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Evening markets: Grains rally falters, as US holiday provokes profit-taking


In the end, the prospect of a US long holiday weekend did inspire selling in grains.


Agrimoney flagged earlier the potential for a bout of profit-taking on gains made this week, given that US markets will be closed for three days (from Friday’s Independence Day holiday) and the potential of sentiment to turn on a dime (again) if the Midwest weather outlook alters in the meantime.


And that is what transpired, leading to substantial price losses, including in corn, the Chicago leader of late, which ended down 2.0% at $3.43 ½ a bushel for September, and by 1.9% at $3.50 ½ a bushel for December.


(The September lot is still up 7.6% for the curtailed week, and the December one up 3.7%.)


“Post-June 30 crop report buying enthusiasm is on pause ahead of the extended three-day weekend,” said Richard Feltes at RJ O’Brien.


’Subsoil moisture levels to decline’

As to what happens when markets reopen, “we will see what the weather outlook looks like on Sunday night” on runs of both European and GFS weather models, Brian Henry at Benson Quinn Commodities told Agrimoney.


“If into the third of week of July the Corn Belt is looking relatively dry, there might be cause to pull the market a little bit higher.”


As it is, “current subsoil moisture levels are below the 2008-19 average across all of the Corn Belt states, with the exception of Missouri,” said Maxar, reporting “the most significant soil moisture deficits… in Indiana, Michigan, and Ohio.


“Subsoil moisture levels are expected to decline across most of the Corn Belt over the next week, particularly in Iowa and Illinois, which when combined with higher temperatures will increase stress on corn and soybeans.”


‘Off the table’

“Weather will hold the key - just as it did last year when favourable mid/late summer weather mitigated the yield drag from late planting,” Mr Feltes said.


Nonetheless, he added that “prospects for 3.3bn-plus bushel end-2020-21 US corn stocks, a long-held assumption by managed funds, are off the table until/unless mid-July weather conditions improve”.


US corn export sales data for last week were mixed with the total for this season of 361,100 tonnes, shy of market expectations of 450,000-700,000 tonnes but the total for 2020-21, at 262,700 tonnes, above forecasts of at best 200,000 tonnes.


More encouragingly, actual exports, at 1.44m tonnes, were a high for 2019-20, while the USDA revealed too the sale of sales of 202,000 tonnes of US corn to China for next season – albeit that some market rumour had suggested a figure at a multiple of that.


Farmer sales

For soybeans, the USDA revealed the sale of 126,000 tonnes of US soybeans to China too for next season, again after some mixed US export sales data for last week.


Old crop sales, at 241,700 tonnes, fell below expectations of 300,000-800,000 tonnes, but those for 2020-21, of 841,700, exceeded market forecasts, also pitched at 300,000-800,000 tonnes.


Still, with soybeans have gained less this week, there was less in the way of end-of-week profit-taking, with the August lot easing just 0.25 cents to $8.91 ¼ a bushel, and the new crop November one by 0.3% to $8.96 ¾ a bushel.


While the lot earlier retook the $9.00-a-bushel mark, there was talk that this attracted a wave of producer selling (as has also been reported from the corn market this week).


‘Could suggest new shorts’

Wheat fared markedly worse, with the prop of rival grain corn weakened, and fell by 1.4% to $4.92 a bushel for September delivery, after earlier rejecting, for a third successive session, a rise above the key $5.00-a-bushel mark.


Terry Reilly at Futures International noted “light profit taking” in the grain, while Steve Freed at ADM Investor Services said that “increased global north hemisphere harvest and talk of reduced import demand continues to weigh on futures”.


Mr Freed also flagged that in the last session “open interest went up in wheat. This could suggest new shorts in wheat”.

US export sales data for last week, at 414,300 tonnes, were within the range of expectations of 250,000-600,000 tonnes that investors had expected.


Also on the negative side for wheat prices, the UN Food and Agriculture Organization eased back on expectations for a tightening of supplies in key exporting countries.


‘Steep uptrend’

Among soft commodities, New York cotton managed to extend winning ways, triggered by its own smaller-than-expected US sowings figure on Tuesday, with the December lot closing up 0.3% at 62.95 cents a pound, taking gains for the week to 5.8%.


US export sales data for this season were, as for the other row crops, soft for 2019-20, at 67,296 running bales for upland cotton.


However, those for 2020-21, as starts next month, at 246,191 running bales, were strong.


ADM Investor Services also noted technical support for the fibre, noting that “December cotton remains in a steep uptrend and has already pushed past the 50% mark of the January 13 to April 2 break”.


‘Air mass of polar origin’

However, September arabica coffee futures fell by 0.8% to 103.20 cents a pound, reflecting in part weakness in the Brazilian real, but also waning expectations of a Brazilian frost.


“An air mass of polar origin advances through southern Brazil,” said weather service Somar.,


“Even so, there is no forecast of frost formation for the coffee areas of Paraná, São Paulo and Minas Gerais in the coming days.”


Another cold wave is expected started mid next week in northern Paraná and Alta Paulista, but for now looks like stopping short of producing a frost too.

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