Too little, too late.
The dollar tumbled late in the Chicago grain-trading session, after the US Federal Reserve, while holding interest rates steady as had been expected, shifted towards a more dovish stance, pointing to possible interest rate cuts ahead.
However, while the dollar did at one point trade 0.6% lower against a basket of currencies, the decline fostered only a small recovery in corn futures from a late low, with the Kuly contract ending down 2.1% at $4.41 a bushel.
The December lot closed down 2.2% at $4/53 ¼ a bushel.
Negative for prices was some – although not universal – talk of improved US Midwest weather ahead for spring crops which did make it into the ground.
‘Heat to build’
Richard Feltes at RJ O’Brien said that while the five day outlook showed “Midwest precipitation coverage of 80… 6-15 day maps look drier than early week maps”.
“Forecasts continue to call for heat to build across the Corn Belt,” said Karl Setzer at AgriVisor.
“Nothing extreme is forecast at this time, and in fact, heat is just what the crops need following the cool, wet start to the growing season.”
Maxar noted in the six-to-10 day outlook a “drier trend in the north-western Midwest” which would “allow wetness there to ease a bit”, with the 11-15 day outlook showing “drier weather in the eastern and southern Midwest”.
‘Disastrous planting season’
Sure, Maxar also said that “the impact of the disastrous planting season across the Corn Belt is now showing up on satellite imagery”.
The key NDVI vegetation index was showing “below normal across most of the Corn Belt due to a combination of unplanted acreage and extremely late development of crops”.
“The current NDVI value in Illinois is the lowest for this date since at least 2000,” a factor “also the case for North Dakota, South Dakota, Nebraska, and Indiana.”
‘Overbought domestic values’
However, as to how much of that is already in corn prices, and how significantly elevated values were shutting off demand, to match ideas of reduced output…
Benson Quinn Commodities thought it a session where “overbought domestic values face global demand constraints”.
“Demand worries and the possibility for improving weather give bulls pause to push values higher.”
In fact, US ethanol production data for last week, down 15,000 barrels a day at 1.081m barrels a day, fell less dramatically than investors had expected, with stocks of the biofuel easing too, by 189,000 barrels to 21.61m barrels, a one-year low.
However, there remains the talk of some US ethanol plants, as well as feed users, turning to Brazil for imported supplies, in the face of expensive domestic values, and logistical problems too.
‘Winter wheat drydown’
For wheat, there was not just the retreat in market leader corn to deal with, but the pressure of improved weather for the US harvest – allowing harvest pressure on prices to build.
In the six-to-10 day outlook, “winter wheat drydown should progress well in the western Plains”, said Maxar, although adding that “some wetness will likely linger in the south eastern Plains”.
In the 11-15-day timescale “drier weather in the central and southern Plains would favour winter wheat drydown”.
‘Yields said to be very large’
Meanwhile, what is being harvested is coming in unexpectedly strong.
“Early yields and quality from Oklahoma deemed good may also be adding to resistance” to price gains, Benson Quinn Commodities said.
Tregg Cronin at Halo Commodity Company said: “Early quality which has hit elevators in Oklahoma and Texas is not as bad as feared and yields are said to be very large.
“We are still 7-14 days away from serious combining in Kansas, if weather allows, but traders must be realising the hard red winter wheat crop is not going to be killed by too much water.”
‘US wheat overvalued’
As for the demand side, there was some good news in that Egypt’s Gasc came in with another tender (and was revealed after the close of markets to have bought 290,000 tonnes of the grain).
However, offers to the tender revealed how uncompetitive US prices are.
“Egypt is in for wheat and US vales appear $24-34 per tonne overvalued compared to Russian and Romanian offers,” said Benson Quinn Commodities.
(Russia won two cargos, with prices as low as $196.16 a tonne excluding freight, with Romania winning the balance of 180,000 tonnes at $198 a tonne excluding freight.)
And then there is the talk, as Terry Reilly at Futures International highlighted, “of French and Russian wheat making its way into Mexico”, on the US’s doorstep.
Meanwhile, in the Black Sea, the hot and dry pattern which has been unsettling some investors “may break down some next week”, said Maxar.
Chicago soft red winter wheat for July closed down 1.9% at $5.22 ¼ a bushel – ending below its 10-day moving average for only the second time since the grain market rally kicked off on May 13.
Paris wheat for September, less uncompetitive, shed a more modest 1.1% to E179.00 a tonne.
Soybean futures for July shed 1.2% to $9.03 ¼ a bushel, back below their 200-day moving average, weighed by the drop in corn, and the ideas of improved US weather ahead.
‘The most amazing thing I’ve witnessed…’
In New York, fellow row crop cotton fared better, adding 0.5% to 67.16 cents a pound, extending their recovery of the last session on hopes for US-China trade accord provoked by a tweet from US President Donald Trump heralding further talks.
“The way these markets trade based on positive/negative Trump tweets is probably the most amazing thing I’ve witnessed in my 20+ years of paying attention to them,” said Ron Lee at McCleskey Cotton.
“If he’d just give me a heads up before he tweets something positive/negative about the Chinese trade war...”
Mr Lee added that on prospects for the US cotton crop this year, “you get conflicting reports out of West Texas,” the key producing area.
“But it is pretty certain that irrigated, high-yielding areas north of Amarillo have been negatively affected by flooding and colder than usual temperatures.”
By contrast, “if we can survive hurricane season this year, Georgia, I believe, is set up to make a very good cotton crop,” he said, adding that “the same is generally true for Alabama and the Carolinas/Virginia”.
And also putting in a strong performance was New York arabica coffee, which for September settled up 1.4% at 97.95 cents a pound, climbing back above its 40-day and 50-day moving averages, at about 97 cents a pound, after the last session’s fall below these levels failed attract follow-on selling.
Whether this was just because there is a holiday coming up in Brazil, where Thursday is Corpus Christi day…
This will “likely encourage many within the country to take a bridge day follow on holiday on Friday and an extended long weekend,” said I&M Smith.
This in turn will “most probably slow Brazil price fixation hedge selling activity for the end of this week, which shall take some of the selling pressure off the markets for a couple of days”.