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|Morning markets: soybeans lose mojo, taking grains lower too
By Agrimoney.com - Published 05/10/2012
Could soybeans build on their October 4 "buy day" gains?
In a word, no. It was the downward move into the finish of the last session which set the scene on Friday.
There was one positive sign in that oats, often viewed as a leading indicator, continued their revival, adding 0.3% to \$3.72 a bushel for Chicago's December contract, taking above 3% their rebound from Tuesday's near-three-month low.
However, other crops were not taking much notice as of 09:20 UK time (03:20 Chicago time), showing declines, albeit small ones.
Soybeans were once again the focus for Chicago investors, given their knack for finding a seasonal bottom in the first week of October, and often October 4, as pressure from the build-up of supplies from harvest wanes.
But one nuance with this US harvest has been its accompaniment by increasing yield hopes too, with the summer drought appearing not to have wreaked the damage it had been expected to.
Richard Feltes noted an "ongoing bombardment of mostly 40+ bushels-per-acre yield reports that support growing view that USDA may be understating the 2012 US soybean yield by 3.5-5 bushels per acre.
"We are not forecasting a 5 bushels-per-acre gain in the 2012 US soybean yield. But the possibility of such will dampen additional upside follow through by November soybeans," to build on the last session's headway.
'Brings on hedge pressure'
Furthermore, the news from South America appears to be positive on soybeans too, albeit at an early stage in the cycle, with sowings underway.
Reports overnight offered upbeat news on Argentine, Brazilian and Paraguayan crops.
And this besides some broader factors to consider too, like the release of US jobs data later, besides crop estimates from Informa Economics, ahead of a US Department of Agriculture Wasde report next week expected to be an important one, and with fair combing weather too.
"Informa numbers and too another harvest weekend coming up, which usually brings on hedge pressure," Mike Mawdsley at Market 1 said.
'Demand offering a floor'
At least the market had some support from Thursday's downgrade to the Canadian canola crop, and strong US export sales data, released on Thursday, to count on, of 1.3m tonnes, the best for three months.
That means that, only a month into 2012-13, the US had sold some 82% of the exports it expects to for the marketing year.
"Demand is offering a floor under the market and should move market in sideways trade heading into next week's reports," Kim Rugel at Benson Quinn Commodities said.
"Anticipated larger production and possibility of bearish supply report is seen limiting gains.
"Whether or not harvest lows have been notched will have to wait till next week to fund out. But a price range appears to be developing between \$15-17 a bushel, barring any South American weather issues."
In fact, the November lot was 0.3% lower at \$15.47 ¼ a bushel.
'Another record year'
And with soybeans lower, it was trickier for the grains (bar oats) to make headway too - even corn, for which yield hopes are decreasing in many quarters.
"We continue to believe, based on spot yield reports submitted to our network daily, that the USDA Is overstating the 2012 US corn yield by 2-3 bushels per acre despite better than expected corn yields across Minnesota, North Dakota and irrigated portions of Nebraska," Mr Feltes said.
One issue was that hopes are resolute for the crop in China, the second-ranked grower, and which had initially been expected to be a major buyer of US corn in 2012-13.
"While the final harvest will fall short of best-case expectations, it will be another record year for China corn," the US Grains Council said.
'Strategic in its purchases'
The council estimated the Chinese harvest rising by 5m-6m tonnes, although stopping short of giving a figure of where from or to.
And that will be enough to reduce reliance on corn imports.
"A good harvest this year, plus the forward purchases they have already done for the 2012-13 marketing year, gives China some breathing room in a very tight global market," the council said.
"China will likely be strategic in its purchases this year, entering the market to build reserves if and when prices dip."
Chicago corn for December dropped 0.4% to \$7.53 ¾ a bushel.
'Less than spectacular'
And wheat fell too, feeling some further pressure from soft US export sales data on Thursday.
"Weekly wheat export sales were once again less than spectacular, well off the rather mundane pace established over the course of the last month," Benson Quinn's Brian Henry said.
"Wheat sales have reached 40.1% of the USDA export estimate. This fails in comparison to the 55% five-year average for this week of the marketing year."
And at a time when Argentina is emerging to take Russia's place, for now, as a source of competitive supplies, as the latest Egyptian tender showed.
Nor did Commonwealth Bank of Australia boost the market in downgrading its estimate for the Australian crop, as Agrimoney.com trailed, pegging the harvest at 21.4m tonnes, within the range of estimates the market is already trading.
Wheat for December dropped 0.4% to \$8.66 ¼ a bushel.
'Close to overbought levels'
Soft commodities got off to weak starts too, with New York raw sugar shedding 0.6% to 21.48 cents a pound.
Its strong rally from mid-September lows has left it "close to overbought levels" in terms of relative strength index analysis, Lynette Tan at Phillip Futures said.
And cotton for December dropped 0.4% to 71.78 cents a pound, despite strong US export sales data on Thursday, of 241,000 running bales.
India had some less bullish news, as Luke Mathews at Commonwealth Bank of Australia related.
"The Indian Cotton Advisory Board has forecast local cotton output at 33.4m bales in 2012-13, down 5.4% year on year because of the poor planting rains.
"Nonetheless, this estimate is 6.5% above the USDA's existing estimate. Exports may tumble 45% to 7m bales from the record 12.7m in 2011-12."
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