The gain in US grain prices gathered pace as data showing that weather had prevented farmers from sowing 9m acres of crops undermined raised further questions over upbeat harvest forecasts.
The USDA’s Farm Service Agency (FSA) put 5.38m acres of corn, 1.22m acres of soybeans and 1.9m acres of wheat (plus some other area) down to prevent plant, meaning that weather setbacks prevented sowings, and opening up the potential for insurance claims by growers.
The total of 8.99m acres, largely in the Dakotas, compares with “normal prevent plant area of around 4m acres,” said Richard Feltes at RJ O’Brien.
While official data already include an allowance for larger-than-usual sowings setbacks, there remains scope for further cuts, many investors believe.
Mr Feltes said was hearing a “wide range of estimates” based on the FSA data “suggesting the USDA is overstating 2020 US corn area by 1.5m-6.0m acres, and soy area by 1m-4.5m acres”.
‘More damage than first thought’
Add to this the damage caused by Monday’s derecho storm through Illinois and Iowa, and doubts grew over the hefty 2020 US corn and soybean production estimates released by the USDA on Wednesday in its benchmark Wasde briefing.
Benson Quinn Commodities said that the “difference between” derecho and “the usual bad weather issues that get attention” was that “this one occurred in a couple of states versus a couple of counties”, and that “winds were 80-100+ miles per hour, versus 60-70 mph”.
CHS Hedging flagged “concerns the derecho storm did more damage than first thought”, besides support to corn prices from covering by funds of part of their large short position – a shift encouraged by the positive post-Wasde price performance.
“Corn has poked above key moving averages, which increases the potential of fund short covering,” said Benson Quinn Commodities.
Corn futures for December, up 3.9% at $3.40 a bushel in late morning trading in Chicago, traded above their 40-day, 50-day and 100-day moving averages.
‘Huge export sales’
Also encouraging bulls was some positive news on demand too, in terms of US export sales, albeit focused more on soybeans than corn.
For corn, data were mixed, with new crop sales of 553,100 tonnes towards the lower end of market expectations of 300,000-1.00m tonnes, although 2019-20 sales of 377,200 tonnes were towards the upper end of the range of forecasts, of 100,000-400,000 tonnes.
Still, as an extra fillip, the USDA through its daily alerts system revealed the export sale of 110,000 tonnes of US corn, to an “unknown” destination.
And for soybeans, a daily announcement of 202,000 tonnes of export sales to unknown plus 197,000 tonnes to China added to some blowout data for last week.
“USDA export sales for soybeans were excellent,” said Terry Reilly at Futures International, while Richard Feltes termed the new crop figure “huge”.
Soybean futures for November gained 2.2% to $9.02 ¼ a bushel, jumping back above 20-day, 40-day and 50-day moving averages, besides the much-watched $9.00-a-bushel mark.
Gains were helped by soymeal, which added 3.3% to $299.30 a short ton for December delivery, helped by its own decent US export sales data for last week, of 182,359 tonnes, the second highest figure of the last two months.
“Strength in soybean meal is supporting soybeans while keeping soybean oil at bay despite another rally in Asian vegetable oils,” Mr Reilly said, referring to investors’ penchant for spreading the soybean processing products against eachother.
Soyoil peer palm oil in fact ended up 1.0% at 2,716 ringgit a tonne in Kuala Lumpur, helped by the strong performance overnight by vegoils on the Dalian exchange on talk of China restocking to the tune of 2m tonnes of soyoil.
Wheat futures added 1.5% to $4.98 ½ a bushel, pulled higher by rival grain corn, but also by a further downgrade by Strategie Grains to its forecast for the EU soft wheat harvest.
As an extra support to weakened ideas for the EU crop, the German agricultural cooperatives group DRV lowered by 1.0m tonnes to 21.5m tonnes its forecast for the country’s wheat production this year.
While US wheat export sales data for last week were modest, at 367,800 tonnes, towards the lower end of market expectations of 250,000-800,000 tonnes, international trade provided a modicum of support in terms of Russian offers to the latest Gasc tender which were broadly higher than those at the previous event earlier this week.
Kansas City hard red winter wheat futures continued to outperform, after their US stocks downgrade in the Wasde, adding 2.0% to $4.26 ¼ a bushel.
Many soft commodities traded stronger too, with New York arabica coffee futures for December trading up 3.9% at 118.70 cents a pound in late deals, back above their 200-day moving average.
A strong real, up 1.1% against the dollar, helped the move, in boosting the value in dollar terms of assets in which Brazil is a key player.
ADM Investor Services added that the coffee market “seems to have put in a short-term low near the 50% mark of the June-August rally. It may see a resumption of the uptrend soon.
“Global demand has been on the mend over the past few weeks. European demand has improved from reduced coronavirus restrictions, and that bodes well for North American demand when coronavirus restrictions are lifted in the US and Canada.”
London November robusta coffee futures gained 3.0% to $1,382 a tonne.
New York raw sugar for October stood up 2.1% at 13.11 cents a pound, a five-month high for a spot contract, also finding support from the stronger real, besides from fund shifts as prices traded above the 13.00 cents-a-pound mark.
Tobin Gorey at Commonwealth Bank of Australia noted a narrowing discount between the October lot and the March 2021 contract, which was up 1.8% at 13.64 cents a pound.
“At the barest carry the market is signalling that the prospective supply pressure from the southern hemisphere is modest,” he said.