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Evening markets: Demand factors help cotton, wheat buck negative ag session

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Cotton and wheat futures, helped by demand factors, bucked a somewhat negative day for ag futures.

 

The Bcom ag subindex eased by 0.4%, if remaining around its highest levels since March.

 

However, New York cotton futures for December managed a 1.2% gain to 64.52 cents a pound, its second best finish in nigh on six months, after the US Department of Agriculture showed that the US sold more than 140,000 running bales of the fibre last week.

 

‘Figures are supportive’

While not a mega figure, the 128,026 running bales of upland cotton sold was the largest in three months, on a current marketing year basis, and offering some hope to bulls of a return of demand as Covid-19 worries ease.

 

The orders were led by a return of China too.

 

And actual exports of 421,533 running bales of upland cotton last week were the largest in six months.

 

“We think that the latest figures are supportive at current trading levels. It seems that weakness in US currency is finally evident in weekly export data,” said Louis Rose at Rose Commodity Group.

 

The greenback was 0.1% lower on the day against a basket of currencies, remaining close to a two-year low.

 

Wheat gains

Wheat futures, meanwhile, gained 1.2% to $5.28 ½ a bushel in Chicago for December delivery, thanks to a spurt in the last hour or so of trading, ahead of which the contract had been only marginally higher.

 

Indeed, Paris soft milling wheat futures for December, taking cues from the flat Chicago performance at the time and an appreciating euro against the dollar, closed earlier off 0.3% at E181.25 a tonne for December.

 

US all-wheat sales last week were, at 522,964 tonnes last week, improved but not mega.

 

Still, investors took heart from the fact that this total included a rare sale of 90,000 tonnes to Brazil, a structural importer of wheat, which usually gets its supplies from Argentina. Is there more to come on this route?

 

Furthermore, there remains speculation of Chinese interest in US wheat, besides French origin, as China tries to fill more of its wheat import quota following a World Trade Organisation ruling.

 

Midwest dryness

But the strength in wheat contrasted with softness elsewhere in Chicago, where corn futures for December edged down 0.1% to $3.39 ¼ a bushel, albeit recovering from an early low of $3.35 ½ a bushel to ensure they ended back above their 40-day, 50-day and 100-day moving averages.

 

New crop corn export sales of 723,345 tonnes last week were decent, at the top end of the range of market expectations of 400,000-800,000 tonnes, although soft for old crop.

 

And there remains some concern at Midwest dryness.

 

Maxar - noting that “subsoil moisture levels have decreased across nearly all of the Corn Belt over the past week, with the exception of eastern North Dakota” - said that “dryness remains most severe in Iowa”, albeit that soil moisture levels there “are still not quite as low as they were at this point in the growing season during 2012 and 2013”.

 

“Soil moisture is expected to decline further across the Corn Belt over the next week, with the most severe dryness expected in Iowa, far northern Illinois, southern Wisconsin, southern Michigan, and far northern Indiana, leading to some stress on corn and soybeans.”

 

‘Glowing yields’

Separately, the weekly US drought monitor showed the proportion of Iowa – the top corn growing state, and second-ranked soybean producer - rated in drought at 45.5%, up 11.2 points week on week, and at the highest in six years.

 

Still, investors were unwilling to move futures too far either way with the results of the Pro Farmer crop tour coming up, and uncertainty how it will balance negative findings in Iowa with promising results elsewhere.

 

“Pro Farmer crop tour early results are showing glowing corn yields and high soybean pod counts for areas outside of storm-ravaged Iowa,” Benson Quinn Commodities said.

 

Corn vs soybean damage

 

Soybean futures for November fell further, by 1.0% to $9.05 ¼ a bushel, with comments from the Pro Farmer tour indicating less damage to Iowa soybeans than to corn from last week’s derecho storm.

 

As in fact some investors had suspected, with Dr Michael Cordonnier at Soybean and Corn Advisor saying on Tuesday that soybeans were “impacted much less than corn” from the storm.

 

“The strong winds lodged some of the soybeans, but that does not necessarily mean that the soybeans lost potential yield. Lodged soybeans can still yield very well as long as the weather co-operates.

 

For corn, however, he said that “the grain filling process is going to be disrupted”, meaning that “there could be more tip back of the ears, light kernels, and inadequate fill.

 

“There will be additional harvest losses due to the tremendous difficulty in harvesting tangled and down corn. The harvest loss alone might be as high as 25-30% in the hardest hit fields, or more.”

 

Soyoil slips

Furthermore, soybeans lost support from soyoil, which closed down 1.4% at 31.52 cents a pound for December, ending lower for the first time this week.

 

Malaysia export data, from cargo surveyors, for rival palm oil were not so hot, with ITS saying that shipments fell by 18.2% month on month in the first 20 days of August, compared with a 16.5% rate of decline at the 15-day stage.

 

Rival Amspec put the pace of decline at 21% as of August 20, compared with 16.3% as of August 15.

 

(The Kuala Lumpur palm oil market itself was closed on Thursday.)

 

And US export sales data for soyoil last week were dire, at zero for new crop and a negative 151 tonnes for this season – the first overall net negative figure of 2020.

 

Soybean export sales for last week were strong for new crop, at 2.57m tonnes, but such a figure had been expected by investors after a series of announcements already of Chinese orders of US supplies.

 

Thailand vs Brazil

Back in New York, raw sugar maintained its recent penchant for going nowhere fast. That is, for showing decent daily volatility, but ending up going sideways nonetheless.

 

The October contract closed down 1.7% at 13.01 cents a pound to cancel out most of the gains of the last session, and trade a touch softer for the week as a whole.

 

On the positive side for prices, “increasing concerns that Thailand will see 10-year low in production for the 2020-21 season has provided underlying support to the market, and it has helped offset a moderate decline in the Brazilian currency and lukewarm energy prices”, said ADM Investor Services.

 

However, on a more downbeat basis, Brazil upped its sugar output forecast for 2020-21 to a record high, just short of 40m tonnes.

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