The, modestly, positive tone around in early deals was there
at the close too, as traders proved reluctant to take values too far in any direction
ahead of key data ahead.
Thursday will bring a slew of ag commodity statistics, starting
off with monthly data on Malaysian palm oil production and stocks, followed by the
monthly briefing on Brazilian crops from Conab.
But the main event will be the US Department of Agriculture's
monthly Wasde report on world crop supply and demand, with particular interest
in revised estimates for US corn and soybean production.
The central forecast is for a cut of 4.5 bushels per acre to
166.2 bushels per acre in the USDA estimate for the domestic corn yield, and a 0.5 bushels-per-acre
reduction to 47.5 bushels per acre in the forecast for the soybean figure.
Forecasts for US 2017-18 corn data in Wasde and (existing figure)
Harvested area: 83.418m acres, (83.496m acres)
Range of estimates: 83.1m-83.5m acres
Yield: 166.2 bushels per acre, (170.7 bpa)
Range of estimates: 162.8-168.5 bpa
Production: 13.855bn bushels, (14.255bn bushels)
Range of estimates: 13.59bn-14.07bn bushels
Year-end stocks: 2.003bn bushels, (2.325bn bushels)
Range of estimates: 1.642bn-2.375bn bushels
Year-end stocks, 2016-17: 2.386bn bushels, (2.37bn bushels)
Range of estimates: 2.34bn-2.73bn bushels
Sources: USDA, Reuters
The cuts reflect ideas of crop setbacks from dryness last
month, particularly in the western Corn Belt, where rains are still needed in some
areas, notably in parts of key producing state Iowa.
But with much uncertainty around – the range of estimate for
the corn yield, for instance, is 162.8-168.5 bushels per acre – many investors have
been leery over sticking their neck out too far.
Indeed, open interest, ie the number of live contracts, was
down nearly 25,000 lots in Chicago corn futures in the last session – after falls
of 24,600 on Monday and 20,500 lots on Friday - in what was taken as evidence
of investors taking profits and heading for the sidelines.
"Open interest changes yesterday were certainly in keeping
with traders exiting positions ahead of the all-important Wasde tomorrow," said
Tregg Cronin at Halo Commodity Company.
'Will continue to
One factor which mitigated towards slightly higher prices on
Wednesday was a fresh round of Midwest weather worries, and a less benign
outlook than that earlier in the month which prompted a sharp removal of risk
Sure, "notable rains across the central Plains, Delta, and
far north western Midwest through the upcoming weekend should continue to
improve moisture there, which will favour late growth of corn and soybeans,"
"However, notable dryness will continue to stress crops in
central and western Iowa, north eastern Missouri, and south western Illinois."
Richard Feltes at RJ O'Brien said that the weather outlook "leans
positive" for prices, with "only 30%, five-day Midwest precipitation coverage,
spawning the view that US corn and soybean yield is eroding".
Corn, soybean prices
Still, trading volumes were soft, and price movement limited,
with soybean futures for November indeed closing flat at $9.73 ¼ a bushel.
Forecasts for US 2017-18 soy data in Wasde and (existing figure)
Harvested area: 88.669m acres, (88.731m acres)
Range of estimates: 83.3m-88.731m acres
Yield: 47.5 bushels per acre, (48.0 bpa)
Range of estimates: 46.9-48.0 bpa
Production: 4.212bn bushels, (4.26bn bushels)
Range of estimates: 4.165bn-4.307bn bushels
Year-end stocks: 424m bushels, (460m bushels)
Range of estimates: 424m-460m bushels
Year-end stocks, 2016-17: 401m bushels, (410m bushels)
Range of estimates: 370m-420m bushels
Sources: USDA, Reuters
As an extra disincentive to a sharp move higher, the USDA
revealed the cancellations of 130,000 tonnes in soybean export orders for
2016-17 to an "unknown" import buyer.
