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AM markets: Canada worries prop up soybeans, but not wheat

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Round one went to bears.

Or did it?

Certainly, the first set of data of many to be released on Thursday – including a monthly report on Brazilian grains from Conab, a twice-monthly briefing on Brazilian


output from Unica, and the US Department of Agriculture's monthly Wasde tome – looked at first sight negative for prices.

The Malaysian Palm Oil Board showed Malaysian

palm oil

inventories far bigger than investors had expected last month, provoked by the biggest surge in output in nearly three years.

Still, palm oil futures extended gains after the data, to stand up 1.3% at 2,664 ringgit a tonne in afternoon deals in Kuala Lumpur.

Predicting reactions

Which goes to show the difficulties for ag investors of positioning ahead of key data – not only to judge the figure right, but the reaction to the data too.

Forecasts for US 2017-18 corn data in Wasde and (existing figure)

Harvested area

: 83.418m acres, (83.496m acres)

Range of estimates: 83.1m-83.5m acres


: 166.2 bushels per acre, (170.7 bpa)

Range of estimates: 162.8-168.5 bpa


: 13.855bn bushels, (14.255bn bushels)

Range of estimates: 13.59bn-14.07bn bushels

Year-end stocks

: 2.003bn bushels, (2.325bn bushels)

Range of estimates: 1.642bn-2.375bn bushels

Year-end stocks, 2016-17

: 2.386bn bushels, (2.37bn bushels)

Range of estimates: 2.34bn-2.73bn bushels

Sources: USDA, Reuters




yield estimates, but which could spur contrary forces too.

"Yield estimates are the wild card," Benson Quinn Commodities said.

"If USDA surprises high and the bears sell off the board, look for end users to come forward to buy any big break" in prices.

"If USDA surprises low with yields, farmer will be a seller of any rally, while improving soybean crop ratings and ample old crop stocks should cap upside."

Corn expectations

No wonder in


, for instance, many investors have quit, taking profits on short bets where possible, with open interest in Chicago future down more than 80,000 lots over the past four sessions.

In fact, for corn, the trade is expecting the Wasde to issue a downgrade in the yield number to 166.2 bushels per acre, from the current estimate of 170.7 bushels per acre.

Price Futures added its weight to such a figure overnight, with results of a crop tour of Illinois, a high production state, coming in with figure for the centre of the state of 190 bushels per acre, down from 196 bushels per acre last year.

The broker flagged a nationwide yield estimate of 166 bushels per acre.

The estimate for "harvested acres could provide a surprise" also, Benson Quinn Commodities said.

'Unchanged to drier'



, for which August rather than July (which was unduly dry in many Corn Belt areas) is more of a yield-determining month, investors expect the yield estimate to be trimmed by 0.5 bushels per acre to 47.5 bushels per acre.

Forecasts for US 2017-18 soy data in Wasde and (existing figure)

Harvested area

: 88.669m acres, (88.731m acres)

Range of estimates: 83.3m-88.731m acres


: 47.5 bushels per acre, (48.0 bpa)

Range of estimates: 46.9-48.0 bpa


: 4.212bn bushels, (4.26bn bushels)

Range of estimates: 4.165bn-4.307bn bushels

Year-end stocks

: 424m bushels, (460m bushels)

Range of estimates: 424m-460m bushels

Year-end stocks, 2016-17

: 401m bushels, (410m bushels)

Range of estimates: 370m-420m bushels

Sources: USDA, Reuters

"Weather models look unchanged to drier for Iowa, Illinois and Indiana, with heavy precipitation staying in the Delta region over the next 10 days," said Benson Quinn Commodities.

Resilience elsewhere in the oilseeds complex, in


futures as well as palm oil, has been another supportive factor.

Canola concerns

"Recent rallies in the soy complex have found support in both dry weather in the central Midwest as well as in the concerns over the size of the Canadian canola crop," thanks to Prairies dryness, CHS Hedging said.

Terry Reilly at Futures International said: "Canadian canola crop worries are aiding to the recent Chicago soybean rally.

"Canadian canola estimates are starting to come in below 18m tonnes."

That said, canola futures for November in early deals in Winnipeg stood unchanged at Can$511.20 a tonne.

Canada downgrade?

Canadian dryness is also being monitored in the


market, given the country's huge spring wheat (ie high protein) crop.

Benson Quinn Commodities, noting a "warm and dry" weather outlook for Canada, forecast the potential for a downgrade in the Wasde from the USDA's current 28.35m-tonne estimate for Canada's wheat harvest.

"USDA should lower that estimate, with private analysts' estimates ranging from 24m-27m tonnes," the broker said.

Australian rains

Still, wheat futures dropped nonetheless in Chicago, by 0.4% to $4.57 ¾ a bushel for September, weighed by improving expectations for another major producing country, Australia, where rain is relieving drought.

Forecasts for US 2017-18 wheat output in Wasde, (existing figure)

Hard red winter

: 756m bushels, (758m bushels)

Range of estimates: 737m-775m bushels

Soft red winter

: 307m bushels, (306m bushels)

Range of estimates: 300m-311m bushels

White winter

: 215m bushels, (216m bushels)

Range of estimates: 205m-224m bushels

All winter

: 1.278bn bushels, (1.279bn bushels)

Range of estimates: 1.258bn-1.293bn bushels

Other spring

: 393m bushels, (423m bushels)

Range of estimates: 350m-440m bushels


: 56m bushels, (58m bushels)

Range of estimates: 50m-56m bushels

All wheat

: 1.711bn bushels, (1.760bn bushels)

Range of estimates: 1.550bn-1.784bn bushels

Sources: USDA, Reuters

"And there is probably some more to come. Western Australia's crop regions are likely on the way to gaining a significant boost to soil moisture."

East coast wheat futures in Sydney fell by a further Aus$1.00 a tonne to Aus$263.00 a tonne – taking losses over the past month above 15%.

'Looking more bullish by the day'

In New York,


futures for December eased too, by 0.1% to 71.04 cents a pound.

That said, Ecom remained sanguine on prospects – depending, of course, on what the Wasde produces.

"December cotton futures have seen a new high made each session for the last six consecutive sessions," the trading house said.

"The market has been met with buyers each time there is a small sell off.

"This is looking more bullish by the day for futures, leading us to believe 72.40 cents a pound may not be too many session away."

By Mike Verdin

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