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Evening markets: Grains post multi-week highs, helped by China orders

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Physical elements in the grain market – on both sides of the balance sheet - helped keep the grains rally stoked, taking prices of corn, soybeans and wheat to multi-week highs.

 

On the demand side, US Department of Agriculture data, previewed earlier by Agrimoney, did not disappoint – fuelled indeed by Chinese orders.

 

For soybeans, US new crop export sales for last week came in at 1.87m tonnes, in six figures for a sixth successive week, and comfortably within the range of market expectations of 1.20-2.20m tonnes.

 

China took 592,000 tonnes, and was likely involved too in the 822,000 tonnes booked to “unknown”.

 

‘Big, big, big corn sales’

For corn, new crop export sales of 1.18m tonnes were also towards the upper end of market expectations of 700,000-1.30m tonnes.

 

China put its hand up for 666,000 tonnes of the total

 

And for wheat it was fingered too, for 123,000 tones of the 764,100 tonnes, exceeding market forecasts, and the second biggest figure of the 2020-21.

 

Hard red winter wheat export sales of 483,741 tonnes did most of the heavy lifting, and represented a historically high number.

 

And that was not all, with the USDA also unveiling, through its daily alerts system, for corn a further 747,000 tonnes of sale to China, plus 140,000 tonnes to “unknown”.

 

“Weekly export sales look good,” said Benson Quinn Commodities, highlighting the “big, big, big corn sales on daily reporting” too.

 

‘Crops might be smaller than thought’

As for the supply side, there is some idea of US producers not cooperating with the grains rally as many have been expecting them to.

 

“Buyers had thought farmers would market a large volume of bushels right out of the field,” said Karl Setzer at AgriVisor, an idea which gained credence with the derecho storm damage to Iowa’s infrastructure seen as crimping growers’ ability to store crop for selling later.

 

(That said, the storm ensured there will be less Iowa crop to deal with too.)

 

“There is a building volume of carry in the market though, especially on corn, which may prevent this [accelerated marketing] from happening,” Mr Setzer added.

 

“Farmers have also not been willing to part with as much old crop as expected.

 

“Not only it this creating basis opportunity, it is also bringing into question how big the new crop really,” with producers’ “unwillingness to extend sales” having many investors “believing the crops might be smaller than thought”.

 

‘Crushings plumeted’

Slow selling by producers has been particularly in the limelight, of course, in Argentina, where economic travails, and a reluctance to hold pesos, has farmers reverting to their historic trend of using crop as a currency hedge, and as protection against inflation.

 

As Oil World noted, “Argentine oilseed crushings plummeted to 3.75m tonnes in July and were down 1.1m tonnes tonnes from a year earlier, reflecting a lack of farmer selling.

 

“While oilseed stocks were record large at the end of July, stocks of vegetable oils at mills fell to multi-year lows at the end of July.”

 

Meal, oil

With Argentina the top exporter of both soybean processing products, soymeal and soyoil, futures in both proved buoyant, despite some mixed US export sales data.

 

Chicago soymeal futures for December closed up 1.2% at $303.10 a short ton.

 

December soyoil soared 3.0% to 33.50 cents a pound for December, a seven-month closing high for the contract, also gaining help from rival grain palm oil, which added 1.4% to 2,682 ringgit a tonne in Kuala Lumpur for November, despite a series of cautious price outlooks this week.

 

One factor undermining bearish thoughts is the labour shortage, spurred by coronavirus, which is hurting ideas of South East Asian production, meaning much crop is going unharvested, and so untapped for palm oil.

 

‘Maintaining stress’

These gains offered extra support to soybeans, to help the Chicago November lot close up 1.9% at $9.42 a bushel, also a seven-month closing high.

 

Also helpful was news that Brazil is to remove impart tariffs on rice, soybeans and corn to try to cool domestic markets stoked by mega exports, helped by currency weakness, which has reduced stocks to a whisper.

 

“Will they import US soybeans? Yesterday they were raising past year production amounts today they are fresh all out?” Benson Quinn Commodities mulled.

 

The Midwest weather outlook was supportive too, with Maxar reporting that “the forecast has trended notably drier across eastern Nebraska, Iowa, and northern Illinois today and soil moisture is expected to decline further over the next week, maintaining stress on corn filling and soybean growth”.

 

This when “subsoil moisture levels remain below normal across most of the major Corn Belt states, particularly in Iowa, Nebraska, and Michigan”.

 

‘Driest since at least 2008’

“The dryness remains most severe in Iowa and soil moisture levels are now slightly lower than they were at this point in the growing season during 2012 and 2013,” Maxar added.

 

“Soil moisture is also now lower in Michigan than any year since at least 2008 and soil moisture in Nebraska are on par with 2012,” when US crops were hurt by prolonged drought (blamed by some on a La Nina, which is rearing its head again).

 

The US Drought Monitor showed 60.9% of Iowa, the top corn-growing and second-ranked soybean producing state, in drought, up 14.4 points week on week, and the highest figure in nearly seven years.

 

All this was helpful for corn futures too, which for December ended up 1.1% at 3.58 ½ a bushel, their best close in nigh on two months.

 

‘Sharp fall in French production’

Soft red winter wheat futures, meanwhile, soared 2.0% to $5.39 ¾ a bushel for December, a six-week closing high.

 

Kansas City hard red winter wheat futures for December soared 2.4% to $4.72 ¼ a bushel, a two-month closing high, and taking them to a finish above their 100-day moving average for the first time since early May.

 

“Wheat markets are trading higher… finding support from the potential for lower exports from the EU this year due to a sharp fall in French soft wheat production,” CHS Hedging said earlier.

 

While the International Grains Council lifted its forecast for the world wheat harvest overall, the EU (excluding UK) production figure was cut by a further 3.8m tonnes to 121.8m tonnes.

 

Paris wheat futures for December gained 1.5% to E186.75 a tonne.

 

‘Hurricane Laura has made landfall’

Among soft commodities, cotton futures for December eased by 0.3% to 65.37 cents a pound, as Hurricane Laura was, in its early manifestation at least, seen as pulling its punches in terms of crop damage.

 

“Hurricane Laura has made landfall, with the greatest damage thus far to the east of most expectations,” said Louis Rose at Rose Commodity Group.

 

“The southern Mississippi river delta will now likely see greater precipitation than originally expected, but overall damage will likely be limited.”

 

US export sales of cotton last week, at 156,600 running bales for upland, were the best in two months, although hardly too much to write home about.

 

‘Improving global risk sentiment’

New York raw sugar for October gained 1.5% to 12.77 cents a pound, after earlier finding support (again) at its 200-day moving average, at 12.50 cents a pound.

 

It was helped too in part by ideas of losses in Louisana cane fields to Laura, besides by gains in Brazil’s real.

 

ADM Investor Services reported that “sugar has found support from stronger key outside markets and improving global risk sentiment”.

 

However, on a bearish note, it added that “until the supply outlook changes for Brazil and/or India, sugar remains vulnerable to more selling pressure”.

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