What goes up must come down.
That includes oil, which after its surge in the last session - its biggest one-day jump in a decade - on the weekend strike on Saudi Arabian oil installations fell back on Tuesday as the country downplayed the dent to crude supplies.
Prince Abdulaziz bin Salman, Saudi Arabia’s energy minister, said the country had restored half of its lost production, the output to be fully restored by the end of this month.
Brent crude stood down 6.4% at $64.60 a barrel in late deals, giving back a good portion of the last session’s headway.
And with that, many of the moves of the last session reversed a bit too.
Ethanol, for instance, ended down 1.4% at $1.378 a gallon in Chicago for October delivery, as RBOB gasoline fell 4.4% to $1.6752 in late trading.
‘No frost threat’
It was little surprise to see corn, a key ethanol feedstock, lower too, by 1.5% to $3.68 a bushel in Chicago for December delivery.
Also ranged against the grain was a resilient weekly US corn rating by the US Department of Agriculture, of 55% good or excellent, when investors had expected a 1 point decline.
The US weather outlook weighed too, with Richard Feltes at RJ O’Brien saying it leaned “negative” for prices, showing a “continuation of above-normal US crop area temperatures through September”, helping late development of a late running corn crop, as well as soybean one too.
Furthermore, there remain few worries of an imminent frost.
Karl Setzer at Agrivisor said that there was “no US frost threat for two weeks”.
‘Lowest in a decade’
The weakened expectations for ethanol consumption of corn returned focus to demand worries for US crop too.
Mr Setzer, saying that “thoughts are the action was overdone” in the last session, added that “this is especially the case in the grains and soybeans where the US is now getting overvalued in the global market”.
Terry Reilly at Futures International noted reports that Ukraine corn export prices “are the lowest in a decade”.
Still, at least soybeans had some protection from demand concerns by news of a further sale of US crop to Chinese importers, this time of 260,000 tonnes, taking to 720,000 tonnes the total in three trading days.
“Trade continues to talk up the likelihood that China will source 3m-5m tonnes of US soybeans,” RJ O’Brien’s Richard Feltes said.
Still, soybean futures for November ended lower, if less so than corn, dipping 0.6% to $8.93 ¾ a bushel.
“Trade is shrugging off the Chinese soybean buying from the past two session as cumulative bookings are still well behind a year ago,” Agrivisor’s Karl Setzer said.
The reversal in oil prices also took a toll on biodiesel feedstock soyoil, which for December ended down 0.8% at 29.99 cents a pound.
Paris rapeseed, which as a another raw material for biodiesel plants had also gained in the last session, closed down 0.5% at E386.00 a tonne in Paris, for November delivery.
Sticking with the oil theme, raw sugar futures for March closed down 1.4% at 10.94 cents a pound in New York, as support from the crude rally failed.
As Agritel said, “the relationship between oil and sugar is important with the common denominator between the two markets - ethanol”.
Furthermore, while Abares and Rabobank both raised forecasts for the world sugar output deficit in 2019-20, neither were exactly bullish on prices, pointing to the large stocks with which the world will enter the season.
Jack Scoville at Price Futures also reminded of the India factor, and its large supplies, saying that reports “indicate that the country still has a large surplus of white sugar that probably must be exported.
“India is reporting very good monsoon rains and production prospects for this year are strong.”
‘Showers are finally to increase’
Back to the oil rally, and another knock on effect of the last session’s oil rally – a strengthening rouble – also reversed with crude.
The rouble stood down 0.7% against the dollar in late deals, improving the competitiveness of Russia’s exports, and so weighing on values of rival shippers such as France, where Paris wheat futures for December ended down 0.4% at E171.00 a tonne.
Chicago wheat for December fell 0.8% to $4.84 ¼ a bushel, with some pressure too from improved ideas of rain relief in Australia.
“Showers are finally expected to increase a bit later this week and next week in southern Queensland, northern New South Wales, and South Australia,” said Maxar.
That said, it added that “much more rainfall will still be needed for wheat”, and as a reminder of Australia’s woes, the Grain Industry Association of Western Australia downgraded its forecast for Western Australia’s crop by 660,000 tonnes to 6.79m tonnes.
“Hopes of an average season for Western Australian grain growers following rain in late August have been dashed with continuing warm dry conditions in the northern half of the state and recent frost events in the southern half,” the association said.
‘Will hamper harvesting’
Still, bulls had one straw to clutch on too, with one door reopening – that of worries over a slow North American spring cereals harvest – even as the oil rally closed.
In Canada’s Prairies, “rains across the region this week will hamper drydown and harvesting efforts, most notably in Manitoba”, Maxar said.
Although Minneapolis spring wheat for December could only put in a less weak performance than peers, ending down 0.5% at $5.06 ½ a bushel, oats posted gains, with the Chicago December lot ending up 0.3% at $2.81 ¼ a bushel.