The wheat complex
recovered from early weakness on Monday.
However, this time, the source of inspiration for bulls was
not drought-pressed US spring wheat,
futures in which actually ended lower, by 0.7% to $6.38 ½ a bushel for July
delivery, after earlier setting a two-year high of $6.49 ½ a bushel.
Not, it has to be said, that the weather outlook is fantastic
for the northern US Plains spring wheat belt, with MDA noting that weather
models for the region have turned drier in the six-to-10 day horizon.
"Drier weather in the northern Plains would maintain
moisture shortages and stress on spring wheat," the weather service said.
But investors were cautious over spring wheat ahead of US
Department of Agriculture weekly crop ratings due later on Monday, which are
expected to show an improvement in the US crop by 3 points week on week to a (still
low) 48% rated "good" or "excellent".
'Stressing wheat growth'
The prime mover this time in the wheat complex, to judge by broker
comment, was actually Paris wheat, which closed up 2.3% at E177.50 a tonne for
September delivery, the highest finish for a spot contract for 18 months.
The better-traded December contract added 2.0% to E180.75 a
tonne, a 10-month closing high, amid growing worries over dryness in the
European Union too.
"The wheat complex is trading to new highs for the move on
spillover from second gap higher trade in French milling wheat due to hot and
dry forecasts for western Europe," said Benson Quinn Commodities.
MDA said that "hot and dry weather will continue across
western Europe this week, stressing wheat
growth in north western Europe and corn
and sunflowers in south western
Corn vs wheat
The strength in Paris wheat futures "tells me that the EU
wheat crop is leading the gains today," said Mike Zuzolo at Global Commodity
Analytics, who was earlier asking whether wheat could repeat its rally of late
And strength in wheat "is likely igniting further long wheat
spreading against [short positions in] corn".
Certainly, while Chicago wheat settled modestly higher on
Monday, by 0.4% to $4.67 a bushel for July delivery, corn could find no such
strength, ending down 2.3% at $3.75 ¼ a bushel for July.
The corn-wheat spread has now soared some 60% in a week July
The selling in corn came despite another week of decent US
export data, at 1.22m tonnes as measured by cargo inspections, up from 1.07m
tonnes the previous week.
However, as CHS Hedging noted, "corn is trading down on prospects
of good weather and improved crop conditions".
"US Midwest corn and soybean belt weather will be good this
week," said Terry Reilly at Futures International.
At RJ O'Brien, Richard Feltes said that "weather leans
negative [for prices], with a cooler tone to US temperatures and two-thirds of
the Midwest slated for rains next week".
Commodities out of
Meanwhile, data late on Friday showing that hedge funds had slashed
their net shot in corn futures and options by 120,000 lots in the week to last
Tuesday was viewed as bearish too, in cutting the potential for price support
from this dynamic.
Furthermore, the dollar
provided a gentle headwind to commodity markets in general by gaining 0.5%
against a basket of currencies, making dollar-denominated assets that much less
Indeed, the CRB
commodities index dropped 1.0% to a 14-month closing low, little helped by a return
in Brent crude back below $47 a
Oil price weakness is also a particular negative for ags,
like corn, used in making biofuels.
too against the likes of a firmer dollar and decent US Midwest weather prospects,
although less so, not having gained so much ground earlier in the month on the
US spring wheat woes.
Soybeans for July ended 0.1% lower at $9.37 ¾ a bushel.
US soybean for exports last week fell to 275,461 tonnes, from
511,718 tonnes the week before.
Still, that was "within trade expectations and still in the
acceptable range of exports needed to reach USDA export predictions for the 2016-17
marketing year," said CHS Hedging.
Dollar strength, and general malaise over commodities, was
seen as a factor in soft commodity markets too, helping put an end to early
resilience in New York cotton, which
for December ended down 0.5% at 69.04 cents a pound, is weakest finish of 2017.
The fibre is being weighed by strong prospects for the US
harvest this year although at least, from a bull's perspective, the December
lot managed to avoid setting a fresh 2017 intraday low, not reaching the 68.58
cents a pound reached in the last session.
was seen as copping more of the anti-commodities feeling, plunging 4.6% to settle
at $1,934 a tonne in New York for September, with bears encouraged by the failure
of the contract to hold above a clutch of moving averages, including the 50-day
and 100-day lines.
Arabica coffee managed a rise of 0.5% to126.60 cents a
pound, after the USDA forecast a drop in world coffee stocks at the close of
2017-18 to a six-year low.