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Morning markets: crop futures rise to meet long-awaited data

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Farm commodities met the big day with some enthusiasm.

And it is a big day, bringing the end of the month, a time when funds often close positions for housekeeping purposes, but this time enhanced by the close of the quarter and, for some companies, the fiscal year too.

It is first notice day too for many July farm commodity contracts, the start of the expiry process which can swing prices by bringing an idea of the level of deliveries of physical crop against futures.

This on top, of course, of the long-anticipated US Department of Agriculture data on stocks and sowings due at 12:30 GMT, and expected to show America's corn stocks falling to their lowest level for seven years as of June 1, and planting 90.8m acres with the grain.

These are reports termed by some investors as of the most important of the year so far on US crops.

Volatility ahead?

And, certainly, their impact on prices is potentially large.

"If stocks are less than expected we cold see a quick spike in prices. If higher, we go lower," Mike Mawdsley at Market 1 said.

"Sometimes it is that simple. But either way, I would expect to see a limit move up or down," meaning a price move the daily maximum allowed by the exchange.

Caution ahead of such potential volatility would dictate position closing which, following the sell-off until this week, implies a big batch of short covering, putting upward pressure on prices.

Cheerier markets

And up is where futures headed in early deals, helped too by better macroeconomic sentiment, following the Greek parliament's agreement on Wednesday to austerity measures which will make the debt-laden country eligible for a rescue package.

Tokyo's Nikkei share index added a further 0.2%, while the investor fear index of the dollar slid 0.5%, improving the case as exports for dollar-denominated assets such as many commodities.

Oil and copper made some headway.

'Lot of rain coming...'

But not as much as wheat, which added 1.0% to $6.47 ¾ a bushel in Chicago, for July delivery, and 1.4% to $8.88 a bushel in Minneapolis, the home of spring wheat trading.

Sentiment was also boosted by reports of wet weather, long forecast, hampering the newly-started harvest in Ukraine – with potentially more to come.

The European weather model "shows a lot of rain coming for Eastern Europe, Belarus and northern and eastern Ukraine over the next five days", WxRisk.com said.

"That huge persistent low that has lingered over the Ukraine is going to get reinforced by a new low this weekend."

Spread bet

That said Kansas hard red winter wheat remained in the doldrums, down 0.2% at $7.43 ½ a bushel for July at 07:30 GMT (08:30 UK time), despite being of the higher protein type which might be expected to be in higher demand, given the sowing setbacks to spring wheat in North America.

Indeed, Kansas futures have been presenting "some opportunities in some of the inter-market spreads where many traders are still looking for chances to establish long position in Kansas relative to Chicago", which trades lower-protein wheat, Dave Lehl at Benson Quinn Commodities said.

Many investors feel that, given the knock-on effects of variable storage rates on Chicago futures, introduced to bring futures prices nearer to cash ones, "will be just a matter of time before some of the deferred spreads begin to widen".

Still, of course prices of the grain are feeling pressure from the coming of harvest, and the spike in supplies it brings.

Crop concerns

Corn, the centre of attention for the reports later, held its premium over wheat in Chicago, gaining 1.0% to $7.05 as bushel for July, with the new crop December lot adding 0.7% to $6.45 ¾ a bushel.

And soybeans gained ground too, adding 0.6% to $13.4 ½ a bushel for July and 0.7% to $13.32 a bushel for the new crop November lot, amid increasing jitters over the health of the US crop.

"There are concerns of soybean rust on late planted soybeans in the Midwest. In the event that the disease spreads out, this could lift the soybean prices," Ker Chung Yang at Phillip Futures said.

A pick-up in US export activity has boosted sentiment for the oilseed too.

Data later

Further information on US exports will be given in data later too, although it is likely to be swamped by the noise over sowing and stocks estimates.

US soybean exports for the week are expected at least to manage the previous week's 204,000 tonnes, with those for wheat expected in line with the last figure of 661,000 tonnes, and corn expected to see a big improvement from 531,000 tonnes,

By Agrimoney.com

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