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Evening markets: Wheat finds support in talk of China import interest

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The pressure on grain prices eased as the findings of a key Midwest crop tour turned more modest, with weather worries notching back up a tick too.

 

The Bcom ag subindex posted gains of 0.3% in late deals to look on track for what would be its second best close since March.

 

That reversed earlier losses, and came despite notable declines in some ags on, such as New York arabica coffee, which for December fell by 1.4% to 119.35 cents a pound, as profit taking reversed some of the recent gains spurred by shrinking exchange inventories.

 

“Ice exchange coffee stocks reached a new multi-year low on Tuesday,” ADM Investor Services said.

 

“They have fallen by more than 228,000 bags in August, which would the largest monthly decline since December 2004 and the largest percentage decline since October 1998.”

 

‘Crop stress will build further’

In Chicago, while corn futures ended lower, at $3.39 ¾ a bushel for December, the decline ended up at a modest 0.6%, and saw the contract remain above its 100-day moving average, which it surrendered temporarily earlier on.

 

On the demand side, US ethanol production data for last week were mixed, with output rising by 8,000 barrels a day to 929,000 barrels a day, but with stocks growing by 520,000 barrels to 20.27m barrels, hinting at somewhat sluggish demand.

 

But production signals from the Pro Farmer crop tour of the Midwest were more mixed on Wednesday too as it entered Iowa, hit by last week’s derecho storm, although with the Twitter trail revealing dryness as a concern.

 

This when the Midwest weather outlook appeared a touch less helpful on Wednesday, according to Maxar, which said that “dryness and crop stress will build further across Iowa, northern Illinois, southern Wisconsin, northern Indiana, and southern Ohio through next week”.

 

The forecast “is drier in southern Minnesota and northern Iowa”.

 

Soyoil support

Soybean futures for November managed a 0.25-cent gain to $9.14 a bushel, helped by the slide retreat in Midwest production optimism, but also by a further sale of US exports to China.

 

China bought 192,000 tonnes of US soybeans for 2020-21, the US Department of Agriculture revealed through its daily alerts system, which has now topped 3.0m tonnes in announcements of sales of the oilseed so far this month.

 

Support also came from soyoil which, while ending well below intraday highs, still managed a 0.2% gain to 31.97 cents a pound for December, the contract’s best close in six months.

 

The gains come against a backdrop of washouts of Chinese orders of Argentine soyoil – albeit it is not clear that demand is switching to US supplies.

 

Terry Reilly at Futures International said that, while “we are hearing more Asian buyers of Argentina soybean oil are cancelling orders”, added that “it’s our understanding” that Indian and Chinese buyers “are switching to Black Sea sunflower oil imports”.

 

Still, dynamics in Brazil – where Mato Grosso soybean prices have set their highest premium over Chicago values since at least the 1990s, as elevated domestic soyoil prices spur crushers to bid up for oilseed supplies to crush – underline the buoyancy in values in many major markets.

 

Chinese purchases?

Wheat posted gains too, adding 0.9% to $5.22 a bushel in Chicago for December delivery, to rise back above their 40-day moving average.

 

The gain was led by Kansas City hard red winter wheat, which added 1.7% to $4.49 a bushel amid enhanced hopes for US exports – notably to China – and despite some recovery in the dollar against a basket of currencies.

 

Benson Quinn Commodities flagged wheat price “support from talk China may be booking US wheat, 2-4 cargos off the west coast”.

 

The performance narrowed the hard red winter wheat discount to Chicago to $0.73 a bushel at the close, from an intraday high of $0.78 ¾ a bushel.

 

Covid-19 hiccups

Hopes of Chinese demand for US supplies helped New York cotton futures close higher too, by 1.3% at 63.77 cents a pound for December delivery, albeit remaining within the trading range it has trodden for the past couple of weeks.

 

Still, raw sugar put in an even better performance, in soaring 2.7% in New York to 13.24 cents a pound for October, a five-month closing high for a spot contract.

 

Jack Scoville at Price Futures said that while “there is plenty of sugar for the world market… getting the sugar available for export is becoming more difficult with the widespread coronavirus outbreak in both Brazil and India.

 

“India is thought to have a very big crop of sugar cane this year but getting it into sugar and into export position has become extremely difficult due to coronavirus lockdowns.”

 

Reduced expectations for Thai output have also been getting airplay, although ADM Investor Services said that “rains in Thailand this week have brought much-needed moisture to their growing areas”.

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