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Chicago wheat rally gets back in gear, after US cuts harvest hopes


The Chicago wheat rally ground back into gear after the US cut its harvest estimate by more than investors had expected - but the buoyancy did not extend to other wheat lots, nor corn and soybeans, which saw “neutral” data.


Chicago soft red winter wheat futures for September, which had stood some 0.8% higher ahead of the US Department of Agriculture’s release of the July edition of its flagship Wasde briefing, extended that headway afterwards to close up 1.7% at $5.34 a bushel, its highest finish in two months.


The report lowered by 53m bushels to 1.82bn bushels the USDA’s estimate for the US wheat harvest this year, a bigger cut than investors had forecast, reflecting bigger-than-expected cuts to hopes for both soft red winter wheat and hard red winter wheat.


The briefing cut too the estimate for the European Union harvest, by 1.5m tonnes, citing in particular France, the bloc’s top grower, where the USDA said that “increased rainfall during June arrived too late to significantly revive wheat yields” damaged by spring dryness.


The Russian crop (excluding Crimea) was also downgraded, by 500,000 tonnes to 76.5m tonnes, with the USDA noting that “concerns over dry conditions in Stavropol and parts of the Southern District have persisted throughout June”.


Price losers

However, the gains did not extend to Kansas City hard red winter wheat futures for September, which extended losses to end 1.0% lower at $4.52 a bushel.


French soft milling wheat lost marginal gains to settle at E188.00 a tonne, down 0.4% on the day, with the EU harvest cut by less than some investors had expected.


And row crop futures fell too. New crop December corn futures, which had stood 0.9% lower ahead of the briefing, accelerated losses to finish down 3.4% afterwards, at $3.44 ¾ a bushel.


November soybeans ended down 1.2% loss to $8.90 ¾ a bushel, having traded flat before the briefing was released.


‘Buy the rumour…’

“Markets lower with the USDA [report] neutral,” said Benson Quinn Commodities.


At Futures International, Terry Reilly, while terming “surprising” the underperformance of Kansas City wheat, said that the corn and soybean market performances were “typical buy the rumour/sell the fact” behaviour.


Although the USDA slashed its forecast for US corn inventories at the close of 2020-21 by 675m bushels to 2.65bn bushels - with a 22.8m-tonne downgrade to the world stocks estimate – “this was largely expected,” Mr Reilly said.


“We already knew there was going to be 1bn bushels shaved off US production,” after the acreage briefing two weeks ago.


“Overall the corn supply and demand was perceived bearish by bull traders looking for a downward revision in the US yield, which was left unchanged”, at 178.5 bushels per acre.


‘Not quite as hot’

For soybeans, sentiment was undermined by carryout stocks figures for both 2019-20 and 2020-21 which came in above market expectations, reflecting the results of the inventory report also released two weeks ago.


Indeed, a stocks figure of 620m bushels for the close of this season was “bearish”, said Benson Quinn Commodities, seeing also as “bearish” for corn and soybean prices Midwest weather forecasts which turned down the extent of damaging heat in the outlook.


Maxar said that “the forecast is not quite as hot and dry across the central and southern Midwest today,” although adding that “below-normal rainfall is still expected over the next 15 days, which will further increase dryness concerns.


“Above-normal temperatures are still expected across most of the Corn Belt over the next 15 days, especially later next week.”


‘Weaker expected harvest’

In New York, cotton futures ended up 0.7% at 64.31 cents a pound, after the USDA cut its forecast for this year’s domestic harvest by 2.0m bales to 17.50m bales – some 500,000 bales more than investors had expected.


However, the USDA also cut by 1.0m bales, to 15.0m bales, its forecast for US cotton exports in 2020-21, which starts next month, saying that the weaker expected harvest “reduces exportable supplies”.


The downgrade was ahead of the 220,000-bale revision that traders had forecast.

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