Ags staged a modest recovery in early trading – although there are doubts about it going very far.
Sure, grains markets have the potential for a strong revival, if the touchpaper can be lit to forcing speculators to close their hefty short bets.
“It’s almost a universal opinion that some type of rally/bounce will happen with funds holding their large - record in the case of corn - short positions, and the entire growing season ahead,” said Mike Mawdsley at First Choice Commodities.
“But, with everyone watching (me included) it’s not happening... at least not yet.”
‘Improving weather forecast’
Problems for the bulls include the fact that, while US sowings are running late, there remains time yet for plantings to go in assuming weather does improve.
“Farmers are still not worried about a delay in corn planting,” given modern equipment “which will allow them to sow quickly”, said Agritel.
“Many folks believe the crop can get planted in two weeks’-time and it is still April,” CHS Hedging said.
And some weather models are a little less wet for the Midwest ahead.
ADM Investor Services, for instance, noted “an improving long range US Midwest weather forecast”.
‘Could be big downside risk’
Meanwhile, the worries over consumption of, especially US, ags have returned, in the face of factors such as China’s African swine fever (ASF) outbreak, cutting feed demand there.
“With ASF impacting China hog production, there could be big downside risk for new crop soybeans if China soybean import demand does not rebound,” said Benson Quinn Commodities.
“As weather outlooks improve, this abundant supply market needs demand.”
And for US grains and soybeans, that demand has been “lacking”, the broker said, noting that “there were no fresh export sales” revealed on Tuesday by the US Department of Agriculture through its daily alerts system.
‘Very painful bulge’
In fact, competition between exporters looks to be growing as a theme, with South American corn and soybean crop estimate continuing to attract upgrades, while the wheat market faces the prospect of a large northern hemisphere harvest this year, especially in Russia.
“The approaching northern harvest is a reminder that the US either did not use or not get a window of opportunity in season 2018-19 to reduce inventories,” said Tobin Gorey at Commonwealth Bank of Australia.
“While US wheat is now competitive at many destinations, there is only short period of time until 2019 [crop] starts arriving at storages.
“The US trade can thus at most only hope to avoid a very painful bulge in supply.”
‘Competition is fierce’
CHS Hedging said: “The world is full of wheat and competition is fierce out there.
“There is not enough concern about late US planting or reduced acres at this point to make the wheat market rally.”
In fact, not all crop outlooks are 100%, with Agritel, while flagging “prospects for good harvests in the Black Sea Basin”, also noting “growing fears over Western Europe, facing a water deficit.
“The rains expected yesterday did not fall in several regions, and the weather forecasts for the coming days show a rise in temperatures and the absence of precipitations.”
Refinitiv noted for the EU “developing drought conditions in core producing areas in northern and eastern Europe”.
However, it still kept at 5.79 tonnes per hectare its forecast for the average EU wheat yield this year, “although the risk leans to the downside, particularly in Germany and Poland, as well as in Spain, where drought has impacted early durum wheat reproductive development”.
Chicago soft red winter wheat futures for May rebounded by 0.5% to $4.47 a bushel as of 09:30 Uk time (03:30 Chicago time), but still remain down 3.8% for this week.
Minneapolis May spring wheat futures – which, thanks to US sowing concerns, have proved relatively resilient, so providing less scope for bargain hunting – eased by 0.2% to $5.26 a bushel, taking losses for this week to 0.9%.
The better-traded July lot was also 0.2% down, at $5.29 ½ a bushel.
Row crops also recovered a bit of ground, with corn futures nudging 0.1% higher to $3.59 ½ a bushel for May, and by 0.1% to $3.68 ¼ a bushel for July delivery.
Chicago soybeans for May added 0.2% to $8.89 ¾ a bushel.
While there have been rumours of China buying 2.4m tonnes of US soybeans, “the market didn’t act like they were in”, with neither futures nor cash prices moving as would be expected, said Terry Reilly at Futures International.
Soyoil fared notably well, adding 0.7% to 28.91 cents a pound, helped by firmness in values of rival palm oil, which jumped by 1.9% to 2,214 ringgit a tonne in Kuala Lumpur, helped by hopes for Malaysian exports which are being underpinned by softness in the ringgit.
‘We will need much drier soils’
In New York, cotton futures, which closed higher in the last session, dodging the broader ag market selling, continued to press ahead, adding 0.4% to 78.85 cents a pound for July.
Louis Rose at Rose Commodity Group noted that in many US cotton-growing areas “soils remain wet to saturated.
“While it is still too early to get excited about not getting the 2019 crop into the ground, we will need much drier soils and warmer temperatures in two weeks’ time.”
Furthermore, he flagged the support to the market from China’s issuance of an extra 800,000 tonnes of cotton import quota, above WTO commitments, and from an on-call position showing substantial mill buying at prices yet to be fixed against futures.