Grain futures traded weak in early deals. Will they do so in late ones too?
Monday is a big day for grain traders, one of the biggest of 2019, in bringing a US Department of Agriculture Wasde crop briefing which will give some clarity on just how much crop (and in particular holes in fields’) US growers seeded this year.
The 91.7m-acre corn seedings figure that the USDA came out with a month ago has been dismissed as way too large many investors.
Traders see the USDA, which has resurveyed many major Corn Belt states, issuing an 88.0m-acre figure, according to a Reuters poll.
‘Holes in fields’
That said, the spread of estimates is large, ranging from 81.6m-92.8m acres, according to a Bloomberg poll, ie an 11.2m-acre range – an area bigger than Denmark.
And that is before getting into the debate about how many of those acres will actually make it to harvest.
Richard Feltes at RJ O’Brien flagged “numerous reports of ‘holes in fields’”, a hangover from the poor sowing conditions, besides seeing an “elevated risk that late corn will not be harvested for grain” – ie that the lateness of the sowings season will mean too limited a growing season for some crops.
“Trade is unlikely to have an accurate fix on corn and soybean abandonment until the November [Wasde] crop report - especially in light of reports that some farmers planted corn for cover crop with no intention of harvesting it for grain” Mr Feltes said.
The possibility of an early frost is another factor concerning investors.
“The market is guessing the USDA will make a large cut to their US corn crop estimate,” said Tobin Gorey at Commonwealth Bank of Australia.
“The uncertainty though is unusually high.”
‘Hard to make predictions’
Worries over what the data might produce have spurred some retreat by investors, with open interest in corn futures alone falling by 92,000 lots last week, albeit reflecting too the imminence of the expiry of the September contract.
Some saw this as behind some uptick in prices last week, as funds took profits on short bets ahead of the Wasde uncertaintly.
Still, it was the bears who held control in early deals on Monday, with Agritel noing that “traders are showing a high level of cautiousness before the release”.
It is “hard to make predictions for this report as the previous one two months ago already brought a lot of surprises”.
Bears were helped by a gain too in the dollar, which edged 0.2% higher against a basket of currencies.
A firmer dollar makes goods, including many ags, denominated in the dollar less affordable as exports.
The weakness extended even to soyoil, which has been a star of late boosted by ideas that China may raise its import, as its domestic oilseed crush - in the face of weaker demand for meal amid the African swine fever outbreak – lowers the country’s production of vegetable oils too.
Chicago soyoil for December stood down 1.0% at 29.66 cents a pound as of 09:30 UK time (03:30 Chicago time), even though the rally in China itself continued.
Dalian soyoil for January gained 1.7% to 6,170 yuan a tonne, earlier hitting a fresh contract high of 6,230 yuan a tonne.
Palm oil for January added 1.6% to 4,818 yuan a tonne on the Dalian. (The Kuala Lumpur palm oil market was closed.)
Terry Reilly at Futures International flagged talk that last week “China importers were asking around for US soybean oil quotes,” against the negative trend of China-US trade relations.
However, the importers “backed off”.
With soyoil lower, soybeans themselves for November dropped 0.6% to $8.86 a bushel.
Corn futures for December eased 0.7% to $4.14 ¾ a bushel, dipping back below their 100-day moving average.
And wheat futures for December fell by 0.9% to $4.97 a bushel, even though Ikar, again, cut its forecast for Russian wheat production this year, this time by 500,000 tonnes to 75.0m tonnes.