Analysts cautioned investors against expecting the reversal
in grain and oilseed prices continuing too far even as they suffered a further
day of sharp losses, with wheat futures plunging 6% on both sides of the
Wheat prices took their correction in Chicago this week
nearly to 10% at one point, while both corn and soybean futures fell temporarily by their daily limit.
The tumbles were attributed to profit-taking stoked both by
weak external markets - as rising Italian and Spanish bond yields fuelled
eurozone debt fears and overcame a temporary boost to sentiment from Chinese
factory data – and greater prospects for much-needed rainfall in the Midwest.
The GFS model looks "very wet" in the six-to-10 day and
11-to-15 day outlooks, WxRisk.com said.
However, the European model, which traders have regarded as
more reliable in the recent drought, is "in strong disagreement", promoting a
drier outlook, the weather service add
At Martell Crop Projections, Gail Martell said: "Rainfall is
expected to be heavy in the northern Midwest, but the jury is still out on how
much rain would develop in the 'heart' of the Corn Belt.
Crop prices at close on Tuesday
Paris wheat, (November): E251.00 a tonne, -5.4%
London wheat, (November): £180.30 a tonne, -5.3%
Chicago wheat, (September): $8.78 ¾ a bushel, -3.6%
Kansas wheat (September contract): $8.80 ½ a bushel, -3.7%
Chicago soybeans, (November): $15.69 ½ a bushel, -3.5%Paris rapeseed, (November): E500.00 a tonne, -3.2%
Chicago corn (December):$7.78 ¼ a bushel, -1.0%
"Nebraska, Iowa , Missouri and Illinois may miss out on heavy,
soaking rains, though scattered showers are still indicated with variable amounts
from 0.25-1.25 inches."
The "normal" rainfall expected next week by the Climate
Prediction Center would, at 1 inch per week in the Midwest in July, "not be enough
to cure drought since in last month alone", during which large areas of states including
Iowa, Illinois and Nebraska have clocked moisture deficits of 3-4 inches.
Furthermore, a round of broker upgrades to forecasts for
futures continued, with Macquarie refining a forecast on Monday of higher
soybean values by saying that a price of $19-20 a bushel was a "very real
prospect in the near term", as was $9-10-a-bushel corn.
"We take a bullish view on the flat price," the bank said,
noting the "devastation" to Midwest crops evident in falling condition ratings
out overnight from the US Department of Agriculture.
At FCStone, commodity risk manager Jaime Nolan Miralles
said: "That we see prices fall yesterday and once more today should not leave bears
in the market with a false sense of security.
"The market has been due this correction and there is still
much grain sitting in the field exposed to significant downside variation on
yield potential, should weather fail to deliver a sustained alleviation in crop
stress across the grains and oilseed complex."
US Commodities said: "Is the top in? Most people believe this is just a correction."
At Rice Dairy, Jerry Gidel said: "Let me know if the top has
actually gone into the market. What we have seen so far is actually not that
bad for a two-day correction."
'Nearly impossible to
Macquarie's upbeat assessment factored in a yield of 39.5
bushels per hectare, 1.0 bushels per hectare below the USDA estimate, and the
difficulty of quelling Chinese demand "which is nearly impossible to ration",
given government imperatives for maintaining ready supplies of pork.
Furthermore, the outperformance of corn prices over soybean
prices in recent weeks questioned ideas that Brazilian growers will increase
sowings of the oilseed quite as much as some analysts have suggested.
"Through the rally in prices in the last month corn has been
the clear outperformer, as the soy: corn ration has fallen significantly," the
"The decision has moved from being approximately $200 per hectare
in favour of planting soybeans to be approximately $150 per hectare of planting
"This is putting at risk 1m hectares of soybean plantings in
the region, the equivalent of 3-3.5m tonnes of production."