Grain markets performed an about turn, with soybean futures, stronger in early trade, ending lower, while wheat futures rebounded from opening losses.
One problem for soybean futures was the growing focus on the prospect of the US spring sowings, and ideas that the oilseed will prove especially popular – talk spurred by results of a survey by Chicago broker Allendale.
This showed US farmers intending to plant 92.10m acres of soybeans this year, “a new record”, as the broker said, and well ahead of the preliminary 92.0m-acre figure that the US Department of Agriculture unveiled last month.
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At MaxYield Co-operative, Karl Setzer flagged pressure on soybean prices from “thoughts that elevated acres this year will lead to a higher [US] carryout.
“There are some projections for soybean carryout to hit 950m bushels by the end of the 2018-19 marketing year,” an outlook he said that, while it “seems like a stretch, is not out of the realm of possibilities”.
Mr Setzer added that “the real question is if this would drop soybeans values to a point where demand would build.
“This would seem likely, but depends heavily upon what the global soy market does.”
‘Notable upturn in rains’
As an extra setback, expectations grew for rains in Argentine, where, as Radiant Solutions noted, “subsoil moisture levels remain very low” across most of the corn-soybean belt, with only southern La Pampa and far southern Buenos Aires seeing any improvement over the past week”.
However, a “notable upturn in rains is still expected across southern Brazil and eastern Argentina by this weekend, which should significantly improve soil moisture.
“The best improvements are expected to be in Santa Catarina, Rio Grande do Sul, Entre Rios, north eastern Buenos Aires, Santa Fe, Santiago del Estero, and Chaco where soil moisture levels may actually be better than normal by this time next week.”
Futures in soymeal, of which Argentina is the top exporter, and so which have proved particularly sensitive to weather forecasts for the country, lost early gains to end down 1.3% at $370.90 a short ton.
Argentine soy sales
The drop in soymeal came despite ideas that government support for drought-hit Argentine farmers may reduce the need for them to sell soybean stocks to raise cash, so curtailing crush volume prospects.
“The Argentine president is working on debt relief package for farmers struggling with the worst drought in 40 years,” Benson Quinn Commodities noted.
At RJ O’Brien, Richard Feltes flagged talk that “the Argentine government may extend more credit to farmers, thus slowing new crop sales to meet loan payments”.
Indeed, Mr Feltes also noted that “cash sources report more interest in US soymeal” in the absence of much South American availability.
At least that helped some outperformance in soymeal futures, compared with soybean ones, which for May tumbled by 1.7% to $10.32 ¼ a bushel, the contract’s weakest close in a month.
How they react in the next session, however, may depend on monthly US crush data from industry group Nopa, expected to come in at 149.4m bushels, a record for the month.
Stocks are seen coming in at 1.766bn pounds, up from 1.728bn pounds in January, and the 1.668bn pounds recorded for February 2017.
There will of course be weekly US export sales data too, expected at 800,000-1.20m tonnes, down from 2.51m tonnes the previous week.
Corn futures lost early headway too, ending for May down 0.8% at $3.88 ¾ a bushel, closing below its 10-day moving average for the first time in a month, despite coming out more bullishly from the Allendale survey.
That showed corn planting intentions of 88.514m acres - “the lowest in three years” and “8.8m acres off the 2012 peak reading of 97.291m acres” - besides being below the 90.0m acres that the USDA pencilled in.
And US weekly export sales data on Thursday are expected at a decent 1.30m-1.70m tonnes for corn.
“We are not seeing much competition in the global corn market though, which is supportive,” said MaxYield’s Karl Setzer.
Still, the improvement in the Argentine weather outlook looks a boost for the country’s output of the grain, as well as of soybeans.
‘Stress will likely continue’
But wheat futures turned around early losses to end up 0.6% at $4.88 ¾ a bushel in Chicago for May delivery, while adding 0.9% to $5.24 ¾ a bushel for Kansas City hard red winter wheat futures for May.
Not that the market was without its bearish news, with Terry Reilly at Futures International, for instance, flagging that “there is talk India may increase import duties on wheat”, tariffs which would follow duties on buy-ins of, for instance, chickpeas and palm oil.
But the ideas of much needed rains on the horizon for the southern Plains – talk of which played a big role in depressing prices earlier on - eased later in the session.
Radiant Solutions said that while, in the 31-60 day outlook, “the precipitation outlook is trending slightly wetter in the eastern Plains, north western Midwest, southern Delta, and South East,” that may not be much help for hard red winter wheat crops.
“Dryness will likely continue to stress wheat in the south western Plains.”
‘Bullish flag formation’
Technical factors were seen as playing a role too, with Tregg Cronin at Halo commodity Company saying that “price action” since last week’s retreat “is now taking on a bullish flag formation, which could also be portending higher prices.
“If the pattern were to hold, and break to the upside relatively soon, it would project the flag pole advance from the current low of $4.83 to around $5.44 a bushel.
“We are certainly not forecasting an advance to $5.44 at the moment, but is certainly something to watch moving forward.”
‘Deficits are needed’
Among New York-traded soft commodities, cotton edged 0.6% higher to 83.44 cents a pound for May, amid ideas of another decent weekly US export figure ahead on Thursday, and talk of mill buying.
And cocoa resumed forward movement, adding 1.0% to $2,556 a tonne, a fresh 16-month closing high for a nearest-but-one contract, amid continued worries over West African supplies at a time of strong demand.
Commerzbank seized on talk of top producer Cote d’Ivoire engaging in measures to reduce supply long-term, with the aim of tackling “the overproduction that saw cocoa prices forced to multi-year lows at the end of last year.
“Deficits are needed to reduce the cumulative surplus [in world cocoa output], as was the case on the oil market a good year ago.
“Opec brought this about by cutting production, and Cote d’Ivoire appears to want to follow a similar strategy for cocoa.”
But arabica coffee futures eased 0.4% to 121.05 cents a pound, after Rabobank cut by 1.5m bags to 2.6m bags its estimate for the world output surplus in 2017-18, if also cutting 900,000 bags to 3.2m bags to its forecast for the deficit next season.
The bank was supportive of coffee price prospects – but not for another three months or so, as results of the Brazilian harvest (on which it is somewhat pessimistic) come through.