PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 18:25 GMT, Monday, 9th Oct 2017, by Mike Verdin
PM markets: soyoil stands out for ag bulls - wheat for bears

Headway was hard to come by on Monday, as investors fretted on what was to come from the plethora of data due this week.

And they did so without recourse to the distraction of Monday's typical US Department of Agriculture statistics on US crop exports for last week.

This data was, thanks to a government holiday (Columbus Day) delayed until Tuesday, when it will spar for investor attention with Malaysian palm oil data for September and the first official forecasts for Brazil's 2017-18 harvests of the likes of corn and soybeans.

(The UN Food and Agriculture agency is coming out with a big ag briefing on Tuesday too.)

'Smaller long position'

Soyoil was one of the few ags to post decent gains, adding 0.8% in afternoon deals in Chicago to stand at 33.21 cents a pound for December delivery, back above its 10-day moving average.

And that was largely down to some statistics late on Friday, showing that hedge funds had slashed their net long position in the vegetable oil by the largest amount on record.

The data "did indicate a smaller long position than estimated for soyoil", said Futures international, with a smaller-than-expected long position meaning less unfulfilled selling pressure on the market than had been thought.

It was also a help to soyoil that the US biofuels industry is fighting back against Environmental Protection Agency plans to weaken mandated use of biodiesel (which is made from vegetable oils).

'Dryness issues in Brazil'

Soyoil's firmness in turned helped November soybean futures add 0.2% to $9.73 a bushel, although short of the 200-day moving average, at a little under $9.76 a bushel which the contract temporarily pierced earlier in the day.

Also helpful was the weather, with dryness in Brazil retaining some alarm, even if some forecasts predict rain relief.

Benson Quinn Commodities said that "dry conditions that are expected through much of Brazil for the next couple of weeks offered support" to prices, particularly earlier in the session.

Futures International noted "continued talk of dryness issues in Brazil, as there is little rain forecast for the next several days, and a slow harvest in the US" prompted by too much wetness there.

Indeed, the Midwest forecast has turned wetter, said MDA, adding that "continued active showers through mid-week will maintain slow harvesting", although adding that "fieldwork should improve later in the week".

 

At Chicago broker RJ O'Brien, Richard Feltes said that weather "leans positive" for prices, "with a moisture shortage in central Brazil, excess moisture in western Argentina, and excess autumn moisture across wide swathe of the western and northern US Midwest".

Still, there are negatives from the harvest slowdown too, with Jerry Gidel at Price Futures saying that harvest, particularly in the western Corn Belt, "needs to pick up quickly or this year's US export activity could be delayed and possibly reduced".

Already, exports have suffered some logistical dislocation from lower river water levels, which have hampered barge traffic from the Corn Belt to port, and have been evident in eye-watering freight rates, although these have come off a bit now.

Corn futures ease

Some of the factors supporting soybean futures apply to corn too.

But corn futures underperformed a touch, easing 0.1% to $3.49 a bushel and, crucially, dropping below the psychologically important $3.50-a-bushel mark.

Like soybeans, it has too the prospect of a small upgrade later in the week to the US Department of Agriculture forecast for the US harvest this year.

At least, so the trade believes, seeing a yield figure of 170.1 bushels per acre, up 0.2 bushels per acre from the current forecast.

For soybeans, traders are expecting a 0.1 bushels-per-acre increase to 50.0 bushels per acre

Signally, corn lacks the support from a soyoil..

'More beneficial rains'

Furthermore, rival grain wheat hardly helped corn, in tanking 1.5% to $4.37 a bushel.

The rain in the Midwest, while a hang-up for row crops sowings and indeed winter wheat seedings, is a net plus for these plantings, in providing much-needed moisture.

In Australia, rains are helping the drought-pressed wheat crop too.

"Australia's wheat areas are forecast to see more beneficial rains this week," CHS Hedging said.

Still, there were some positives around for the wheat market, in terms of demand, with Ethiopia in the market for 400,000 tonnes.

There is some nascent, but growing, concern about dryness in the European Union too.

'Very good production'

Among soft commodities, New York cotton futures for December stood own 0.5% at 68.49 cents a pond, undermined by waning concerns of crop damage from Hurricane Nate.

In fact, "although some fields of cotton within Alabama, Florida and Georgia did get wet, reports indicate that damage was minimal," said Louis Rose at Rose Commodity Group.

And New York cocoa for December plunged 3.5% to $2,012 a tonne, in a decline fuelled by technical factors, and with some note taken of a further reduction in the hedge fund net short in the bean to below 26,000 lots for the first time in nearly six months creating fresh scope for selling.

At Price Futures, Jack Scoville reminded that "world production ideas remain high.

"Harvest reports show good to very good production will be seen this year in West Africa."

'It is dry again'

However, arabica coffee futures for December gained 0.6% to 130.80 cents a pound, despite weakness in the real, which dropped 0.9% against the dollar, so making Brazilian assets less expensive in dollar terms.

While Brazilian growing areas have received some rains to boost ideas of a strong 2018 harvest, "it is dry again now and there are no real forecasts for a wet period for the next week or so", Mr Scoville said.

"Most areas will need to see some consistent rainfall now to keep the potential for a big crop alive."

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