Evening markets: ag bulls and bears emerge honours even
By - Published 24/07/2014

If Tuesday belonged to ag bears, and Wednesday to the bulls, this session provided a bit for everybody.

Yes bears could claim yet another four-year low for corn, which hit $3.56 a bushel in Chicago for September delivery, the lowest for a spot contract since July 2010, before recovering some ground to end at $3,61 a bushel, down a modest 0.3%.

And they sure put cotton on the rack.

But bulls could point to a three-year high for cocoa, which touched $3,234 a tonne in New York, the highest for a spot contract since July 2011, before ending at $3,198 a tonne, up 0.4% on the day.

If cocoa's rally has raised concerns that it may be based on hedge fund whim rather than fundamentals, there was plenty of news around to explain moves in other agricultural commodities.

'Continues to look great'

In corn, for instance, there was not only Allendale's hefty US corn yield estimate, of 174.1 bushels per acre, to factor in.

There was news that Chinese authorities are requiring imports of distillers' grains, a corn-derived feed ingredient, to be certified free of MIR 162, a Syngenta genetically modified corn variety which has been approved in Washington but not Beijing.

Furthermore, the weather for US corn pollination "continues to look great for corn with cool temperatures in the forecast for the next 10 days," CHS Hedging said, giving credence to hefty yield ideas.

There was some more upbeat news, such as hefty US corn export sales last week of 1.14m tonnes of new crop, plus 291,500 tonnes for 2013-14.

CHS also reminded of Wednesday's firm US ethanol data which if maintained at last week's rate of 959,000 barrels per day "will result in 5.115bn bushels of corn used for ethanol" this season, 75m bushels more than the US Department of Agriculture is counting on.

Still, corn for December closed down 0.3% at $3.69 a bushel.

'Relatively dry weather pattern'

Conversely, for soybeans, the weather outlook is not so benign, with some idea of drier weather next month, its key period, bringing pod-setting.

"Weather is expected to turn dry for the first two weeks of August which will create potential dryness for soybean pod setting," said Sterling Smith, futures specialist at Citigroup,  adding that "the weather issues that have rattled the soybean market are not an issue for the corn".

Benson Quinn Commodities said: "The weather focus continues to shift towards a relatively dry weather pattern for the bulk of the Corn Belt.

"Forecasts aren't void of moisture, but most rainfall is expected to be on the light side."

Western Corn Belt states of Iowa and Nebraska, plus Missouri, are the focus of attention so far.

MDA said that central and eastern areas of the Midwest will get enough rain to improve moisture for row crops, but "moisture will decline in south west areas".

'Should be supportive'

As an extra boost for bulls, US soybean export were viewed as well above expectations, at 226,700 tonnes of old crop, and 2.45m tonnes for 2014-15, figures termed "excellent" and "outstanding" by Mr Smith.

The data "should be supportive to the market for at least the near term", he said.

After all, the US has now committed to or exported 45.84m tonnes of soybeans for 2013-14, 1.75m tonnes more than the USDA has forecast, and with time running out for net cancellations to balance the books. (The season ends next month.)

Strong export demand is also being reflected in strong US Gulf prices, although this is in part seen down to expensive freight too.

November soybeans rose 0.8% to $10.84 a bushel, closing above their 10-day moving average for the first time this month, while the old crop August lot added 0.5% to $12.07 a bushel.

'Nothing bullish'

Wheat, however, got no support from US export sales, with volumes of 442,300 tonnes viewed as at best OK.

At RJ O'Brien, Richard Feltes said: "Wheat export sales were disappointing, especially for hard red winter wheat," which ended down 0.5% at $6.20 a bushel in Kansas City, the weakest finish for a spot contract in five months.

That was worse than the 0.4% drop to $5.28 a bushel in Chicago wheat for September.

"There is nothing bullish about today's wheat export sales report, while the US hard red spring wheat tour is finding better-than-expected yield potential."

In fact the Wheat Quality Council, at the end of its North Dakota crop tour, and after the close of markets, revealed forecast a yield of 48.6 bushels per acre, up from the 2013 finding of 44.9 bushels per acre, and the five-year average of 44.7 bushels per acre.

Indeed, it was the highest in at least 22 years.

'Increasing quality fears'

Still, there remain some concerns abroad.

Official Australian meteorologists forecast, with 60% certainty, that rains in the east coast grains belt of the country will be below average over the next three months, thanks to an El Nino weather pattern.

And "the quality concerns for the EU wheat crop continue to mount," CHS Hedging said.

UK grain merchant Gleadell said that "rainfall has swept across much of France, into Germany and then Poland, increasing quality fears in its wake", if pondering whether this was positive or negative for futures on Paris's Matif market.

"Export cash premiums have risen, leaving Matif as no guarantee of export quality. And if you have export milling quality, why would one deliver to futures which is only feed wheat with a 76kg per hectolitre [bushel weight] spec?," the broker asked.

Still, Paris wheat for November added 0.8% to E181.00 a tonne, helping London feed wheat added 0.1% to £127.75 a tonne.

Feed wheat prices are being depressed by the idea that poor wheat quality will mean significant supplies planted as milling wheat ending up in livestock rations.

Cotton plunges

In New York, while raw sugar added 0.6% to 17.05 cents a pound for October delivery, given some support from data showing a slowdown in Brazilian Centre South sugar production, cotton tumbled.

Cotton for December slumped 3.0% to a contract closing low of 66.05 cents a pound.

The drop as blamed on technical factors, defying in fact some decent US export sales data, at 371,400 running bales for 2014-15.

Net sales reductions of 1,900 running bales for 2013-14 were hardly much of an indicator, given that the season only has a week left to run.

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