Grain markets grabbed a lot of investor interest, after a barrage of (largely bearish) US data.
Wheat futures for March ended down 2.9% at $4.20 ½ a bushel in Chicago - on the biggest day bar one in six months for spot contract trading volumes – after the US Department of Agriculture estimated US winter wheat sowings at a 109-year low but ahead of market expectations
“Trade sources missed winter wheat area estimates badly,” said Richard Feltes at RJ O’Brien, noting that “this is the first year since 2012 when US winter wheat acres have exceeded the average trade guess.
“Are US farmers, against backdrop of tight margins, seeking low cost of production crops?”
The sowings figure, speaking of better production prospects for 2018-19 than had been expected, came as the USDA also raised its estimate for US stocks at the close of 2017-18 – ie meaning extra supplies going into next season too.
Ditto, corn futures for March dropped 0.4% to $3.46 ¼ a bushel, a contract closing low, after the USDA raised its estimate for domestic stocks at the end of 2017-18 by more than investors had forecast, helped by a surprise upgrade to the estimate for last year’s harvest yield.
At least soybean futures pleased bulls, ending up 1.3% at $9.60 ½ a bushel for March – the first winning session this week, and rebounding from a near-five-month low - after the USDA made an unexpected cut to its estimate for last year’s harvest.
This was in part offset by a cut in the forecast for 2017-18 US soybean exports – now seen falling for the first time in five years.
‘Tend to dampen soy rallies’
Indeed, some investors remain cautious over soybean price prospects, with Richard Feltes at RJ O’Brien flagging the potential for further downgrades to the USDA forecast for US exports of the oilseed.
Such ideas, in boosting stocks expectations, “will tend to dampen soy rallies and encourage the managed fund short to add to existing positions, and discourage additional managed fund buying,” Mr Feltes said.
At Global Commodity Analytics, Mike Zuzolo said: “Don’t look for support in the soybeans until we get the weather results from South America, notably Argentina, when we come back from the long weekend.
(US markets are closed on Monday for the Martin Luther King Day holiday.)
“Otherwise, if it rains in Argentina, I could see the resumption of the trade buying corn and selling soybeans, once wheat finds support,” Mr Zuzolo added.
But in New York, cotton futures for March - having closed the last session limit up, and raced ahead again early on Friday to an eight-month high (for a spot contract) of 84.65 cents a pound ended the day down 1.2% at 81.68 cents a pound.
While the USDA had on Thursday sprung a bullish surprise, with some upbeat US export data, on Friday, its crop revisions
The USDA data were not so upbeat for the fibre, in trimming the forecast for US cotton stocks at the close of 2017-18 by just 100,000 bales to 5.70m bales – well short of the 290,000-bale downgrade that investors had expected, according to a Bloomberg poll.
While the USDA did cut its estimate for the 2017-18 domestic harvest by 177,000 bales, “due to small declines in regions outside the Delta”, a bigger downgrade than investors had forecast, the full-season export estimate was held at 14.8m bales.
Investors had expected the shipment figure to be upgraded above 15.1m bales.
Also in New York, cocoa futures proved weak, ending down 0.7% at $1,914 a tonne for March, amid nerves ahead of the market’s own key data, and the round of quarterly statistics on regional grinding volumes of the bean.
European numbers, due on Monday, are expected to show a rise of 2-5%, with North American data, on Thursday, are seen coming in up 1-3% year on year.
Still, March cocoa futures remain higher for 2018 so far, by 1.6%, amid ideas of the West African main crop harvest starting to wind down, easing pressure on prices from that score.
This when, as Jack Scoville at Price Futures noted, “arrivals in West Africa remain behind year ago levels when they were expected to be above year ago levels”.
“The market is also on alert for the Harmattan winds that can suck moisture from the soil and trees and really hurt bean quality and production,” he added.