Pity the poor wheat farmer in the US hard red winter wheat
Having prayed for rains for months to resolve dryness which
affected nigh on 100% of Kansas, the top US wheat growing state, it arrives.
But the precipitation is not only too late in many cases to
restore crops. It may actually damage them, with moisture potentially meaning
sprouting and quality downgrades for ripe crop, besides slowing harvesting.
'A legitimate concern'
The impact on futures was their best day in some two months
on US markets, especially in hard red winter wheat itself, traded in Kansas
City, which soared 3.2% to $7.37 a bushel for July delivery, recovering its
10-day moving average for the first time in nearly a month.
"There is significant buying in the wheat (and to some
extent the corn) on concerns of too much rain," said Darrell Holaday at Country
"This is a legitimate concern in the hard red winter wheat area
as harvest in Kansas would have likely started early next week, but that is not
going to happen with the recent rain and the rain projections for the next 7-10
"The prospect for doing any cutting is very low."
CHS Hedging said: "Some in the trade are concerned about hard
red winter wheat quality after recent heavy rains in parts of Kansas."
'Slower than normal'
As a measure of the progress of combines, US Wheat
Associates said that "cutting continues to be slower than normal due to
isolated rain showers and high humidity in many areas, even though temperatures
were at, or close to, 100 degrees Fahrenheit".
The harvest "has progressed as far north as the
Oklahoma/Kansas border in northwest Oklahoma".
Yields so far have been in the range of 5-25 bushels per
acre, 0.3-1.7 tonnes per hectare, which is hardly a strong crop, although US
Wheat Associates, which promotes US exports of the grain, said that early test
weights, one quality measure, were "encouraging", coming in at 59.1 pounds a bushel
(77.8 kilogrammes per hectolitre).
"Generally, test weights have increased as harvest has moved
northward," the group said, adding that "preliminary results confirm reports of
very high protein", of 14%.
Still, when wheat futures were already well oversold, after
their longest losing streak in Chicago in 20 years ended only on Wednesday, the
bounce was intensified there too.
Chicago soft red winter wheat, a lower protein class, for
July gained 2.1% to $6.18 ¼ a bushel.
Minneapolis hard red spring wheat for July, another source
of higher protein grain for millers, gained 2.7% to $7.09 ¼ a bushel.
In Europe, Paris wheat for November bounced 1.0% to E193.00
a tonne, also regaining its 10-day moving average, while the London November
contract added 0.4% to £143.10 a tonne.
'Basis bids firmed up'
The rise was reflected in corn too, encouraging a wave of covering of short positions which
have been a good bet for the past month, even though the supply and demand
reasons for lifting prices appeared sparse.
"Ideal weather outlooks and great initial condition ratings
have about pulled the rug out from the corn bulls," CHS Hedging said early in the
However, one fundamental signal in favour of higher prices
was a firmer basis in the US cash market, likely a sign of demand.
"We saw some Gulf basis bids firm up a little overnight and
that has sparked some interest in buying futures as it indicated some export
interest, which has been lacking recently," Mr Holaday said.
There is also talk that a cargo of US corn was on Thursday
unloaded at a Chinese port, potentially signalling a waning in the crisis over MIR
162, a Syngenta genetically modified variety grown in the US but as yet not
cleared by Beijing.
And technical help kicked with, besides a correction of
oversold conditions, the December contract retaking the $4.50 a bushel mark,
whose loss in the last session had heralded an accelerated sell-off.
This time, the contract soared 2.3% to end at $4.57 ¾ a bushel,
while the old crop July lot added 2.2% to end at $4.59 a bushel.
'Weather continues to
be a negative'
It was soybeans, bulls' greatest friend for most of the last
month, which underperformed this time, closing down 0.2% at $14.57 a bushel for
July delivery, its weakest finish in a month, feeling the weight of a cocktail
of negative snippets.
"Growing weather for beans looks very good for the next two-week
period," CHS Hedging said.
And this ahead of official data on Monday which will show
the first condition rating of the season for soybeans.
"Weather continues to be a negative" for prices, Sterling
Smith at Citigroup said, foreseeing a "great condition number" on Monday.
Furthermore, prices of soybeans eased on China's Dalian
exchange overnight while, elsewhere in the oilseeds complex, palm oil dropped in Kuala Lumpur too,
if my a modest 0.1% to 2,417 ringgit a tonne.
And, in rapeseed,
ODA raised its forecast for the EU crop by 450,000 tonnes to 21.8m tonnes, matching
a forecast from rival Strategie Grains earlier in the week, putting the French
crop at 5.2m tonnes, up from 4.4m tonnes last year.
Separately, Sparks Polish raised the forecast for the Polish
rapseed crop by 200,000 tonnes to 2.7m tonnes.
In fact, futures in rapeseed itself for August dropped 0.4%
to E3244.25 a tonne in Paris, the lowest finish for a spot contract in 10
In Chicago, soybeans for November did rise, by 0.7% to $12.18
¾ a bushel, but this was fuelled by a technical factor, and the unwinding of
spreads against the old crop contracts.
"There is still a lot of liquidation in the July soybean
contract as many of the long July-short November soybean trades look for a
chance to get out," Mr Holaday said.
Bullish coffee talk
Among soft commodities, arabica
coffee, which like wheat has been under the cosh for the last month, like
wheat enjoyed a strong recovery, bouncing 1.4% to 171.60 cents a pound for July
The revival was fuelled by a statement by Brazil's CNC
producers' group that it was standing by its forecast for a Brazilian coffee
crop of 40.1m-43.3m bags, contrasting with a recent round of more upbeat
Rains had been meagre and done little to improve prospects
for production in Brazil's coffee belt, hit by drought earlier this year, and,
if they ramped up, could even prove a setback in the harvest period, hampering
the gathering and drying of beans.
Early harvest results had also shown low yields and small beans,
the group added.
Weakness on its way?
Raw sugar gained,
too, adding 0.5% to 16.92 cents a pound for July, helped by a touch of bargain
hunting, and ideas that some cane growing areas require more rain, which
tallies with the CNC observations above.
"The weather is still too dry" in Brazil, Jack Scoville at Price
Furthermore, the International Sugar Organization gave a bit more detail on its forecast of unimpressive Brazilian sugar output and exports this season and next.
Still, the failure of the contract to regain the 17.00
cents-a-pound mark could prove a setback.
"The sugar bulls need the market back above 17 cents a pound
in the short term and so far we have seen strong resistance," Sucden Financial said
earlier in the day.
"Should we close below 17 cents a pound tonight then it
seems likely we will test 16.50 cents a pound next week."