Wheat continues its sharp fall, while corn and beans were also losing ground as Tuesdays trading started.
US wheat prices remain under pressure, with better yield prospects in Russia and the Black Sea region outweighing the poor European harvest. The strengthening of the Euro against the US Dollar - 1.1770 this morning – is adding to the pressure on Europe’s market.
US funds were net sellers Monday of 9,500 lots of wheat and net buyers for 5,000 lots of corn and 3,500 lots of soybeans.
The Chicago September wheat futures contract closed Monday’s session at $5.21 a bushel - a sharp fall from the previous week’s $5.31¼ /bu close, and a long way from the recent mid-July peak of $5.50½/bu. Early Tuesday business saw a further fall to $5.17/bu.
Europe’s wheat followed Chicago downwards, losing €2.50/tonne over Monday to close at €180.25/tonne.
Rainfall key for US spring wheat
Rainfall in North Dakota has relieved dry condition concerns over the US spring wheat crop, although dry weather persists in Indiana and Ohio, reported CRM Commodities – “moderate rainfall is forecast, and the volume of precipitation will be key for US spring wheat this week”.
In addition, yesterday saw the crop rating for spring wheat in the US increased to 73% good to excellent compared to 70% the previous week.
Tobin Gorey at Commonwealth Bank of Australia, commenting on the sharp fall in US futures, said: “For all the volatility of late, that new low is the first novelty of the past fortnight. Spot prices were little changed outside the US. US Hard Red winter wheat looks quite competitive for now. And that’s something that will likely provide some support for prices eventually”.
The Russian analyst IKAR has raised its estimate of the Russian wheat harvest by 1.5 million tonnes to 79.5m tonnes – this and rainfall in Australia are seen as bearish to wheat values. In the Ukraine, wheat harvest is now 75% complete with average yields continuing to grow as it progresses yields are averaging 3.8 t/ha, noted Agritel, with “a final result above 4 t/ha on average possible - which would ensure a crop above 26m tonnes”.
Europe’s soft wheat exports, at 635,453 tonnes, are down 68% year-on-year, in line with the smaller harvest.
Less chance of Russian export quotas?
Benson Quinn analyst Kim Rugel commented that wheat was the downside leader to start the new month as Russian wheat production estimates increase on better yields, despite the July WASDE downgrade. “Today Russia’s IKAR raised its estimate 1.5 MMT to 79.5 million with others talking crop upwards of 80.0 MMT vs. last year’s 73.6 MMT and 2018’s 71.7 million,” she stated. “The prospects for Russia to impose export quotas in 20/21 are dwindling.”
Nearby CBOT corn futures gained on Monday, opening at $3.16/bu and closing $3.17½/bu, but were trading at $3.14/bu in early Tuesday business. European values also gained on fears of dry weather in Southern Europe – the Paris maize contract gained €4/tonne to finish Monday at €182/tonne.
CRM Commodities advised that weather predictions for the majority of the US corn area are favourable for the crop, with cool conditions followed by higher temperatures and rainfall. The corn crop rating has been left unchanged at 72% good to excellent. It noted that 92% of the corn acreage is estimated to have reached the flowering stage, compared the 87% 5-year average.
But Europe is less positive - the French maize crop is suffering from dry and warm conditions. The good to excellent crop rating has fallen 3 points to 77% - although ahead of the year-ago rating of 61%.
“Corn futures malingering at recent lows”
Mr Gorey noted that corn futures are little changed over recent days. “Chicago September and December are still malingering near recent lows.”
Soybeans had opened Monday’s trading with the Chicago August position at $8.97/bu and had risen to $9.03/bu by mid- morning, only to fall back to the opening price by the close. Early Tuesday trading was down to $8.93 ½ /bu. In Europe, the Paris rapeseed contract opened at €381.75 and closed at €384/tonne.
CRM reported weather concerns after “weeks of favourable weather in the US for soybeans” as dryness fears build in Iowa and Illinois. These may have helped yesterday’s short-lived rally. Agritel noted the good to excellent crop rating for US soybeans rose to 73% against 72% last week, as traders were anticipating an unchanged level. Some 85% of the US soybeans crop area has now reached the flowering stage, ahead of a 5-year average of 82%.
At the same time, signals for export activity were weak, with “lacklustre” export sales of just 260,000 tonnes yesterday - 8,000 tonnes for delivery during the 2019/2020 marketing year and the bulk of the order in 2020/21.
Strong demand from China has supported the vegetable oil market, especially for palm oil, but also helping rapeseed prices. But dryness in Europe is seen as negative to growers planting intentions for the 2021 rapeseed harvest, with the area already under pressure due to insect damage after the EU banned neonicotinoid pesticides.
Disappointing Black Sea rapeseed
Agritel said the Black Sea rapeseed harvest is 75% finished, with 1.8m tonne in store. “The disappointments for this crop are significant, both in terms of yield - the lowest for the last 5 years - and in terms of oil content. These figures reinforce our prediction of a harvest just over 2.5m tonnes.”
Mr Gorey added: “Soybean prices remain near (not‑all‑that‑high) recent highs. US canola prices are holding up at higher levels. Weather problems have cut canola production in Europe and China. And parts of Canada’s Prairies now seem likely to be a little too dry for a little too long for the big yield forecasts. Canola prices, and premiums to soybeans, look well‑supported."