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Morning markets: wheat prices slip as harvest pressure tells

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If Chicago lore has it right, agricultural commodity prices should be heading for gains, it being a Tuesday after a strong trend (downward) in the last session.

But if today is to be a Turnaround Tuesday, it was in disguise in early deals. Chicago grains had barely woken by 07:20 GMT (08:20 UK time), standing near opening levels – except for Minneapolis spring

wheat

which turned from market favourite to dunce.

The July lot stood at $10.34 a bushel, down 0.8% from last night's closing level, and even further below Monday's intraday, two-year high of $11.20 a bushel.

That said, it was not the most promising day to stage a rebound.

The signals from external markets were mixed. Sure, the

dollar

was lower, a help to dollar-denominated assets by making them more competitive as exports. And Asian shares showed modest gains.

But many other commodities, including

copper

and

oil

, were in negative territory. And Chinese food commodity markets returned from a one-day holiday in poor mood, showing losses across the board.

Beans behind

And the overnight US Department of Agriculture crop report was picky in its favours.

It was bullish for

soybeans

, stating that 68% of the US crop had been sown as of Sunday, up 17 points on the week but below the average of 82%, and behind market expectations too.

That helped the oilseed overcome disappointment at Monday's export inspection data showing only 3.4m bushels soybeans checked, half analysts' estimates and down from 10.3m bushels a week before.

Chicago's July soybean lot added 0.4% to $13.88 ½ a bushel, with the new crop November contract gaining 0.4% to $13.78 ½ a bushel.

'Giving up hope'

But for

corn

, sowings, at 94% finished, were a little better than the market had expected, if still way behind average. And the condition of the crop improved too, by four points to 67% in the "good" or "excellent" categories (if below the 76% a year ago).

Corn gained, but not so fast, adding 0.2% to $7.33 ¼ a bushel for July.

And wheat dipped 0.1% to $7.43 a bushel even in Chicago, despite the continued slow pace of US spring crop sowings – at 79% versus 98% normally by now.

Canada is still behind too, at 80% complete for all spring crops compared with an average of 93%, the Canadian Wheat Board said.

That the year ago figure was 78%, behind the current pace, is little comfort given what an awful time growers had in 2010 with abandonment.

"Wet areas in south-western Manitoba and eastern Saskatchewan are less than 25% done, with many farmers giving up hope of planting before the June 20 crop-insurance deadline," the CWB said.

Harvest pressure

But then, seasonal weakness might be expected given the US harvest has begun, adding supply pressure to prices.

"The hard red winter wheat harvest is progressing rapidly as warm temperatures have dried down a less-than-spectacular crop rather quickly," Brian Henry at Benson Quinn Commodities said.

Sure, analysts are still totting up estimates for how many acres have been lost to the late sowing season and US flooding, with Benson Quinn seeing 3m corn, soybean, cotton, and rice acres lost in the Mississippi Delta and 1m acres of corn and soybean acres along the Missouri, in South Dakota, Nebraska and Iowa.

However, as Mike Mawdsley at Iowa-based Market 1 said, "late plantings are old news", with the market moving on to how well what is in the ground will prove to be.

"My windshield survey showed corn probably tripled in growth over the weekend," he said

Things here look great. Now if we can just stay away from any heavy rains for a few weeks..."

Weather outlook

In fact, states from Wyoming and Utah through to the Upper Plains and "all of the Midwest" look like getting above-normal rainfall in the six-to-10 day outlook, according to WxRisk.com.

And large parts of the Midwest look damp in the eight-to-14 day timespan too.

And, undoubtedly welcomed by farmers, more rain is expected in Europe too, including this weekend when a front "produces significant rain for western and central Germany, with amounts over 1 inch and the coverage of a least 60% if not higher for all of Germany".

'Defensive market'

Elsewhere,

cotton

, which closed the last session the maximum allowed in New York, continued its decline, easing 0.5% to 154.80 cents a pound for July delivery.

"The cotton market remains defensive in light of continued lacklustre demand," Luke Mathews at Commonwealth Bank of Australia said.

Besides, US sowings, at 87% complete, have caught up with the average.

In Tokyo,

rubber

edged 0.2% higher to 392.70 yen a kilogramme for the benchmark November contract.

Ker Chung Yang at Singapore's Phillip Futures highlighted the "disruption of tapping by rains in parts of southern Thailand", the top exporter, as supporting prices.

However, bulls are not getting it all their own way, "with an uncertain economic outlook in Japan and tightening measures in China weighing".

By Agrimoney.com

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