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Evening markets: Soybean futures' winning streak ends in 13th session

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Thirteen indeed proved a winning number for soybean bears.

 

After 12 successive positive sessions, during which the Chicago November contract had gained 8.2%, the lot closed lower on Thursday, for the first time since August 21.

 

Not that the decline was massive, by all of 0.1% to $9.77 ½ a bushel.

 

And, after all, there remained some stories to give bulls a bit of fodder.

 

China purchase

Signally, China bought an additional 195,000 tonnes of US soybeans, the US Department of Agriculture announced through its daily alerts system.

 

That took to 2.13m tonnes the amount of soybeans that the USDA has, though the daily announcements, revealed in September as sold to China, with a further 582,000 tonnes booked to “unknown”.

 

Meanwhile, Brazilian soybean imports went up the agenda too, with the president of Conab suggesting that the country should indeed temporarily eliminate import tariffs on the likes of soybeans and corn, to keep domestic prices in check.

 

This as Conab forecast that Brazil’s soybean imports in 2019-20 would hit some 1m tonnes – very large by the country’s standards, thanks largely to an overenthusiastic export programme pegged at 82m tonnes.

 

‘Significant hedging opportunity’

Still, as far as China goes, the seasons will bring an end to its huge custom of US supplies.

 

Benson Quinn Commodities noted that “China is still shopping soybeans, although talk they were doing Argentine business in the April May slot offered resistance” to Chicago prices.

 

There were ideas of a pick-up in producer sales, with the likes of John Walsh at Walsh Trading suggesting that the soybean “rally may present a significant hedging opportunity.

 

“For producers, consider locking in both old and new crop sales in this level. It is difficult for me to see the market trade above $10.00 per bushel.”

 

And this before getting to the uncertainty presented by the USDA Wasde briefing due on Friday, seen as likely to encourage some investors to book profits.

 

Sure, there are expectations of a cut to the US yield estimate, and to the forecast for US stocks at the close of 2020-21. But will these trade expectations be realised?

 

Corn in demand

Soybeans’ sluggishness contrasted with a strong performance by December corn futures, which in Chicago ended up 1.3% at $3.65 a bushel.

 

That was its best finish in five months, and took it decisively ahead of its 200-day moving average (which it closed, just, above on Tuesday for the first time in 13 months).

 

The divergence was not all coincidence, with some talk of the unwinding of corn-soybean spreads ahead of the Wasde.

 

However, corn was helped too by its own China talk, with increasing focus on ever-growing ideas for the country’s imports.

 

China import talk

“There is more and more talk China will have to import well more than 10m tonnes of corn this crop-year,” said Terry Reilly at Futures International.

 

A Bloomberg report said that China may need to import about 30m tonnes of corn next year.

 

Mr Walsh said that “the Chinese continue to buy corn, and talk now that DDGs [distillers’ grains] will be added to the mix”.

 

Such ideas have only gained traction with speculation of storm damage to Chinese crops from a series of typhoons, on top of the inundations previously logged, although in more southerly areas.

 

‘Russian wheat has rallied’

If corn’s strength was one support to rival grain wheat, it was not the only one, with a series of import tenders also supportive – in particular a 715,000-tonne one was Saudi Arabia.

 

Sure, Russian origin remains favourite for business where eligible, thanks a harvest which keeps getting bigger, with SovEcon ticking its estimate higher to 83.3m tonnes.

 

However, even Russian wheat is not looks quite the bargain it was a few weeks ago.

 

Benson Quinn Commodities, noting that the “Russian farmer has been a reluctant seller”, reported that “spot fob Russian wheat has rallied $23 per tonne in the past month”.

 

Currency factors

Chicago soft red winter wheat for December added 0.9% to $5.48 ¼ a bushel, after finding support earlier at its 200-day moving average, at $5.43 a bushel.

 

Kansas City hard red winter wheat for December gained a more modest 0.6% to $4.74 a bushel, feeling some pressure from rains in its southern Plains heartland which are improving prospects for US sowings for the 2021 harvest.

 

“Good rains across Kansas overnight should improve conditions for winter wheat planting,” Benson Quinn Commodities said.

 

Paris soft milling wheat for December added 0.5% to E188.75 a tonne, constrained a touch by strength in the euro, which weighs on the value in local terms of assets traded internationally in dollars.

 

By contrast, with sterling tumbling 1.6% on fresh Brexit worries, London feed wheat for November gained 1.9% to £177.75 a tonne, their best close on a spot contract basis since October 2018.

 

Also contributing to the strength of London prices is the ever-greater certainty of substantial UK imports in 2020-21 – potentially of 3m tonnes, as Agrimoney reported – thanks to a harvest low on quality as well as quantity.

 

‘Turned trends down’

Among softs, the weakness in sterling saw London cocoa for December at least trim its losses to £1 a tonne, taking the contract to £1,779 a tonne, compared with a 1.0% loss to $2,537 a tonne for its New York peer.

 

“The charts show that both markets turned trends down for at least the short term,” said Jack Scoville at Price Futures, noting too that “there are a lot of demand worries as the coronavirus is not going away and could be making a comeback in the US.

 

“Europe is still trying to open its markets again but the coronavirus is still around and consumers are reluctant to buy.”

 

What will chocolate demand be like as Halloween offers an excuse for significant confectionary consumption?

 

Brazil factors

 

New York raw sugar for October, meanwhile, ended down 1.0% at 11.91 cents a pound, after Brazil’s Centre South showed continued strength in production – thanks to the quality of cane, as well as mills giving ethanol the cold shoulder.

 

A further cut by Petrobras to its gasoline price, by 5%, didn’t help either in further undermining prospects for ethanol values, and so the enthusiasm for mills making the biofuel, as opposed to turning their cane into sugar instead.

 

But arabica coffee bounced by 2.2% to 131.70 cents a pound for December delivery.

 

OK, Brazilian government statistics agency IBGE on Thursday revised up by 600,000 bags, to 59.6m bags, its forecast for the country’s all-coffee harvest. But given that both figures are well below other markets estimates, they were treated by investors with some disdain.

 

More important was a renewed fall in New York certified stocks which, after falling by just 250 bags on Tuesday, accelerated that decline again on Wednesday to 28,081 bags (with a further fall for Thursday of 18,897 bags just announced).

 

This eased worries over semi-washed Brazilian beans rebuilding the inventory.

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