“Can Tuesday break the mould from its ‘turnaround’ theme or does new momentum prevail drawing new fund buying?”
That was the question, from Benson Quinn Commodities, for grain investors at the start of the second session of the week.
And the answer was, in early trading at least, the former. Ie that the adage of Tuesdays reversing a strong trend from Mondays (which was this time a strong session) was holding true.
Not that losses were universal this time.
Chicago soyoil futures for December managed to scrape a further 0.4% higher to 31.64 cents a pound for December delivery as of 10:10 UK time (04:10 Chicago time), continuing for find help from the US crush data unveiled late in Monday’s session from industry group Nopa.
This showed US soyoil stocks as of the close of last month at 1.619bn pounds – some 70m pounds below trade expectations, and down 159bn pounds month on month.
This despite too a slightly larger-than-expected US crush in July.
“Domestic use for soybean oil was much better than we thought, given the higher than projected crush rate and an upward revision to the soybean [crush] yield from 11.56 pounds per bushels during June to 11.60 pounds for the month of July,” said Terry Reilly at Futures International.
The headway helped rival palm oil higher too in Kuala Lumpur, where the November contract added 0.5% to 2,692 ringgit a tonne, overcoming earlier pressure fostered by ideas of seasonally strong production in the South East Asia oil palm growing region.
In New York, cotton futures also traded higher, adding 0.5% to 63.51 cents a pound for December, despite a gain of 3 points week on week to 54% “good” or “excellent” in the US Department of Agriculture’s rating of the domestic crop, unveiled overnight in the Crop Progress report.
The rating for the key growing state of Texas – where investors have been worried about dryness - grew by 5 points, albeit to a modest 27% good or excellent.
In fact, the text of the USDA’s Texas office was less reassuring than the numbers, saying that last week “most of the state experienced triple-digit temperatures along with little to no precipitation”.
It also said that “in areas of the Lower Valley, many producers opted for crop insurance payments over harvesting after assessing damage from hurricane Hanna”.
Still, more supportive were technical factors, with the contract managing to break above its 200-day moving average at 63.28 cents a pound.
‘Caused considerable damage’
Also a tailwind for dollar-denominated ags generally was a further dip in the greenback, of 0.3% against a basket of currencies, taking it close to two-year lows, and boosting the affordability of dollar-denominated exports.
Still, that could only act to help limit descent in many other ags, such as corn, which found selling after overnight USDA Crop Progress data showed the US crop not deteriorating quite as much as investors had expected last week.
At 69% good or excellent, the rating was down 2 points week on week, but ahead of the 68% figure the market had expected.
Sure, the reading tumbled by 10 points to 59% in Iowa, the centre of last week’s derecho storm.
The USDA’s Iowa scouts reported that “high winds experienced on Monday caused considerable damage to on- and off-farm grain storage in their path as well as other structures.
“The level of crop damage reported varied widely depending on location and wind strength.”
However, for Illinois, also affected, the rating fell by a more modest 3 points to 76% (and in fact failed to register a mention on the weekly briefing from the state’s ag bureau, which is never the most chatty of the state offices).
‘Simply doesn’t wash with me’
Still, losses in December corn futures were limited to 0.6%, taking the contract to $3.42 ¾ a bushel, still up 6.0% week on week.
“While the overall decline was down less than expected the statistical condition model lowered national yield forecast to 180.8 bushels per acre from last week’s model forecast of 182.7 bushels per acre, and USDA’s 181.8 bushels per acre” as cited in the Wasde briefing.
Mike Zuzolo at Global Commodity Analytics took a somewhat upbeat tone in saying that “the market as a whole has been relying upon the high crop conditions to defend the short funds positions”, which at a net 170,000 contracts as of last Tuesday was indeed substantial.
“This simply doesn’t wash with me any longer: especially if this week we see yet more hot/dry weather,” with the Midwest outlook not ideal.
Soybeans for November shed a more modest 0.4% to $9.12 a bushel.
The USDA’s US soybean condition rating fell by 2 points week on week to 72% good or excellent, in line with market expectations.
While that reading is still high, “the statistical condition model forecasts a soybean yield of 52.8 bushels per acre, is down slightly from last week’s condition forecast of 53.0 and down from USDA’s 53.3 bushels per acre,” Benson Quinn Commodities said.
Soyoil provided some support too, as did a Nopa report which put the July US crush at 172.8m bushels, some 800,000 bushels ahead of investor forecasts, and up from 167.3m bushels in June.
Wheat, meanwhile, traded 0.6% lower at $5.23 a bushel in Chicago for December delivery, undermined by corn, but also some caution over higher prices at a time when Russian crop estimates are getting bigger (and at the end of the season when Russian exporters are maxing out).
That, said there was continued comment over the US export sale of 130,000 tonnes of hard red winter wheat, as announced on Monday, to “unknown”.
The sale was “thought to be China as well but there were some rumours that the sale could be to Africa,” said Benson Quinn Commodities.
“With lower French production, US does spread into northern Africa.”
This when there is a tender by Algeria going on and, as Agritel noted, “the firmness of the European currency against the dollar, but also against many other currencies, is penalising [EU] export prospects and may unsurprisingly favour imports”.
That said, French traders are expected to bust a gut to win business from Algeria, a key customer.
‘Back in the competitive range’
One other origin getting back into contention on global markets, and providing downward pressure to world prices, is Australia.
Tobin Gorey at Commonwealth Bank of Australia, noting that ASX east cost wheat futures were trading earlier on Tuesday at the equivalent of about $197.50 per tonne, said that “perhaps that means traders in Australia are, big crop looming, wanting to get on with a much larger export task.
“Spot prices in Australia’s south and east ports were cut by hefty amounts yesterday.
“That has put spot Geelong” Victoria wheat exports “back in the competitive range in Asia for the first time in a while”.