Corn futures for December fared better, adding 0.5% to $3.86
¼ a bushel, at the end of a trading day constrained at the top by the 20-day
moving average, and the bottom by the 10-day.
Demand news on the grain was better, with weekly US ethanol
production last week up 10,000 barrels a day to 1.01m barrels a day.
"Business on domestic corn usage remains good, but any new
export business is difficult," said Benson Quinn Commodities.
meanwhile, for September gained 0.4% to $4.59 ½ a bushel in Chicago, continuing
to tread a part just below the 100-day and 200-day moving averages, at some $4.66-4.67
a bushel, but sterring clear of the $4.50 mark too.
On the downside (arguably) for values were decent quality results
from the French harvest, released late on Tuesday, and wet weather on the way
for the southern Plains mid-month.
"If they verify, these rains would go a long way in recharging
soil moisture ahead of fall wheat planting across almost the entire region,
including the panhandle areas of Oklahoma and Texas," said CHS Hedging.
But the results from the Russian harvest, while strong in
volume terms, are not so in quality terms, with consultancy Ikar reporting that
Russian protein spreads are pushing to record highs, with 11.5% protein wheat
trading at a $15-a-tonne discount to 12.5% protein wheat.
Forecasts for US 2017-18 wheat output in Wasde, (existing figure)
Hard red winter: 756m bushels, (758m bushels)
Range of estimates: 737m-775m bushels
Soft red winter: 307m bushels, (306m bushels)
Range of estimates: 300m-311m bushels
White winter: 215m bushels, (216m bushels)
Range of estimates: 205m-224m bushels
All winter: 1.278bn bushels, (1.279bn bushels)
Range of estimates: 1.258bn-1.293bn bushels
Other spring: 393m bushels, (423m bushels)
Range of estimates: 350m-440m bushels
Durum: 56m bushels, (58m bushels)
Range of estimates: 50m-56m bushels
All wheat: 1.711bn bushels, (1.760bn bushels)
Range of estimates: 1.550bn-1.784bn bushels
Sources: USDA, Reuters
"This is the equivalent of $0.40 [per bushel] per point [in
terms of protein percentage], which is in keeping with spreads witnessed in the
US," said Halo Commodity Company's Tregg Cronin.
In fact, strong harvests often come in with depressed
protein levels, with high yields seen as "diluting" protein levels.
Furthermore, quality worries continue to grow over German,
and now UK, harvests - but over rain delays which threaten harvesting and leave
crops out to deteriorate.
While the UK is typically better known for feed wheat, the
development of higher-yielding milling varieties has spurred farmers to try for
quality as well as quantity.
The rainfall is causing "serious concerns for UK wheat
quality", CRM AgriCommodities said.
"Relentless rains continue to fall on ripe crops across much
of the UK as harvest stalls once again.
"Quality, as a result, is deteriorating and buyers are
starting to increase the premium which they are paying pay for higher spec
London feed wheat, meanwhile, for November eased 0.7% to £142.75
a tonne, weighted byt eh prospect of extra feed supplies.
Among soft commodities, New York arabica coffee for September settled down 0.1% at 142.65 cents per
pound, despite weak Brazilian export data, with some investors opting to take
profits on a rally of approaching 25% from a mid-June low.
Furthermore, the real weakened 0.8% against the dollar,
which found firmness as a "safe haven" at a time when cage rattling by US and
North Korea is unnerving broader markets.
A softer real undermines the value in dollar terms of assets
in which Brazil is a major force.
But New York raw
sugar for October settled down 1% at 13.64 cents per pound, dropping with the
real, and worries that values have not been low enough for long enough yet to encourage
Brazilian mills to champion making ethanol from sugar, and depress output of
Indeed, Sucden Financial flagged a shortfall in "positive
news for the sugar bulls at present from within the sugar sphere, with reports
of spectacular levels" of cane harvesting in Brazil, and "market chat that 50%
plus of sugar for October from Brazil is still to be priced".