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|Market 'panic' sends corn, soybean and wheat prices soaring
By Agrimoney.com - Published 21/08/2012
Corn futures set course for their highest ever close, while Chicago's benchmark soybean lot set a contract high, as dire crop reports from a tour of major US farming districts stoked "panic" among buyers.
Wheat rose too, and, in London, set a contract high amid fears that persistent rains will prompt downgrades of 1m tonnes to expectations for the UK crop.
Chicago corn for September stood 1.9% higher at $8.39 ½ a bushel in late deals, a level which would represent a closing high for a spot contract.
December corn, the best-traded lot, also looked set for a closing high, while the benchmark November soybean contract hit $17.33 a bushel at one stage, beating its previous contract high by more than $0.40 a bushel.
The November soybean lot stood at $17.32 a bushel, up 2.9% on the day, as trading ended.
'That little boost'
The jumps followed concerns for US crops stoked in part by data out overnight by the US Department of Agriculture which showed the domestic corn crop stable, and soybeans achieving only a small improvement, despite a round of rains for dry areas of the Midwest.
"The market was disappointed with crop progress results, with soybeans failing to notch up any real improvement, despite the rains that have passed these last seven days," broker FCStone said.
However, fears were heightened by continued reports from the ProFarmer tour of the Midwest which, while often showing an improvement on Monday's results, signalled that yields may end up further still below current USDA estimates.
"What's coming out of ProFarmer is just giving the market that little boost," Jerry Gidel at broker Rice Dairy said.
Paul Georgy at broker Allendale said: "Grain futures are being driven by headlines as the well promoted crop tour crosses Indiana, Illinois, Nebraska and Iowa - yields of 40-50 bushel an acre for corn has rekindled buying interest."
'Feel of commercial panic'
At broker Country Futures, Darrell Holaday said: "For the first time in this rally, there is a feel of commercial panic starting to show up in the corn and soybean markets" as users question the security of their physical supplies.
"There is now legitimate concern that the production numbers will slip significantly lower and the panic is really about their ability to get a hold of the physical product as yield prospects continue to decline.
"You cannot load soybean futures in a ship and send to China. You can't put soymeal futures in your feed ration to feed to chickens and hogs. The point is that the panic is in the physical ownership."
And, as an extra boost, the rising prices improved contracts' technical credentials too.
Mr Gidel said: "Soybeans popped up through $16.92 a bushel, which had been a key mark. We got above $17 a bushel and looked like this thing was really going somewhere."
From a chart perspective, the rise has "opened the door to something with an $18 in front of it".
Wheat, besides gaining help from fellow grain corn, received support from fears for the Western Australia crop, where one of the driest Julys on record has raised the risk of further downgrades, and put a potential halving in output on the cards.
Chicago wheat for September stood 2.4% higher at $9.24 ¾ a bushel in late deals.
The latest batch of news from Russia showed yields from the overall grains harvest falling 27.5% to 1.98 tonnes per hectare as of Monday, with a little under 66% of the area combined.
A poor crop in Russia, following drought, has raised expectations of demand from wheat importers being switched to other suppliers, notably the European Union and the US.
And continued dryness in the southern Plains, an important US winter wheat area, has raised fears even over the start the 2013 crop will receive, with sowings imminent.
UK downgrades ahead?
"To counter this" downbeat talk, "the French wheat harvest is all but over and yields are reported to be higher than last year," traders at a major European commodities house said.
At FCStone, Rory Deverell added: "In Europe, harvest has progressed very nicely in France and Germany over the weekend."
However, "results coming from the field in the UK", the EU's third-ranked wheat producer, "continue to foster a large degree of variability with test weights and falling numbers falling and premiums for quality receiving plenty of support.
"At least 1m tonnes will be shaved from UK wheat output estimates, taking it down to the mid-to-low 14m-tonne range."
London wheat for November closed up 2.2% at a fresh contract high of £206.50 a tonne, continuing to receive support too from the reopening of the UK's Ensus ethanol plant, which will take more than 1m tonnes of wheat a year.
Paris wheat added 1.8% to E267.75 a tonne, lagging in part thanks to the relatively upbeat harvest talk.
Among soft commodities, cotton joined in the rally, closing up 3.1% at a three-month high of 77.30 cents a pound in New York for the best-traded December contract.
The fibre is linked to grains and oilseeds through being a rival crop in parts of the US, unlike most other soft commodities, meaning it tends to receive some boost from the fates of corn of soybeans – if one diluted heavily by huge world cotton inventories.
However, investors have also taken a shine to the fibre's chart signals, while Macquarie on Tuesday raised the spectre of another potential price spike, as in July, when the expiring July contract soared more than 25% and lost nearly all these gains within the space of three weeks.
Macquarie, while bearish over cotton long term, cautioned over the weakened stocks available for delivery against New York contracts.
'Expected to be bearish'
But, also in New York, raw sugar for October tanked 3.5% to 19.78 cents a pound, ahead of data on Thursday from Unica, the Brazilian cane industry group, on the cane crush in the important Centre South district.
"This is expected to be bearish given the much improved weather seen in the region, spurring mills to crush as much as they can and try to make up for time lost at the beginning of the season," Nick Penney at Sucden Financial said.
"Weather in Centre South Brazil is expected to remain favourable well into next month so we would expect a marked improvement in the picture."
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