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Evening markets: Wheat import purchases spur futures buying too

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Wednesday looked a decent day for wheat traders.

 

Turkey’s state grain board, TMO, provisionally purchased about 250,000 tonnes of wheat, optional origin.

 

And Algeria bought 600,000 tonnes (although some talk had it at 420,000 tonnes).

 

After the close of grain markets, Egypt’s Gasc chipped in with a 180,000-tonne purchase of Russian wheat.

 

“The flurry of tenders indicated buyers see current prices as good value to fill demand,” said CRM AgriCommodities.

 

‘Increased stress’

And that offered some encouragement to buyers in wheat futures too, which closed up 1.1% at $4.89 ¼ a bushel in Chicago for December delivery, ending back above their 50-day moving average for the first time in two months.

 

Also continuing to gain attention in the wheat market are the declining expectations for harvests in Australia and Argentina, thanks to dryness, albeit that the latter is still expected to have a strong crop.

 

“Australia continues to struggle with dryness over western and central New South Wales into Queensland,” said Benson Quinn Commodities, adding that “Argentina also sees restricted chances for showers through the next 10 day period”.

 

As Maxar put it, “no rainfall is expected across Argentina over the next 10 days, which will lead to further declines in soil moisture and increased stress on crops”.

 

Plantings concerns

Kansas City hard red winter wheat fared even better than its Chicago peer, settling up 1.9% at $4.09 ¾ a bushel, helped by short covering, with hedge funds having an unusually large net short in the contract, compared with only a modest one in the grain.

 

There are some worries over dryness too in the main hard red winter wheat growing region, with Maxar saying that “more rains needed in the southern Plains to fully support germination” of crop being seeded for harvest in 2020.

 

In the six-to-10 day outlook, “drier conditions across the central and southern Plains would deplete moisture a bit for winter wheat germination”.

 

‘Slow harvesting efforts’

For spring wheat, by contrast, persistent rainfall is the issue in the northern Plains, and into Canada’s Prairies, where “rains across the region this week will hamper drydown and harvesting efforts, most notably in Manitoba”, Maxar said.

 

“Rains today across Saskatchewan and Manitoba will slow harvesting efforts with additional rains across Manitoba Friday and Saturday maintaining those slow efforts there.”

 

Minneapolis spring wheat for December gained 1.3% to $5.13 ¼ a bushel.

 

This time, the spring cereals harvest woes did not extend to oats, which for December dropped 1.3% to $2.77 ½ a bushel, in Chicago succumbing to profit-taking.

 

‘Mixed bag’

Corn, however, did manage gains, adding 1.0% to $3.71 ¼ a bushel for December delivery, helped by the strength in rival grain wheat, but also by some US weather worries.

 

“Weather is a mixed bag” from a price perspective, said Richard Feltes at RJ O’brien.

 

While there is “still no sign of US frost through early October”, weather models did “trim back needed rains early next week for the northern Delta” region.

 

While US ethanol data for the US for last week were not encouraging - showing output down 20,000 barrels a day to 1.003m barrels a day, terming “slightly bearish for corn” by Terry Reilly at Futures international – the transformation in energy markets since then has raised hopes for output ahead.

 

Chicago ethanol futures, which ended up 0.6% at $1.386 a gallon for October, are up 2.2% for this week, with RBOB gasoline up considerably more (6.3%).

 

‘Too much risk premium removed’

Karl Setzer at Agrivisor also noted “thoughts that too much risk premium has been removed from the market ahead of the South American growing season”, a factor giving “support today” to grain prices.

 

After all in Brazil, dryness is raising concerns over seedings prospects, of soybeans in particular.

 

“Brazil has a few chances for rains in the two-week forecast for southern areas, but most regions are still waiting for a change in pattern to bring moisture,” Benson Quinn Commodities said.

 

Still, soybean futures for November ended down 0.5% at $8.88 ¾ a bushel, weighed by a lack of further news on exports to China, or indeed other origins either.

 

‘A lot of uncommitted sugar’

In New York, raw sugar futures for March eased 0.2% to 12.07 cents a pound, undermined a retreat in oil prices, with Brent crude down 1.7% at $63.44 a barrel in late deals, curtailing its gains this week to 5.3%.

 

Tobin Gorey noted that “producers sold hefty amounts of sugar into Monday’s price spike”, when the oil price jump on the drone strike on Saudi Arabia sent prices of a range of energy-related ags higher.

 

The uptick in producer selling “probably suggests the market still had a lot of uncommitted sugar to deal with, further stoking questions about sugar demand”, Mr Gorey said.

 

“The market must deal with this burden before it can ‘move on’ to the New Year’s more enticing cocktail of tightening physical supply and massively short investors.”

 

Coffee gains

A weaker real, down 0.7% against the dollar, didn’t help either, presenting a headwind for dollar values of assets such as sugar, coffee and soybeans in which Brazil has a major market presence.

 

However, arabica coffee for December managed to hold its ground at 100.35 cents a pound, helped by persistent worries over Brazil’s 2020 crop, over factors including dryness and a dearth of investment in fertilizers.

 

The weather outlook remains mixed, with dryness looking the prevailing trend for the rest of the week in major Brazilian coffee-growing areas, but with wetter weather likely to set in this weekend – at least, until the return of dryness in October, according to Somar.

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