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Evening markets: crops wounded by external market sell-off

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It could have been worse.

Agricultural commodities could not hold out, as they did in the last session, against the onslaught of negative external conditions, which sent West Texas Intermediate crude down 2% to below $92 a barrel, with shares on Europe's main bourses posting similar losses.

Weak US service sector data, against a background of continuing eurozone debt concerns, were blamed for the decline.

Nonetheless, crops put on a brave face, even rising in Europe, (although that was really down to playing catch up with the late gains posted by Chicago grains on Tuesday).

Paris

wheat

for November added 2.0% to E199.25 a tonne, with its London equivalent gaining 1.9% to £164.00 a tonne.

"We seem to be for the moment trading fundamental drivers or weather markets rather than outside issues," the UK grain arm of a major European commodities house said, attributing the firm performance to the declining estimates for US corn yields.

'Lowest yield estimate'

And those downgrades continued to come, ahead of a key US Department of Agriculture crop report due next week, and helping keep grains relatively firm in Chicago too.

At least one forecast is below the 150 bushels per acre posted by Commodity Weather Group which helped send Chicago grains soaring in the last session.

"The lowest estimate I have heard from anyone credible is 149 bushels per acre," Matthew Pierce at PitGuru said.

"The highest remaining is the USDA," whose forecast is 158.7 bushels per acre, "with private forecasters leaning to 155 or lower".

Acres too

US Commodities said that "the trade is now convinced real damage has been done to corn and soybeans", adding that acreage data were a concern too.

"The trade whisper is also concerned that another 500,000-1m acres could be abandoned in the southern Plains due to the heat," the broker said.

That on top of a downgrade for sowings which many traders believe the USDA will make following its resurvey of rain-dented spring plantings in the northern Plains. Results of the survey are due next week.

Ear fill vs numbers

But the weather outlook was mixed, "cooler and better in the one-to-five day and six-to-10 day outlooks", but with heat "surging back" in the 11-to-15 day, US Commodities said.

And then traders had another of those USDA data quirks to battle with, which may mean that any downgrade to that 158.7-bushels-per-acre yield figure is not as large as many have pencilled in.

The estimate in next week's crop report, the latest in the flagship Wasde series, week will use historical averages for ear weights, rather than freshly calculated ones, which does make a difference to prospects, Darren Holaday at Country Futures said.

"The concern with yield is the ear fill, and that will not be reflected in next week's numbers. They will count population and we believe the population numbers are very big," Mr Holaday said.

'Shipments not impressive'

Besides, the Wasde may have weaker export estimates for corn, and

soybeans

, to factor in, implying upward pressure on the stocks figure and so downward pressure on prices.

"Shipments have not been impressive in the last several weeks and a lot of sales have been rolled to the new crop, especially soybeans," he said.

Put all this together, and the market had a recipe for a 0.4% slide in December corn, to $7.13 a bushel, in Chicago.

The September lot fell 0.7% to $7.06 a bushel, increasing its discount amid those thoughts of disappointing near-term export demand.

And that put a negative spin on soybeans too, which fell 0.5% to $13.73 a bushel for the best-traded November contract.

The vomitoxin question

Still, it was

wheat

which held up the rear, falling 1.0% to $7.10 ½ a bushel in Chicago for September delivery, amid thoughts that the last session's 6% jump, largely on the back of corn's performance, may have been overdone.

Nonetheless, the concerns for vomitoxin in spring wheat, which also drove that rally, remained in view, although the implications for prices of the fungal residue, which can render grain unfit even for animal consumption, may not be as clear cut as might be thought.

Matthew Pierce spoke for most when he said that "this remains a bullish situation, in that vomitoxin is not deliverable" against contracts in Minneapolis, where US spring wheat is traded.

"So where is all the wheat going to come from for September delivery?"

'Fit for human consumption'

However, Benson Quinn Commodities took a different spin, that "quality concerns… have offered a negative tilt to Minneapolis wheat market.

"The vomitoxin specification on the Minneapolis delivery is 'wheat fit for human consumption'," which has in the past meant up to five parts per 1m of tainting, a figure which may be unappealing to some buyers.

Still, Minneapolis wheat got the benefit of the doubt this time, limiting its losses, for September delivery, to 0.6%, taking the contract to $8.44 ¾ a bushel at the close.

Brazil put into perspective

Indeed, that loss was far lower than sustained by many soft commodities, such as

cotton

, whose knack for late revivals failed this time, leaving the December contract down 2.5% at 104.16 cents a pound at the close.

Raw

sugar

fell 1.7% to 27.69 cents a pound for October delivery, with the tide appearing to be turning towards the bears as production reports from the northern hemisphere make up for Brazil's disappointing output.

"Sugar largely swam against the tide in the past few weeks and is looking somewhat tired," Nick Penney at Sucden Financial in London said.

"Positive news on the Northern European beet crop development, Russia's expectation of a record beet crop, and Thailand's anticipation of an early start to its harvest to crush an estimated, by some, 120m tonnes of cane has put the tribulations of Brazil's Center South crop into perspective," he said.

Ominously, white sugar did substantially worse, down 3.8% at $624.60 a tonne in London for October, an underperformance by the ready-to-eat version of the sweetener which could indicate weakening short-term sugar demand.

New York

coffee

fell 0.5% to 241.90 cents a pound for September delivery despite fresh concerns of frost in Parana, which produces some (if only about 5%) of Brazil's coffee.

By Agrimoney.com

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