Spring wheat, the
flagship of the grains complex of late, encountered fierce selling towards the
And with that, the rest of the grains flotilla turned tail,
although losses proved largely relatively modest.
Indeed, it was some of the softs which steered far further
into negative territory, with raw sugar
for July settling down 1.2% at 13.62 cents a pound, the weakest finish for a spot
contract since February last year.
Besides an upgrade by Sucden to its forecast for the world
sugar production surplus in 2017-18, futures also continued to suffer from
stronger-than-expected output data for late May in Brazil's main Centre South cane-growing
"The season is still young and processing could yet catch up"
with earlier expectations for the full 2017-18, Commerzbank said, if flagging that
this looks less likely with weak sugar prices, which encourage mills to turn
cane into ethanol instead.
futures, which Agrimoney.com noted earlier staring into the abyss, slid into
it, closing down 1.4% at 73.50 cents a pound in New York for July delivery, the
weakest close for a spot contract in nearly four months.
The new crop December lot settled down 1.2% at 70.95 cents a
pound, its weakest in nearly five months.
'Trends are down'
The drop reflected the improved ideas over US supplies in
2017-18, as highlighted by Friday's US Department of Agriculture Wasde report,
which lifted the estimate for domestic stocks at the close of next season to a
While Judy Ganes-Chase did flag some cause to be less bearish
on cotton, these look longer term,
"The futures market is moving its focus from the current
tight situation to one with much more potential production in the US and
overseas for the coming production year," said Jack Scoville at Price Futures,
flagging too negative technical factors.
"Charts show that July trends are down and that December is
also in a down trend."
Signally, both the July and December contracts closed below
their 200-day moving averages for the first time in more than a year.
'Not enough to end
Back to grains, and the fall in Minneapolis spring wheat was far less marked, with
the July lot down 0.1% at $6.27 ½ a bushel.
Will this prove a pause in the rally, or a sign of a
One negative factors for prices is the extent of recent
rains in the drought-hit spring wheat belt, with precipitation higher than many
observers expected – in some areas at least.
MDA, flagging that "the rain event across the northern
Plains is coming to an end", noted that it "generally overperformed expectations
from late last week across South Dakota and south eastern North Dakota", where
some farms received 2 inches of rains.
That said, the precipitation "underperformed across northern
and western North Dakota and eastern Montana".
"This rainfall will certainly benefit the spring wheat, corn, and soybean crops, but is still
not enough to end the drought in these areas.
"In eastern Montana and western North Dakota, where rains
underperformed, little improvement occurred, maintaining severe stress on the
spring wheat crop."
Indeed, Tregg Cronin at North Dakota-based Halo Commodity
Company underlined that "much of this spring wheat in South Dakota and southern
North Dakota is too far along to be helped all that much by rainfall.
"Yield potential was determined weeks ago, and at this point
rain might help heads fill, but a full revival of yield potential is not
"Production estimates are being slashed and carryout levels
for 17/18 are pointing toward some dangerously low levels."
'Tightest in the 20
According to CHS Hedging, many forecasters are "starting to
take their yield ideas down below 40 bushels per acre now, and most feel rains
now may be too late to help the yield and total production".
The average yield of the past three years is 47 bushels per
acre or so.
"Traders will be adjusting their HRS balance sheets
accordingly and many now talk of carryout sub-100m bushels.
"This would be the tightest in the past 20 years. So concern
for protein wheat needs is real."
Prospects are hardly being helped by an outlook for "mostly dry weather... over the next 10 days in the northern Plains, which will allow soil moisture to decline again", according to MDA, although there are expected to be some showers on Saturday.
Canadian crop faring
Still, whether end users actually pay up for this is one
factor, which will take some time to become clear.
And there are ideas that Canada's spring wheat crop may be
in better shape than had been thought.
"I expect a large portion of the Canadian spring wheat crop
is in good condition despite the drier bias of late," said Benson Quinn Commodities.
Furthermore, spring wheat felt a weight from Chicago winter
wheat, which has been relying on Minneapolis for support against harvest
pressure on values,
But, with spring wheat sagging, Chicago's July contract
dropped 0.4% to $4.43 a bushel.