Soybeans took over leadership of the grains complex, as the sowings worries which have sent corn futures to five-year highs spread to the oilseed too, which also gained support from strong vegetable oil markets.
Chicago soybean futures for July closed up 1.5% at $9.12 ¾ a bushel, closing back above their 200-day moving average for the first time in three months. This after retaking their 100-day moving average in the last session.
Indeed, technical factors looked a support to the contract’s strength, with the July lot never looking back after spiking through its 200-day moving average, helped by what had the appearance of a push of automatic buy orders placed around this point.
There was also the factor that hedge funds retain a large net short position in soybeans, unlike corn, leaving the oilseed open to the potential for short-covering, upward pressure on prices.
Still, investors did not have to look far for fundamental reasons to get more upbeat on US soybean prices – notwithstanding the expectation, of course, that the country will end this season with record stocks of the oilseed.
“Ongoing rains fall and building concerns over what impact current conditions will have on this year’s yields supported trade,” said Karl Setzer at AgiVisor.
“This interest has started to shift from corn to soybeans with the possibility of unplanted acres in that crop growing every day.”
“It is currently believed we will see an additional 3m-4m unplanted corn acres,” above the 3m acres identified last week by the US Department of Agriculture, “and upwards of 2m unplanted soybean acres this year.”
In fact, while US corn planting is “virtually over,” soybean seeding “will continue into month end”, said Richard Feltes at RJ O’Brien, with the oilseed having a slightly later planting window.
However, the weather outlook is not great, whatever, with Maxar saying that “the forecast for the next week remains very wet across most of the major growing areas across the US.”
The heaviest rainfall is “expected across the east central Plains, central and southern Midwest, and the northern Delta”, precipitation that “will prevent remaining soybean planting, stall winter wheat maturation and harvesting, reduce winter wheat quality, and likely lead to flooding”.
On top of this, the “15-day forecast has trended even wetter across portions of the Corn Belt since Friday”, the weather service said, noting that in Nebraska, Iowa, northern Illinois, Indiana, and western Ohio “the forecast trended wetter by 1.5-4.5” (38 to 115 mm)”.
Furthermore, cool temperatures this week “across the Corn Belt will slow germination and early growth of corn and soybeans” that has actually made it into the ground.
‘Still well behind average’
That said, US farmers are believed to have got a large amount of crop in the ground last week, with a Reuters poll, ahead of USDA weekly data due later on Monday, forecasting a soy seedings figure of 79% - up 19 points week on week.
That said, this kind of figure “is still well behind average,” said Benson Quinn Commodities, echoing ideas of large acreage losses, saying that “soybean prevent plant is expected ranging from 1.5m-3.0m acres”.
Still, in a twist, it also noted that private analysts “think the base for beans acres was higher than March intentions”, given the US farmers likely switched some intended area from corn to soy.
This arithmetic “which could leave [soy] acres unchanged at end of day” compared with the USDA March figure of 84.6m acres.
Another input that the market had to deal with came from the demand side, with Nopa US soybean crushing data for May, which actually, at 154.8m bushels, came in some 6.8m bushels behind market expectations.
Investors had expected a small increase from the 160.0m-bushel figure recorded for April.
“The slowing crush might force us to make a 3m-4m bushel downward revision to the crop-year crush projection,” said Terry Reilly at Futures International, although acknowledging that this would take the broker’s estimate “more in line with” the USDA’s.
Still, Agrimoney has noted a tendency for soy prices on Nopa days to move the opposite way the report might indicate. Maybe on “sell the rumour, buy the fact” thinking (or vice versa)?
Or maybe thanks to the knock-on effect on soyoil stocks, which after a weaker-than-expected crush fell in May by more than 2.0bn pounds month on month to 1.58bn pounds – coming in too 198m pounds short of market forecasts.
Chicago soyoil for July ended up 2.0% at 28.14 cents a pound.
As for corn, its early enthusiasm ran out of steam, as demand forces took their toll.
After Agrimoney earlier on noted talk of an Indiana ethanol plant shutdown, in the face of elevated cash corn prices, AgriVisor’s Karl Setzer too said that “at least two US ethanol plants are slowing and shutting operations until margins improve.
“We are starting to hear more demand stories,” from a negative viewpoint that is, as high prices squeeze processors.
US corn exports last week, at 653,875 tonnes, while at least within the range of market forecasts, came in towards the bottom end of it.
With, amid demand pressures, an apparent reluctant by producers to sell spot losing its force, Chicago July corn futures ended at $4.54 ¾ a bushel – a fresh five-year closing high, and up 0.3% on the day.
But that was nearly $0.10 a bushel off an earlier high, and in fact allowed the new crop December lot to make up some ground lost in recent days, adding 1.0% to $4.68 ½ a bushel, a fresh contract closing high.
However, the decline in corn futures did few favours for Kansas City hard red winter wheat, which for July had been offered support earlier by its unusually low spread versus Chicago corn.
The July hard red winter wheat contract ended down 0.2% at $4.75 ½ a bushel - a performance in fact more akin to that typical at this time of year, when winter wheat contracts feel pressure from a harvest which appears in the southern Plains to be defying concerns over weather damage to yields and quality.
US wheat exports (which are largely of hard red winter wheat) last week reached 375,365 tonnes – within the range of market forecasts, but nothing to write home about.
This even as Abares lowered its hope for Australian exports of the grain in 2019-20, to well below US Department of Agriculture estimates.
Chicago soft red winter wheat did better, edging 0.1% higher to $5.39 ½ a bushel for July, with its harvest looking more vulnerable to the next wave of US rains.
‘Relatively strong demand’
Among soft commodities, New York cotton fared notably well, adding 1.0% to 66.42 cents a pound for December delivery – although this of course when prices remain within range of the contract low of 64.70 cents a pound set last week.
Louis Rose at Rose Commodity Group noted that “demand for yarn from US mills is reportedly relatively strong.
“Inquiries have reportedly been mostly for base tenderable grades and better from both the 2019 and 2020 crops.”
And, of course, the fibre received a pull from its fellow row crops.