A big data day for agricultural commodities has already started.
China’s ag ministry kicked off the round of ag briefings with its own monthly report on domestic crop supply and demand, the Casde, which was actually light on changes to estimates for major dynamics.
An exception was the forecast for Chinese corn imports in 2017-18 which - amid worries over a drop in imports from the US of rival feed grain sorghum, the subject of a Beijing anti-dumping probe - was raised by 25% from last month.
Corn futures on China’s Dalian exchange slowed their rise in the face of the idea of increased import supplies, with the May contract adding 2 yuan to 1,824 yuan a tonne.
That said, the revised import figure of 1.5m tonnes was still modest, down from 2.46m tonnes last season on Chinese data, and 3.17m tonnes in 2015-16.
The US Department of Agriculture bureau in Beijing earlier this week raised their estimate for China’s corn imports this season to 3.5m tonnes.
That bureau figure is 500,000 tonnes above the official USDA estimate, which is of course itself up for revision in the department’s own monthly Wasde supply and demand report, on world crops, due at 17:00 UK time (11:00 Chicago time).
In between is the prospect of data on Brazilian crops from Conab, the official crop bureau, besides weekly US export sales data from the USDA which are often pretty high profile themselves.
The US export sales statistics are expected to come in at 200,000-500,000 tonnes for wheat, compared with 289,106 tonnes last time.
For corn, the figure for 2017-18 export sales is expected to fall short of the 1.85m tonnes achieved the previous week, but not necessarily by much, with trade estimates at 1.30m-1.80m tonnes.
Soybeans are expected to see some recovery, to 400,000-700,000 tonnes, from the marketing-year low of 359,014 tonnes reported last time.
(Trade estimates for the Wasde are reported elsewhere on Agrimoney.)
‘It’s all about Kansas City’
In Chicago, grain futures cowered ahead of the meat of the data slew, with wheat futures, particularly buoyant earlier in the week, staging the biggest reversal in early deals on Thursday, dropping 0.7% to $4.57 ½ a bushel for March delivery as of 09:45 UK time (03:45 Chicago time).
Kansas City hard red winter wheat for March eased 0.5% to $4.78 ½ a bushel, although stayed above its 200-day moving average, broken above in the last session for the first time in six months.
Mike Mawdsley at First Choice Commodities noted that the wheat market is “all about Kansas City hard red winter wheat”, grown on the southern Plains, where dryness fears have raised crop concerns.
“Will it continue to rally? Will the southern Plains see rain soon?”
In fact, according to Benson Quinn Commoditeis, “conditions in the Southern Plains are expected to remain dry”.
‘Crops will need water’
Such concerns are gaining momentum with the prospect of spring, warmer temperatures, and the emergence of winter wheat seedlings from dormancy, when moisture requirements will rocket.
“The crops will need water – but they are unlikely to find any in the soil,” Tobin Gorey at Commonwealth Bank of Australia said.
“Crop dormancy had put this problem on pause, but higher temperatures mean that is no longer possible.”
Furthermore there is the issue that in wheat markets as a whole “investors are in the process of buying back a hefty short position” which can “can act as a turbo charger for the market”, Mr Gorey said.
Open interest clue
Indeed, exchange preliminary data overnight indicated a further slew of fund short-covering, with open interest in Chicago wheat futures down 12,659 lots in the last session, to 524,069 (with the fact it was a winning session indicating closure of short bets rather than long ones as being dominant).
For Kansas City wheat, open interest dropped 5,496 lots to 304,046 contracts.
Mr Gorey said: “Investors will complete this [short-covering] task at some point, possibly as early as this week.”
After that, the “market might then struggle”, given that US wheat is after its gains “currently uncompetitive” on export markets, as Agrimoney highlighted on Wednesday.
‘Good US export sales’
For corn, short-covering was the key driver too in gains in the last session, with open interest down more than 27,000 contracts – nearly double the rise in open interest on Tuesday.
“Corn is still finding support in good US export sales,” said Agritel, although of course US export sales data later will give more of an insight into that.
Meanwhile, for the Wasde, CHS Hedging noted that “trade is expecting the USDA to adjust the corn US ending stocks from its January report at 2.477bn bushels, down somewhat to 2.468bn bushels”, with a cut made to the US stocks figure too.
Still, with corn futures already at their highest in nearly six months, on a spot contract basis, further headway was not forthcoming, with the Chicago March lot down 0.2% at $3.54 ½ a bushel.
Soybean futures for March eased a modest 0.1% to $9.81 ¾ a bushel, although remaining above 50-day and 200-day moving averages, with data on Chinese soybean imports offering some reassurance at a time of high profile – given reports that Beijing is mulling an anti-dumping probe on imports from the US.
China last month imported 8.48m tonnes of soybeans, up from 7.655m tonnes in the first month of 2017, although below the December 2017 figure of 9.547m tonnes.
The data were “interesting to watch amid heightened trade tensions between the US and China,” Australia & New Zealand Bank said.
“Stronger crush margins should be keeping the imports firm while increasing trade tension remains a tail risk.”
‘Likely to prove strong’
In New York, cotton - by contrast, which has underperformed grains of late, dropping in the last session to a seven-week low – found favour in the last pre-Wasde ructions, adding 0.3% to 76.16 cents a pound for March delivery.
The Wasde is expected to make little change to estimates for US and world cotton balance sheets, according to a Bloomberg survey, with the most notable forecast perhaps expectations of a 250,000-bale downgrade to the USDA estimate for world cotton inventories at the close of 2017-18.
Will data later on US export sales (and actual shipments) prove more exciting, and strong again?
“Data analysis suggests that total net sales against the current marketing year are likely to prove to have been strong for the week ending February 1,” said Louis Rose at Rose Commodity Group.
“Shipment data will also likely continue to quicken, but may still not meet the average weekly pace required in order to ship 14.8m bales by July 31,” the close of 2017-18.