It was third (actually more) time lucky for grain bulls.
Chicago corn futures for July, having tried and failed a few times over the last two weeks to break above $4.38 a bushel, and set a five-year high, managed it on Friday.
The contract reached $4.42 ¾ a bushel at one point, the highest for a spot lot since June 2014 – spurting higher after topping the $4.38 a bushel mark, as buy stops kicked in - before easing back to settle at $4.42 a bushel, a gain of 2.8% on the day.
The new crop December contract, at the fifth time of asking, bust through its own ceiling too, of $4.54 a bushel, to reach a contract high of $4.56 ¾ a bushel.
It finished at $4.55 ¾ a bushel, up 1.6%.
‘Weather leans bullish’
The price gains reflected expectations of further poor US weather for sowings and crop development.
Richard Feltes, at RJ O’Brien, said that “weather leans bullish, with 65% Midwest five-day coverage,” in rainfall terms, and “cooler 6-10 day temperatures for the north west Midwest”.
He quoted a Commodity Weather Group statement that “rains will stall late planting and add to reduced soy acres except for the northern Midwest”.
Maxar focused on chill, saying that “most of the Midwest is expected to see temperatures average 2-5 degrees Fahrenheit (1-3 degrees Celsius) over the next 10 days.
“In addition to preventing remaining corn and soybean planting, the cool and wet weather will keep soils saturated, lead to uneven germination of crops, and increase disease risks for crops, particularly in Missouri, Illinois, Indiana.”
Such talk is spurring ideas of further downgrades ahead for the US Department of Agriculture’s US corn harvest forecast for this year, after the bigger-than-expected cuts revealed in Tuesday’s Wasde briefing.
“Ongoing concerns that US plantings will be much lower than USDA’s revision on Tuesday are underpinning the market,” Terry Reilly at Futures International said.
Mr Feltes noted “more chatter that USDA will post an even smaller corn production forecast on the July [Wasde] crop report”.
Not, it has to be said, that there aren’t some signs of vertigo at these levels, with Karl Setzer at AgriVisor, for instance, saying that “we are starting to hear more talk on commodity demand and how it will be impacted if US values continue to rally while the remainder of the world market is stagnant”.
Benson Quinn Commodities said that “today’s weekly export sales were a grim reminder of how poor global demand for US corn is”.
US corn export sales last week totalled 168,500 tonnes for this season, and 94,100 tonnes for next, hardly bumper trade, although the USDA did announce through its daily alerts system a further sale of 175,000 tonnes to Mexico for next season.
Demand dynamics also look to have played a part in another of the interesting corn features of the day, that the July contract closed some of its discount to the December one, despite there being plenty of old crop supplies around – on paper at least – but lots of worries over new crop prospects.
Still, there is a difference between supplies and available supplies.
“According to the March 1 stocks data, which is admittedly dated now, there should be no physical corn tightness in 2018-19,” Tregg Cronin at Halo Commodity Company said.
However, he added that there is the potential for withholding by “producers who have little or no crop planted clinging tightly to remaining old crop supplies”.
In fact, terming the narrowing in the July discount “an impressive feature”, Mr Cronin said that the shrinking spread “is certainly in-keeping with basis strength in the central and eastern Corn Belt,” where corn consumers are having to pay up to dislodge supplies.
“Premier ethanol plants are paying as much as $0.45 a bushel above July futures in Indiana, while the flagship plant in Decatur, Illinois is said to be paying $0.14 above.”
Soy crusher closures
There has been a US cash market dynamic going on in the soy complex too, with RJ O’Brien’s Richard Feltes noting a “recent boost in soymeal futures and basis, driven by planned and unplanned closures” of soybean crushing plants.
That said, this “must be viewed as only a short-term tightening of soy meal supplies”, he said.
“We cannot predict when disabled plants will return to full operating capacity but we can underscore the importance of monitoring daily meal basis for any sign that meal is returning to its typically abundant supply status.
“The western US meal basis started to ease yesterday.”
Planting number downgrades
Soymeal futures for July actually closed up a relatively modest 0.6% at $321.70 a short ton, this time underperforming soybeans, which for July ended up 1.1% at $8.88 a bushel.
There is increasing talk of US farmers not being able to meet their ambitious for soybean plantings too, given the poor weather.
“As of Monday, there were 30 million acres of soybeans left to plant,” said Halo’s Tregg Cronin,.
“Some analysts are beginning to slash their final soybean planted acre numbers,” although he highlighted too that the US looks like retaining hefty stocks of the oilseed whatever.
Winter vs spring
Chicago soft red winter wheat for July added 1.9% to $5.35 ½ a bushel, the strongest finish for a spot contract in nine months, helped in part by the jump in fellow grain corn, but also by its own travails, with Midwest wetness seen as hampering the US harvest of the type.
Kansas City hard red winter wheat for July gained too, although by a weaker 1.2% to $4.68 ¼ a bushel.
“While the potential rain totals in the southern Plains are expected to be lighter, what is forecast looks to be a problem for those looking to start the hard red winter wheat harvest,” Benson Quinn Commodities said.
Minneapolis spring wheat for July added a modest 0.3% to $5.66 ¼ a bushel, weighed by forecasts of much-needed showers for Canada’s Prairies.
While dryness “remains a concern across south eastern Alberta, southern Saskatchewan, and south western Manitoba, maintaining significant stress on spring and canola… showers are expected to develop tomorrow and Saturday, with another chance for rainfall next week”, Maxar said.
In New York, cotton futures made small gains, adding 0.4% to 66.83 cents a pound for July, with the support from its fellow row crops undermined by some weak US export sales data for last week.
The USDA announced old crop upland cotton sales of 75,110 running bales, the lowest figure in six months, with 2019-20 sales of 42,959 running bales hardly making up for that.
And arabica coffee futures dipped too, by 1.8% to 99.75 cents a pound for September, little helped by data from Conab showing the amount of coffee in the hands of private companies in Brazil as of the end of March up 31% year on year at 12.89m bags.
Arabica stocks were up by 33% at 11.85m bags, with robusta ones up 20% at 1.04m bags.
London robusta futures fared relatively well in shedding 1.1% to $1,414 a tonne for September.