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Evening markets: Re-emergence of importers helps wheat futures gain ground

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Wheat importers are back again.

 

It needed something a bit special in grain markets to inspire buying against a backdrop of a turn down, eventually, in sentiment on a China-US trade deal.

 

(Early buoyancy on reports of a “constructive” phone call over the weekend was punctured later on by a CNBC story that a Chinese trade official was pessimistic on a deal getting done.)

 

But wheat was helped in part by a (small) downgrade by Strategie Grains to its forecast for European Union winter sowings ahead of the 2020 harvest, after persistent wetness hampered fieldwork in parts of France, the bloc’s top grower of the grain, and more severely in the UK, the third-ranked.

 

The revision, while only of some 200,000 hectares, put a year-on-year fall in area on the cards for 2020.

 

And soft wheat output was pegged at 142.3m tonnes, down 3.2m tonnes year on year.

 

‘Seen as supportive’

Furthermore, in the US, there are ideas of a slow finish to the winter wheat planting season, with US Department of Agriculture data later on Monday seen showing seedings at 95% according to a Reuters poll, up just three points week on week.

 

Meanwhile, some of the importers whose interest supported wheat prices last week turned up again.

 

Tunisia and, importantly, Algeria unveiled tenders, with Ethiopia and Jordan already in the market.

 

This following Egypt’s purchase late last week of 465,000 tonnes of Black Sea wheat.

 

“Despite the EU unable to price competitively enough to make [Gasc] line-up, the tender is seen as supportive showing there is still plenty of demand around,” said CRM AgriCommodities.

 

Price performances

Paris soft milling wheat for December closed up 0.8% at E178.00 a tonne.

 

With the dollar easing too against the euro, Chicago soft red winter wheat prices fared a little bit better, with the December lot closing up 0.9% at $5.07 ¼ a bushel, rising back above its 40-day moving average.

 

This after earlier testing support around the $5.00-a-bushel mark, where the 100-day and 200-day moving averages are situated.

 

The Chicago March lot gained 0.8% to $5.10 ¾ a bushel.

 

London feed wheat, the star of the complex of late on the UK seedings fears, eased off this time, by 0.7% to £151.00 a tonne for May 2020 delivery, undermined by the strength of sterling, besides some improvement in the weather.

 

Export worries

Back in Chicago, corn lost ground against wheat, ending down 1.0% at $3.67 ¾ a bushel for December delivery, lacking the same demand gusto.

 

Actually, US corn exports last week at 637,000 tonnes, were at least improved from the 582,000 tonnes the week before.

 

But that was not enough to change the narrative of disappointing export volumes.

 

US corn export “commitments so far this crop year are showing three key trade partners down significantly”, said CHS Hedging.

 

‘Weather leans negative’

Meanwhile, for soybeans too, “weather leans negative” for prices, said Richard Feltes at RJ O’Brien, flagging “incoming beneficial and timely last half of November rains slated for Brazil and Argentina.

 

Furthermore, there are “no major snags in US harvest weather, except for pesky last half of November showers across the Delta”.

 

Benson Quinn Commodities also said that “weather for South America leans negative” for prices, as “better precipitation is slated for northern Brazil and southern Argentina.

 

“These are areas that could use better moisture.”

 

‘Corn basis remain strong’

Sure, there remains the supportive factor of strong US cash markets, a reflection of a late-running harvest, meaning short-term supplies less ample than might have been expected.

 

Corn basis remain strong in the east driven by domestic demand,” CHS Hedging said, noting that “posted numbers in Decatur [Illinois] are $0.20 a bushel above December futures while Cedar Rapids [Iowa] is still strong for harvest at $0.08 a bushel below”.

 

For soybeans,” basis continues to do a lot of work”, CHS Hedging said, adding that “since the beginning of the month, processors have firmed a good $0.20 a bushel through much of the region”.

 

Still, Mr Feltes said that it was “notable” that Chicago futures are “content to leak lower despite firming US basis.

 

“I suspect rallies will encounter selling if favourable South American weather continues.”

 

‘Path of least resistance to the downside’

Benson Quinn Commodities said that “it feels like the path of least resistance is to the downside as harvest continues at a slow pace, technicals lean negative and South American weather is favourable”.

 

And that went for soybeans too, which ended down 0.8% at $9.10 ¼ a bushel for January delivery.

 

This despite some decent US export data for last week, at 1.53m tonnes, up from 1.35m tonnes the week before.

 

The decline also contrasted with a 0.7% gain to 30.64 cents a pound in December soyoil, as investors took a second glance at US crush data from Friday, which implied demand of the vegetable oil stronger than had been thought, yet which failed to support values on the day.

 

‘Inventories steadily growing’

Of course, the retreat in optimism over a China-US trade deal was a particular blow to bulls in soybeans, as a crop usually bought by the former on a large scale from the latter.

 

But cotton, another such agricultural commodity, lost more, ending down 1.1% in New York for March delivery, at 65.97 cents a pound.

 

Pressure from fresh supplies from the US harvest was seen as undermining values, with Jack Scoville at Price Futures noting that “certified inventories have been steadily growing”.

 

He added that “the market could hold to a sideways-to-weaker pattern until the tail end of the harvest”, although noted that that “the harvest will start to wind down over the next couple of weeks”.

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