern Plains".

It report a "very active hard red winter wheat harvest over the weekend in Oklahoma and southern/central Kansas. Hot and windy conditions turned a lot of wheat."

What if rains disappoint?

And what of spring wheat, the toast of grain bulls last week, for its rally on the spreading drought in the Dakotas?

The Minneapolis July contract closed lower, but by a relatively modest 1.0% to $6.00 a bushel importantly, keeping its head above the psychologically-important $6.00-a-bushel level.

"Rains are starting to come into the Dakotas as I write, and the model updates are also coming in currently - the updated models so far as wetter for the Dakotas in the next 48 hours," Mike Zuzolo said.

"If these rains disappoint, however, I'd say we are in for a market that will likely make-up these losses very quickly, and potentially also take out last week's highs."

China rumblings

Soybean futures for July, meanwhile, shed 1.0% to $9.31 a bushel, undermined also by improved US weather, as well as expectations that the USDA will later unveil an elevated initial rating of the domestic soybean crop.

"Private analysts expect good/excellent ratings to be at 70%," CHS Hedging said.

"This would be four points below last year's rating of 74%, but still ahead of the five-year average of 68% good/excellent."

There were also concerns, on the demand side, of a potential threat to Chinese imports of the oilseed from a clampdown ordered by officials on imports of genetically modified crop, which is permitted for feed, but not food, use.

Coffee revives

Among soft commodities, weakness was also evident in cotton, which eased 0.7% to 75.13 cents a pound in New York for July, undermined by an upgrade by the USDA on Friday to its estimate for domestic stocks at the close of 2017-18.

However, New York arabica coffee for July managed a 0.8% gain to 127.60 cents a pound - despite weight from a weakening real, which dropped 0.5% against the dollar as worries over cold weather in southern Brazil made themselves felt.

These countered the bearish pressure emanating from an estimate late last week from Brazilian exporter Comexim that the country's 2017 harvest could hit 52m tonnes, in the top end of market expectations, with the result for 2018 seen as potentially coming in at 65m bags.

 

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