Spring wheat futures
returned to winning ways, with corn
and soybean futures trading higher
too, as weather forecasts turned drier for major US growing areas, and with worries
over crops in other countries too.
Minneapolis-traded spring wheat, a particular focus of grain
market attention since drought began last month to send US crop condition
tumbling, stood up 1.1% at $7.74 ¼ a bushel in early afternoon deals.
That represented a marked turnaround from early losses, besides
the slump in the last session, the worst for spring wheat in six years as funds
took profits on long positions, and farmers sold into the surge in prices over
the past month or so.
'Look for drought
conditions to expand'
The recovery came amid fresh worries for the weather in the
northern US Plains spring wheat belt, and into Canada, following temperatures
as high as 105 degrees Fahrenheit (41 degrees Celsius) in the eastern Dakotas,
and with more heat on its way.
"The spring wheat-growing areas of the northern Plains are
expected to remain in an extended drought," said CHS Hedging, adding that this
could mean a further decline in crop ratings when the US Department of Agriculture
on Monday unveils its weekly crop progress report.
According to Terry Reilly at Futures International, "northern
Plains weather conditions will be mostly dry in the western half into the
middle of next week", and with eastern areas seeing only modest rains.
"Look for drought conditions to expand by this time next
week across the Northern Great Plains and parts of the Canadian Prairies. "
Societe Generale said that the "US spring wheat crop
continues to shrink and the window of recovery is closing by the day.
"The US spring wheat crop is already aborting heads and the
number of kernels per head is also substantially below last year's level."
The bank stuck with an estimate for the US spring wheat
yield (excluding durum) of 35 bushels per acre "with downside potential",
compared with the 46.2 bushels per acre farmers achieved last year.
As an extra help for the wheat complex, SocGen analyst
Rajesh Singla noted that the "weather outlook for Canada, Argentina and Australia
is also not that favourable", with Agrimoney.com reporting ideas that the Australian
crop may fall below 20m tonnes for the first time in a decade.
That after last year's record 35m-tonne crop.
'Likely to remain
"Supply of high protein wheat is likely to remain tight across
the world," Mr Singla said, forecasting a drop in world wheat inventories for
the first time in five years.
The world wheat stocks-to-use ratio, excluding China, will
fall to 20.7%, "the lowest level since 2007-08", when supplies were deemed
tight enough to send prices to highs which remain the most expensive ever.
In fact, winter wheat markets gained buoyancy from
Minneapolis, but still felt pressure from ideas of relatively buoyant supplies.
Chicago wheat for September eased by 0.1% to $5.38 ½ a
bushel, while Kansas City hard red winter wheat for September eased 0.1% to $5.46
US export sales for wheat for last week came in OK but not
fantastic at 375,300 tonnes, towards the lower end of the range of market estimates.
'An increasing concern'
Corn and soybean markets fared better, with the
more challenging crop weather forecasts not limited to the northern Plains.
"Dryness is also
an increasing concern across portions of the Corn Belt, particularly in
Nebraska, southern and western Iowa, and central Illinois," MDA said.
"Showers and storms are expected across the north central
and eastern Midwest next week, but mostly dry weather should prevail in the
south western Midwest and the Plains," the weather service said, adding that the
"forecast has also trended hotter across the Midwest in the 6-15 day period".
"Corn trade is higher today on growing concerns over a hot
and dry extended weather forecast," said CHS Hedging.
Corn, soy price gains
Furthermore, Tregg Cronin at Halo Commodity Company noted
that the Midwest was not the only game in town even for row crop investors.
"A lot of the extra acres being planted to corn and soybeans
on the fringe are located in the Dakotas and it is difficult to make the case
those crops will be getting larger over the next two weeks," he said.
Corn futures for September added 1.0% to $3.94 ¼ a bushel despite
weak US export sales of the grain of 140,300 tonnes last week for old crop, the
lowest figure for the season.
And soybean futures for August added 1.3% to $9.98 ½ a
bushel, getting a little extra help from observations that funds were record
net short in the oilseeds as of last week – positions now looking a little
sorry, and likely to encourage short-covering and upward pressure on prices.
US soybean export sales were also, at 365,500 tonnes for
2016-17, deemed more encouraging coming in towards the upper end of market
Still, forward sales for next season remain poor, at 73.200
tonnes last week.
The gains just about spread to cotton too, which for
December stood up 0.1% at 69.90 cents a pound, supported too by some decent US export
data, at 194,200 running bales (upland cotton only) for 2016-17, and 297,200 running
bales for next season, which starts next month.
The figure for 2016-17 "remained well ahead of the pace
required to hit the USDA's export target" for the season, said Louis Rose at
Rose Commodity Group, adding that the new crop performance was "extremely
"We think that today's report is supportive-to-bullish for December
futures," Mr Rose added.
'Demand has not been
Also in New York, raw
sugar futures for October stood 1.5% higher at 14.13 cents a pound in late
deals, despite ideas that prices had not been low enough for long enough to
resolve sufficiently supply improvements, whether through boosting demand or deterring
"The fundamental outlook is still bearish both because
demand has not been forthcoming for raw sugar in volumes sufficient to move the
price, and because the market never remotely tested the ethanol parity for long
enough," said Sucden Financial.
"Sugar is still more advantageous to produce" for Brazilian
mills, which can turn cane into either sweetener or ethanol, "even if that
advantage has been dramatically eroded in the past few months".
Not that bad?'
Still, there were some jitters ahead of weekly data on hedge
fund positions later, which could show a record net short in futures and
options in raw sugar – provoking ideas that further speculative selling could
be curtailed, and that some short-covering could be on the way, boosting
"Some in the market believe that this [huge net short] is 'not
that bad', as a long spell of selling by hedge funds and an unusual net short position
in sugar futures and options potentially will go into reverse," said the
International Sugar Organization.
"It may be noted, however, that a net short position per se
is not that unusual," the ISO added.
"For example, in the recent past funds were net short for 14
months from July 2014 to September 2015.
"Now funds have been net short for nine weeks only."