Estimating the Russian wheat
harvest is getting a bit like a round of poker in an old Western movie.
After the US Department of Agriculture on Thursday lifted its
forecast for the crop by 5.5m tonnes to 77.5m tonnes, already a record by a
distance, analysis group SovEcon early on Friday raised its estimate to 77.9m
"The main reasons for the upgrade are record crop
yields, good conditions of spring grains and a hefty level of moisture in the
soil," the group said.
Rival Ikar then raised the stakes still further, to 77m-80m
tonnes, from a previous figure of 74m-77m tonnes.
While there was a bar-room bust up over claims of overstepping
the market, the scuffle was not among wheat investors.
(It is in corn
and soybean markets that traders
have suspicions over data.)
The reaction was merely to see wheat futures lose their
early resilience and stand 1.1% lower at $4.35 ½ a bushel in late deals in Chicago,
for September delivery, with the contract hitting its lowest in three months.
Richard Feltes at RJ O'Brien said that the market is "still
reacting to negative world wheat supply and demand yesterday", in the USDA's
Wasde report which, largely thanks to the Russian upgrade, saw the world wheat
stocks estimate for the close of 2017-18 hiked by 4.1m tonnes to 264.69m
Spring wheat slumps
wheat fared even worse, tumbling 3.5% to $6.90 ¾ a bushel for the
best-traded December contract, which fell below its 50-day moving average for
the first time in nearly three months.
But then, the Wasde made a smaller-than-expected downgrade
to the forecast for the US spring wheat crop, with the USDA also, for what it's
worth, making positive comments on spring wheat harvests in Russia and
Meanwhile, many reports on early results from the northern
Plains US spring wheat harvest have come in not so bad on yield as well as
In Europe, Paris soft milling wheat futures for December
stood down 1.1% at E165.50 a tonne in late deals, earlier setting a fresh
contract low of E165.00 a tonne.
Back in Chicago, corn
futures fared better, up 0.6% at $3.73 ½ a bushel for December delivery,
despite the USDA's smaller-than-expected downgrade in the Wasde to the estimate
for the domestic corn yield this year.
Some investors were pragmatic over the data.
"USDA gave us a plate full of numbers yesterday that were
very surprising and bearish," said CHS Hedging.
"No matter whether we want to believe them or not, this is
what the plate full offers us for now."
However, Benson Quinn Commodities flagged that "most in the
trade aren't on board with the corn estimates".
RJ O'Brien Richard Feltes said that "scepticism abounds over
USDA's optimistic yield forecasts", if sounding a somewhat bearish tone on corn
prices nonetheless, saying that the Wasde estimates "will top off rallies at
lower level while pushing harvest lows lower".
Where there is "no need" for the December contract to match
its December 2016 peer and fall as far as $3.15 a bushel, "a $3.30-3.40 low is
now entirely possible" when weight from harvest supplies hits the market.
too, adding 0.3% to $9.43 a bushel for November delivery, amid doubts too over
the USDA's surprise upgrade to the forecast for the US yield this year.
"The increase in the bean yield really has the trade
scratching their heads," said Benson Quinn Commodities.
CHS Hedging said that "largely, the trade believes that the
numbers posted by the USDA yesterday are at the top end of the range and will
be lower in subsequent reports.
"Weather will still be the key factor in price movement in
The oilseeds complex is also continuing to get support from rapeseed/canola, which has been firm on an Oil World warning of a potentially "explosive situation" in terms of
tight supplies after dryness setbacks to Australian and Canadian crops.
Rapeseed for November added 0.9% to E371.75 a tonne in
Among soft commodities, cotton
gained too in New York, by 0.5% to 68.48 cents a pound for December delivery, amid
doubts over a hike to forecasts for US stocks of the fibre too in 2017-18.
"We staunchly disagree with the USDA's export and carryout
projections," said Louis Rose at Rose Commodity Group, who noted that US weekly
export data also out on Thursday were "not terrible".
"Total net sales against 2017-18 were approximately 76,000
running bales. Shipments were nearly 120,000 running bales," Mr Rose said.
"The US is already 44% committed against the USDA's revised
export target for 2017-18," with the season less than two weeks old.
And raw sugar
revived to stand up 0.9% at 13.36 cents a pound for October delivery, after a caution
by industry group Unica that dryness speeding the Centre South cane harvests
posed a threat to yields ahead.
Furthermore, the real recovered 0.6% against the dollar,
boosting the value of assets, such as coffee and sugar, in which Brazil is a