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Evening markets: US frost talk bolsters corn, soybean markets

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The frost that investors have long been anticipating for US crops looks like it might be on the horizon at last.

 

Refinitiv flagged the potential for “sub-freezing temperature risks as early as this weekend for parts of the western/northern Plains”, although the chances of a freeze “will increase into early next week.

 

“Numerical model guidance is beginning to latch onto low temperatures below frost/freeze levels for the western Plains towards the end of the 6-10 day forecast period, somewhere around October 1-3.”

 

Benson Quinn Commodities said that “weather forecasts point to a potential frost/freeze event in the northern Plains on October 4-5”.

 

‘Running on borrowed time’

That said, would these cold temperatures come soon enough to cause much in the way of crop damage?

 

“Most of these areas are running on borrowed time as a September 20 frost/freeze event is typical,” Benson Quinn Commodities said.

 

Still, to consider also is that US corn and soybean crops are running behind, with only 29% of the corn crop rated “mature” in US Department of Agriculture data overnight, half the typical figure.

 

In North Dakota, the figure is only 5%, compared with a typical 37%, with the likes of Minnesota South Dakota also behind (on 8% and 12% respectively, compared with the 44% norm for both).

 

‘Highest-priced in the world’

Chicago corn futures for December rose, if by a modest 0.4% to $3.74 ¾ a bushel, still feeling some pressure from demand worries.

 

“The fact the US remains the highest-priced source of corn in the world market and the demand issues it is causing are weighing on the complex,” said Karl Setzer at Agrivisor.

 

The US Department of Agriculture at least ameliorated such worries by confirmed a trade sale of 200,000 tonnes of corn to Mexican buyers.

 

Soybean development

Soybean futures for November edged a more modest 0.1% higher to $8.93 ¼ a bushel, despite ostensibly having more going for it.

 

OK, the oilseed could be less sensitive to an imminent frost, with 30% of US soybeans dropping leaves, behind the 59% norm, but a bit less tardy than the corn figure.

 

In North Dakota, the figure was 67%, lagging but a relatively modest 16 points behind the five-year average.

 

However, unlike for corn, the USDA did not increase in overnight data is assessment of the proportion of the US crop in good or excellent condition.

 

China order rumours

And there remain ideas of large Chinese purchases of US crop – although, signally, these have yet to confirmed.

 

Terry Reilly at Futures international flagged talk “that China bought around 1m tonnes of US soybeans out of Pacific North West,” with another sourcing putting the figure at some 1.2m tonnes.

 

CHS Hedging noted “talk that China soybean interest was returning and that more quotas for tariff-free beans were being doled out”.

 

Still, such rumoured demand has not been confirmed, nor indeed the 600,000 tonnes said on Monday booked by China, limiting the extent of the bullish impact of the speculation.

 

‘Wheat is being pressured’

Wheat fared worst of Chicago’s big three, again, shedding 0.5% to $4.81 ¾ a bushel for December delivery, although managing to stay above its 40-day moving average.

 

“Wheat is being pressured from elevated rain chances for Argentina,” where the crop has been threatened by dryness, “and the simple large size of the world crop,” said Karl Setzer at Agrivisor.

 

Also weighed against it were USDA data overnight showing US plantings at 22% complete as of Sunday, 4 points ahead of market expectations, and up 14 points week on week, dashing ideas of US farmers in the southern Plains holding off because of a lack of rain.

 

Taiwan passing on a tender for 110,300 tonnes of US wheat for November and early December shipment, because “prices were too high” according to Terry Reilly at Futures International, was also mentioned by traders.

 

‘Could be hurting’

Still, Minneapolis spring wheat did manage further headway, adding 1.4% to $5.44 ½ a bushel for December, amid worries over weather damage to the last of the US harvest, and to the Canadian crop which is still in the early stages of being reaped.

 

“There is concern over the unharvested spring wheat across the northern Great Plains where persistent wet weather could be hurting quality,” said Terry Reilly at Futures International.

 

There are also ideas of spreading against Chicago wheat. The premium of Minneapolis spring wheat against Chicago soft red winter wheat, December basis, has near-tripled over the past week, to nearly $0.63 a bushel.

 

However, this looks too a reflection of closing by some funds of their large net short in Minneapolis.

 

Sugar sweetens

 

In New York, raw sugar was notably firm, adding 1.6% to 12.41 cents a pound for March, amid some ideas of short-covering too, with managed money holding a record net short as of a week ago, the latest data available.

 

The temptation to close shorts may have been encouraged by data on Brazil’s Centre South showing sugar production in the first half of this month down 5.6% at 2.04m tonnes, more than 50,000 tonnes short of market expectations.

 

The cane crush, at 38.49m tonnes, was shy of the 40.70m-tonne figure expected by investors, with the proportion turned into sugar, at 35.1%, below the 35.7% expected by a poll undertaken by S&P Global Platts.

 

‘Supply will tighten’

Tobin Gorey at Commonwealth Bank of Australia said that “news from India continues to presage further cuts to estimates of India’s sugar production.

 

“And that kind of news bolsters the consensus that sugar supply will tighten next year.”

 

Meanwhile, from a technical perspective, a change in price momentum from its negative trend earlier this month “raises the likelihood that investors, or at least a significant group of them, will be triggered to buy their short position back.

 

“That buying is likely to boost prices sharply.”

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