Ags returned from the weekend in something of a muted mood.
But then, there are plenty of hurdles awaiting markets this week, with a string of data, including the US Department of Agriculture’s flagship Wasde briefing, besides monthly ag reports from Brazilian and Chinese officials, and Malaysian palm oil supply and demand data.
And it is not as if investors appear to see much hope for that many bullish revisions, particularly to the important US corn and soybean balance sheets.
The USDA’s domestic corn and soybean yield estimates for 2019, deemed by many a month ago as unreasonably large, are now gaining increasing acceptance.
As Benson Quinn Commodities put it, IEG Vantage was on Friday “the latest to concur with USDA” on yield, with the analysis group lifting its forecast the corn figure by 1.8 bushels per acre to 169.6 bushels per acre, and for soybeans by 0.2 bushels per acre to 48.4 bushels per acre.
(The USDA is at 169.5 bushels per acre for corn, and 48.5 bushels per acre for soybeans.)
Meanwhile, demand worries remain live too.
In the Wasde, Benson Quinn Commodities said that “trade looks for USDA to cut both US ethanol and corn export demand”, for 2018-19, meaning an upgrade to the carryout estimate for the season (which ended last month for the grain and for soybeans).
And for 2019-20, weakness in US export sales data is hurting sentiment.
“As of August 29, cumulative corn sales stand at 11.4% of the USDA forecast for the 2019-20 marketing year versus a five-year average of 22.6%,” said ADM Investor Services.
“Sales of 875,000 tonnes are needed each week to reach the USDA forecast,” compared with the 416,700 tonnes sold in the latest reported week (to August 29).
‘Don’t need the corn’
Terry Reilly at Futures International said that US corn export demand so far for 2019-20 is “running at their lowest level since 2005-06.
“We are seeing slow US export commitments from major importing countries like Japan and South Korea.”
Mike Mawdsley at First Choice Commodities said that “the demand bears are in total control at the moment”, adding that he was not sure where corn prices would be if the US had “had a normal growing season”, rather than a rain-delayed one.
“We don’t need the corn.”
Corn futures for December, having set a fresh contract closing low in the last session, bounced in this one, but by a modest 0.2% to $3.56 ¼ a bushel as of 10:10 UK time (04:10 Chicago time).
Soybean futures fell a touch, by 0.1% to $8.57 a bushel for November delivery.
Sure, there is the potential for the USDA in the Wasde to lower its forecast for US soybean stocks at the close of 2018-19.
“I look for USDA to raise crush and export demand for 2018-19 and lower old crop carryout,” said Benson Quinn Commodities.
“But US and world soybean balance sheet will still be bloated,” and could easily absorb possible lower yield estimate.”
‘Reduce the room for the US’
And US export sales for 2019-20 are running behind the pace too.
ADM Investor Services said that as of August 29, “cumulative soybean sales stand at 13.3% of the USDA forecast for the 2019-20 marketing year versus a five-year average of 38.2%.
“Sales of 795,000 tonnes are needed each week to reach the USDA forecast,” although to be fair US export sales for the latest week were only some 7,000 tonnes short of that.
Where there were some promising trade data around was from China, on imports, which for last month came in at an 18-month high of 9.48m tonnes - up from 8.64m tonnes in July, and 9.15m tonnes in August 2018.
Still, there are also ideas of a large Brazilian crop about to be planted for harvest early in 2020, with Karl Setzer at Agrivisor saying that “for the most part, analysts are predicting a soybean crop from 121m-122m tonnes, with a few as high as 124m tonnes.
“Soybean exports for the year are projected at 75m tonnes. If correct, this will reduce the room for the US in the global soybean market, especially if the trade dispute with China is not resolved.”
Wheat vs corn
Chicago soft red winter wheat futures were also little changed, adding 0.1% to $4.64 a bushel for December.
“Trade is keeping a close eye on the price spread between corn and wheat,” Mr Setzer said, noting that this spent much of the summer below $1 a bushel.
“Traditionally this will favour wheat usage as a feed grain, especially if corn supply is tight.
“If corn quality is brought into question, we can see even higher feed usage of wheat.”
‘Could hurt the quality’
Also on the more positive side for prices, while there remains ample supply of wheat in the world, Benson Quinn Commodities noted that Argentina has “been dry.
“The Buenos Aires exchange says if dryness persists it could hurt the quality of the wheat crop with harvest expected to start in November.”
This when dryness worries continue to dog Australian crops too.
“Here as we are now in September, a small eastern crop is looking more and more likely,” said Tobin Gorey at Commonwealth Bank of Australia.
‘Worries have dissipated’
In New York, cotton futures for December added 0.3% to 58.76 cents a pound, backed by higher oil prices, which in turn found support from a 9.2% rise year on year in Chinese crude imports last month.
As for storm fears for the US crop, Mr Gorey said that the “last of the worries about Hurricane Dorian have now dissipated.
“Indeed, looking at rainfall maps, the impacts on quality and quantity are most likely only modest.”