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Morning markets: huge yield guess weighs on corn

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Crops began Thursday on weak form, sapped in Chicago by a forecast of large production and in Kuala Lumpur by a spot of profit-taking.

There were few tailwinds from external markets to lift the mood. Oil was a touch lower, Asian shares were mixed and the dollar remained stable, if near 2009 lows against many major currencies.

That left investors to focus on the fundamentals which, for Chicago crops, are showing a diminishing risk of the supply shocks many investors have been looking for to raise prices.

Record yield

Corn remained depressed by an estimate from Informa Economics of an American crop of 13.0bn bushels this year, some 700m bushels more than official US forecasts, driven by a record yield of 164 bushels per acre.

Chicago's September contract was 3.5 cents lower at $3.43 ½ a bushel at 06:15 GMT, with new crop lots showing similar losses.

The decline took to 6% corn's drop since a Monday high of $3.65 a bushel.

Weather debate

Soybeans were lower too too, although weather was a big factor here.

Informa's estimate of a US crop of 3.32bn bushels this year was higher than US forecasts, but not by too much.

What has been worrying traders, though, are forecasts of hotter weather in the MidWest, which while initially viewed as bullish – as a threat to beans' vulnerable podsetting phase – are increasingly being seen as bearish. Warm weather may help speed up the development of a lagging crop.

August beans dropped 25 cents to $11.55 ¼ a bushel, with November off 14 cents at $10.31 a bushel.

Abundant stocks

Wheat was also weaker, although not by so much, down 5 cents at $5.23 ¼ a bushel for September delivery.

Prospects of another decent harvest, and rising global stocks, continue to overhang the crop, while US exports have been a little soft.

Australia, meanwhile, reported a 27% surge in exports for June.

Rebound halts

Fundamentals for Kuala Lumpur palm oil have been looking a little better, with reports of flagging output in Malaysia's biggest production area, Sabah, because of biological tree stress.

Meanwhile, August sees the start of the Asian festival period, including the Muslim Ramadan holy month, where celebrations typically increase demand for palm oil.

But profit-taking kicked in after a 20% recovery in prices from a mid-July low to Wednesday's high.

Benchmark October palm oil slipped 42 ringgit to 2,293 ringgit in the morning session on Bursa Malaysia's Derivatives Exchange.


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