PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:39 GMT, Monday, 17th Jul 2017, by Mike Verdin
PM markets: return of US weather fears revives grains, a bit

One of the main early pressures on grain prices an improved US weather outlook reversed a bit, allowing futures a bit more buoyancy.

But the other main burden - the huge buying by hedge funds in the complex, creating worries of an overhang of long bets remained a deterrent to higher prices.

And soybeans encountered an extra setback, in terms of monthly US crush data from industry group Nopa which came in, at 138.074m bushels for June, well below expectations.

Traders had forecast a 143.093m-bushel number, and even that was well below the 149.246m bushels recorded for May.

Last year, US crushers processed 145.050m bushels of the oilseed.

'Lower than expectations'

Soybean futures for November ended down 0.4% at $9.97 a bushel, surrendering the $10-a-bushel mark, although closing above an early low of $9.93 a bushel.

Futures also received little help from US export data for last week for the oilseed at 285,972 tonnes, down from 476,136 tonnes the week before.

The figure was also "lower than expectations of around 300,000-400,000 tonnes", said Derek Hullett at CHS Hedging.

'Above-average temperatures'

However, corn futures fared better, in ending down a more modest 0.1% at $3.88 a bushel for December, and well above an intraday low of $3.83 a bushel, in part thanks to more promising US export data.

Shipments last week totalled 1.11m tonnes, up from 1.01m tonnes the week before.

But the main boost to prices was some turn less benign in the outlook for major US growing areas at a time when corn plants are undergoing the heat-sensitive pollination process.

"The 6-10 day temperature forecast is showing above-average temperatures across all of the Corn Belt and northern Plains," said CHS Hedging's Derek Hullett.

The recovery in futures from lows stems from "forecasts that point to hot and relatively dry conditions through much of the Corn Belt", said Benson Quinn Commodities.

'Weather market alive and well'

At broker Country Futures, Darrell Holaday said that "the weather market is still alive and well", flagging that a "high pressure ridge is setting up in the southern Plains, and a heat dome will extend up through Kansas, Nebraska and parts of Iowa".

MDA said that "dryness continues to stress corn, soybeans, and spring wheat across the north western Midwest and northern Plains".

That said, "rains are expected to increase across the north eastern Plains and northern Midwest this week, which should improve moisture supplies and crop conditions".

'Heat still just as impressive'

Looking further ahead, said that the latest run of the GFS model "through day 10 has shifted the rains along the cold front July 20-22 further to the north.

"The rainfall amounts on the front are still as impressive as what was showing this morning with some areas receiving up to 6 inches of rain

"But the midday GFS model as you can see has these rains restricted to the northern 25% of Iowa, the southern third Minnesota the northern 25% of Illinois, and Indiana and southern Wisconsin."

"Most of central and downstate Iowa, Illinois see no rain over the next six days according to the midday GFS.

"The heat is still just as impressive," reaching 100 degrees Fahrenheit in Des Moines, Iowa late this week.

'On the defensive'

Futures would probably have fared much better, were it not for the substantial hedge fund net long in grains, after a record pace of buying in the latest week.

"Funds were significantly net long all of the grains as of last Tuesday," Mr Holaday said.

"They obviously dumped many of those in the last three days," with prices tumbling later last week, "but those numbers have kept the markets on the defensive".

'Well-supplied markets'

In fact, winter wheat, in which hedge funds have a penchant for going short, but are currently net long, eased by 0.9% to $5.06 a bushel in Chicago for September delivery, closing below their 20-day moving average for the first time in a month.

Richard Feltes at RJ O'Brien noted that winter wheat markets were "well supplied", although there are increasing worries over Australia's harvest, with increasing talk of sub-20m-tonne estimates, which revealed two weeks ago.

Spring wheat fared better, adding 1.2% to $7.67 a bushel in Minneapolis for September delivery, helped by ideas that weekly US Department of Agriculture crop condition data later will show a decline in ratings.

Furthermore, the contract was one in which managed money did not increase its net long in the latest week - cutting it in fact by 2,859 lots to 11,158 contracts, so eroding ideas of an "overhang".

And the worries over drought damage to crops spreading from the northern US to Canada are growing, with MDA cautioning that "dryness will continue to stress the crops across south western Saskatchewan and southern Alberta, and more rains will still be needAMNoned in eastern Saskatchewan and Manitoba to end moisture deficits".

'Mix favouring sugar'

Among New York-traded soft commodities, by contrast, hedge funds have built up a record net short position, including individual record net shorts in cocoa and raw sugar.

Still, if that might be tempted to provoke some ideas of a potential short-covering wave ahead, and bring upward pressure on prices, that has not emerged yet.

Raw sugar for October settled down 1.5% at 14.09 cents a pound,

Sucden Financial flagged continued disappointment at last week's "bearish" report from industry group Unica on the Brazilian Centre South sugar crush

"Last week's Unica report was bearish in that it showed the mix favouring sugar to a larger extent than had been forecast illustrating the producers rush to produce sugar out of the cane juice whilst weather conditions are dry."

(Centre South mills can turn cane into either sugar or ethanol, with price incentives playing a big role in deciding to which, and by how much.)

"There is little rain expected until the end of this month so this trend should continue in the short term."

'No damaging cold in sight'

September arabica coffee futures settled down a more modest or 0.1% at 133.55 cents per pound, after earlier hitting a six-week high of 135 cents a pound, as investors keep an eye on weather in Brazil's "winter", and whether there will be a deleterious frost.

"The weather in Brazil remains with temperatures above damaging levels," said Jack Scoville at Price Futures.

"Most forecasts suggest that the temperatures could average near-to-above normal much of this week after a couple of cooler nights early this week.

"There is no damaging cold in sight for now."

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