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Morning markets: Corn fights battle to stay above key price point

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Can corn futures stay above their 100-day moving average?

 

While Monday’s strong session for grains saw the Chicago December corn contract end above that level for the first time in a month, the retreat since has pulled it back closer and closer to the line.

 

In early deals on Wednesday, the December lot retreated a further 0.4% to $3.38 ¼ a bushel as of 10:15 UK time (04:15 Chicago time) – within an ace of the 100-day moving average (which actually stands at about $3.38 1/8 a bushel).

 

In the last session, “the 100-day moving average was tested, but futures closed above”, as Mike Mawdsley at First Choice Commodities noted.

 

Whether it holds this time…

 

Tour findings

One big factor in play – and for soybean futures too, in a less tense fight to stay above their 200-day moving average - is the Pro Farmer crop tour of the Midwest.

 

That had produced strong results from its early days, in the likes of Ohio, Indiana and South Dakota, and on Wednesday found above-average results in Illinois too.

 

But it is the top growing state of Iowa where the findings really count - with investors seeking more information on the extent of damage caused by last week’s derecho storm, and with dryness concerns in play there too.

 

On Wednesday, from western parts of Iowa, scouts estimated corn yields and soybean pod counts below last year’s and, mainly, below the tour’s three-year average level too, although a state-wide average will not be released until more area is scouted on Thursday.

 

Yield estimate retreat

As Karl Setzer at AgriVisor said, “some forecasters have started to back off their yield estimates”, although mainly thanks to “the dry conditions that have been noted in regions of the Corn Belt” rather than storm damage.

 

“The average yield estimates now are closer to 180 bushels per acre on corn and 52 bushels per acre on soybeans.

 

“While still much above trend, these are below the latest USDA estimates of 181.8 bushels per acre on corn and 53.3 bushels per acre on soybeans.”

 

At Soybean and Corn Advisor, Dr Michael Cordonnier said that the USDA’s 181.8 bushels-per-acre figure, as revealed in last week’s Wasde briefing, “might end up being the highest yield estimate of the 2020 growing season”, highlighting a dry Midwest outlook.

 

“The forecast is calling for below-normal rainfall and seasonal temperatures for the last half of August, which could increase moisture stress especially in the drier areas.”

 

 

 

Adding in uncertainty from the derecho storm - for which corn “loss estimates range from 100m to 500m bushels”, Mr Cordonnier said, himself pencilling in a 200m-bushel figure – and it is hardly surprising that investors appear unwilling to bet too much for now on any particularly corn or soybean price move.

 

As Steve Freed at ADM Investor Services said, speaking more of soybeans, “some feel it may be hard to sustain breaks and rallies in prices until more is known about final US crop size”.

 

Soybean futures for November had a bit more direction, downwards, by 0.6% to $9.08 ¼ a bushel, but remained some $0.07 above their 200-day moving average, a breach of which, or not, may prove influential in deciding whether prices have already set an early seasonal low.

 

Data later

Still, there is more than production prospects to determining pricing, with Thursday later bringing important demand data too, in terms of US export sales data for last week.

 

These are expected for corn at 100,000-550,000 tonnes for 2019-20, and 400,000-800,000 tonnes for next season, according to a Reuters poll.

 

For soybeans, for which demand is being helped by a series of Chinese purchases, sales are forecast at 100,000-550,000 tonnes for this season, and 400,000-800,000 tonnes for next.

 

For wheat, for which the 2020-21 season has begun, export sales are forecast at 300,000-600,000 tonnes.

 

China rumours

Still, for wheat, investors will also be awaiting to see if the USDA, through its daily alerts system, confirms any sales of US crop to China, with talk around in the last session of some business on this route.

 

As AgriVisor’s Karl Setzer said, “there were also rumours that China was shopping for US wheat, but these were not confirmed”, with ADM Investor Services adding that supplies in Pacific North West ports were in play.

 

In early deals, wheat futures gave back some the ground made on the talk, shedding 0.7% to $5.18 ½ a bushel in Chicago for December delivery.

 

Baltics vs France

There remains some chatter too over the outcome of Algeria’s latest tender, which was the key importer buy 560,000 tonnes of wheat at $231-232 per tonne, on a cost and freight basis.

 

“Wheat origins are optional, leaving time for exporters to make arbitrages between the various areas of shipment.

 

“However, the level of prices is suggesting that European origins should be delivered,” said Agritel although stressing supplies from the Baltic countries, such as Lithuania, rather than France, the default origin for Algerian purchases.

 

“Algeria’s 560,000-tonne tender is expected to be sourced from the Baltics because of the significant reduction in the French wheat crop,” CHS Hedging said.

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