As if corn bulls didn't have enough going against them, with
China's suspension of imports of US distillers' grains, Brazil chipped in with another
reason to sell.
Markets were already struggling to follow through on the
sanguine attitude of Joseph Glauber, the US Department of Agriculture chief economist,
who said that, with China ultimately having a structural need for grain
imports, the distillers' grains (DDGs) hiccup would prove "temporary".
But how temporary?
"The effects of China's announcement to stop imports of DDGs
are still lingering over the head of the corn market today," CHS Hedging said.
Chinese authorities have apparently decided, as of June 6,
to suspend purchases of DDGs (a byproduct of corn ethanol manufacture used in
animal feed) on grounds of potential contamination with MIR 162, a GM corn
variety permitted in the US but not in China.
"China's move to suspend US DDG imports will result in
better availability of DDGs for domestic users," Benson Quinn Commodities said,
adding that "the move indicates the China simply doesn't have a need for
imports right now".
And this before Brazil's Conab crop bureau weighed in by
raising its forecast for the domestic corn harvest by 2.70m tonnes to 77.89m
The upgrade reflected in the main improved hopes for the second,
or safrinha, harvest, pegged at 45.66m tonnes, up from an estimate of 43.74m tonnes
The small downgrade, by 1 point to 75%, in the proportion of
the US corn crop rated "good" or "excellent" in US Department of Agriculture data
overnight was a small bullish token in relation to other forces.
Corn for July was 1.1% lower at $4.46 ¼ a bushel with a
little over an hour of trading to go, with the new crop December lot down 1.1%
at $4.45 ¼ a bushel.
Wheat fared even
worse, in part too thanks to a Conab upgrade.
Sure, the bureau raised by a relatively modest 500,000
tonnes, to 7.37m tonnes, its forecast for the domestic wheat crop this year.
But that is a sensitive point for US prices, given that strong
Brazilian imports proved a major support to US wheat trade in 2013-14.
OK, Ikar hacked 2.5m tonnes from its forecast for the
Russian grains harvest, reflecting in part a cut to hopes for wheat.
However, at 93.5m tonnes, the Russian harvest is hardly
skimpy, and small enough to take the Black Sea powerhouse out of export
'Little reason to
Technically, there is some reason to hope for support.
"Leveraging the oversold nature of the market, wheat markets
have had a tendency to recovery late in the session," Benson Quinn Commodities
"But they aren't attracting any follow-through buying," with
stable, if poor, ratings on the winter wheat crop and a sizeable 71% of spring
wheat termed good or excellent, up from 62% a year ago, hardly likely to
"Spring wheat crop ratings were exceptional and give little
reason to aggressively buy this market," the broker said.
As an extra reason to sell, the USDA is expected on
Wednesday in its monthly Wasde crop report to raise its forecast for wheat
stocks at the close of both 2013-14 and the newly started 2014-15.
Wheat for July stood 2.0% lower at $6.00 ½ a bushel in
Chicago, having earlier hit $5.99 ¼ a bushel, the lowest for a spot contract
Once again, it was left to soybeans to carry the banner for bulls, rising by 0.6% to $14.65 ¼ a
bushel for July delivery, and by 0.4% to $12.29 ½ a bushel for November.
The Wasde is expected to reduce expectations for US soybean
inventories a little.
Indeed, there was more talk of investors taking out short
corn-long soybean spreads.
Still, there are "concerns that more South American [export]
shipments will be cancelled", meaning more supplies available for other buyers,
"and this will keep the upside limited along with the large fund position",
said Sterling Smith at Citigroup.