This time it was the turn of soymeal, among the three recent ag market stars, to keep bulls’ hopes alive.
In New York, cocoa eased 0.6% to $2,352 a tonne from the last session’s 16-month closing high, which was reached amid continued worries over West African supplies.
Chicago wheat futures for May tumbled by 0.9% to $4.86 ½ a bushel, taking to 6.2% the contract’s decline from seven-month highs reached last week.
But Chicago soymeal futures for May rebounded by 1.5% to $375.50 a short ton, their first win in six sessions, amid continuing worries over Argentina’s soybean crop.
‘Rain pattern is improving, but…’
Michael Cordonnier at Soybean and Corn Advisor became the latest to downgrade the harvest, by 2.0m tonnes to 43.0m tonnes, albeit a figure already in the market consciousness.
While there was some talk of improved hopes for rain in Argentina, fitting now that La Nina is official ended (according to official Australian meteorologists), there are doubts as to how much good the moisture will do to yields.
“The rain pattern is improving, which is seasonal, but with soybeans and corn maturing quickly the rains are seen only stabilising conditions rather than improving yield potential,” Benson Quinn Commodities said.
And in fact not all commentators agree on ideas of Argentine rain anyway.
“Trade continues to talk about weather in South America with no significant addition of moisture to the latest forecasts for Argentina,” CHS Hedging said.
‘Not getting enough soybeans’
However, what was particularly supportive for prices of soymeal was ideas that the big Argentine farm stocks of soybeans, seen as supporting processing volumes despite a weak harvest, may not be coming onstream as fast as some investors have factored in.
Argentine soy crushers “are not getting enough soybeans”, said Richard Feltes at RJ O’Brien.
One factor dissuading Argentine farmers from selling is the weakness of the peso, which at 20.20 per $1 is close to record lows set last week, with crops – the local price of which is linked to values on dollar denominated international markets – offering a hedge against currency weakness.
Soybeans themselves added a more modest 0.7% to $10.48 ¾ a bushel for May delivery.
‘More concerned about demand’
As for wheat, it found some support earlier on, after US Department of Agriculture data highlighted a challenge to the US winter crop from too much rain in the Delta region, besides too little in the southern Plains.
Still, “weather leans negative” for grain prices, Mr Feltes said, flagging the “removal of precipitation from next week’s US Delta forecast”, a factor likely to speed early corn seedings too.
Meanwhile, there remain worries over the dent to export competitiveness that recent price gains have encouraged in US wheat too.
“The inability of wheat futures to post new highs since March 2 despite an ongoing dry US hard red winter wheat pattern suggests that the wheat market is more concerned about high-priced US hard red winter wheat losing market share than slippage in 2018 US wheat production,” Mr Feltes said.
Early in the growing season
Such ideas were only enhanced by a (small) upgrade by SovEcon to its forecast for Russian wheat output next season, and an initial estimate of healthy Russian wheat exports in 2018-19 too.
And as for the downgrades to hopes for this year’s US harvest, it is still early in the growing season to write the crop off.
Tregg Cronin at Halo Commodity Company, while saying that the “southern Plains still isn’t expected to see widespread relief”, added that “one still needs to remember it is March 13, and rallying from this point through the US weather market will be incredibly difficult”.
Kansas City hard red winter wheat for May shed 0.4% to $5.20 ¼ a bushel.
‘Caught the market unexpected’
Still, Minneapolis spring wheat for May did manage gains, edging 0.2% higher to $6.25 ½ a bushel, beginning to put in a bit of a fight in the so-called “battle for acres”, and inclusion in farmers’ spring sowings programmes.
Minneapolis wheat has now rebuilt above $1.05 a bushel its premium over Kansas City hard red winter wheat, May basis, after a fall in the gap last week to a nine-month low of $0.78 ¾ a bushel.
Paris soft milling wheat for May also managed headway, up 0.5% at E164.00 a tonne, helped by ideas that a relatively small purchase by Algeria (probably of French grain) was a sign it will need to return to the market soon, rather than of a reduced appetite.
“Algeria caught the market unexpected today with a surprise purchase of 150,000 tonnes of milling wheat for June shipment,” CRM AgriCommodities said.
Back in Chicago, corn futures for May added 0.3% to $3.91 ¾ a bushel, back in territory between soybeans and wheat, after their spritely performance late last week on a surprisingly large downgrade by the USDA to its forecast for US corn stocks at the close of 2017-18.
However, sticking with row crops, cotton futures for May followed cocoa in reversing lower, ending down 0.4% at 82.98 cents a pound for May delivery.
INTL FC Stone raised to 1.18m hectares, from 1.13m hectares, its forecast for Brazilian cotton sowings for 2017-18, a 26% rise year on year, citing a greater switch from safrinha corn, thanks to relative crop returns.
At Rose Commodity Group, Louis Rose also reported that in the south of Texas, the top US cotton-growing state, “rain and showers moved across the Rio Grande Valley on Monday”.
While “interrupting planting operations… the rainfall was considered mostly beneficial” for dryness-tested areas.
Also in reverse was raw sugar, which in New York tumbled 2.4% to 12.562 cents a pound for May delivery, more than giving back headway from the last session, and setting an eight-month closing low for a spot contract.
While there is some support to prices from ideas that Brazilian mills will in the forthcoming 2018-19 crushing season process far more cane into ethanol rather than sugar, “healthy supply in Thailand, India and Europe will offset this when supply reaches the market”, INTL FCStone said.
And arabica coffee reversed too, although this meant a rebound of 1.8% to 121.55 cents a pound for May delivery.
Arabica vs robusta
For once, this meant outperformance over London robusta coffee, which for May eased 0.3% to $1,763 a tonne for May delivery.
Indeed, coffee merchant I&M Smith noted earlier that “it is perhaps remarkable that despite the much larger new Vietnam crop, and the resulting good volumes of robusta coffee exports that are coming to the market… that the London market is holding relatively steady for the present”.
Indeed, given the “prospects for the new Indonesian and Ugandan robusta coffee crop to start to pick up in volume by July, which shall be accompanied by the surplus Brazil conilon robusta coffees that might be looking for a home”, arabica futures might be expected to outperform.
“One might speculate that with these additional coffees coming to the fore and with them increased volumes of price fixation selling in the London market, that it might contribute to a broadening of the arbitrage between the London and New York markets.”