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Morning markets: Corn futures revive a bit after massacre. Cotton prices soar

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The horror show which grain markets witnessed in the last session did not find a sequel on Monday.

 

At least in early deals, when corn found some cause for headway, recovering a small portion of the losses of last time, when Chicago September 2019, December 2019 and March 2020 contracts were limit down at one point, before trimming losses a touch towards the close.

The reason for the Friday fright was, of course, the US Department of Agriculture’s much-anticipated Acreage report which - instead of showing the further cut to the estimate for corn sowings that traders had expected, to 88.7m acres - came in with a 91.7m-acre figure.

 

(This was below the 92.8m-acre number that the USDA had forecast in March, but above a revised 89.8m-acre figure revealed in the last Wasde, three weeks ago.)

 

Resurvey

However, the USDA at least offered bulls some consolation in acknowledging that its latest estimate, based on a farmer survey in the first half of June, had some cause for concern over accuracy, given the abominally wet weather which was slowing seedings.

 

The USDA said: “Excessive rainfall had prevented planting at the time of the survey, leaving a portion of acres still to be planted for corn” in states including top growers Iowa and Illinois, besides soybeans in these states too and some others, cotton in Arkansas and sorghum in Kansas.

 

“In July, USDA’s National Agricultural Statistics Service (NASS) will collect updated information on 2019 acres planted to corn, cotton, sorghum, and soybeans in 14 states.

 

“If the newly collected data justify any changes, NASS will publish updated acreage estimates in the Crop Production report to be released… on Monday, August 12.”

 

‘A little sceptical’

And many investors expect August 12 indeed to reveal data changes.

 

“Analysts are a little sceptical” of the June numbers, said Tobin Gorey at Commonwealth bank of Australia, adding that “the USDA seems a little sceptical too – they might do a supplementary survey in August”.

 

In Paris, Agritel said that traders are “expressing some doubts about the reliability” of Friday’s data, the result of a poll made at a time “when farmers were probably still hopeful about their plantings, and this could justify such a high number”.

 

ADM Investor Services said that “at the time of the [June] survey farmers still must have wanted to plant corn versus soybean given the trade war with China and fact China was not buying US soybean and US soybean stocks were record high.

 

“Most feel that farmers did not get those acres planted.”

 

‘Purchasing large amounts’

The other reason for bulls to feel a bit more cheery was the rapprochement between presidents Trump and Xi at the G20 meeting in Japan.

 

As Mr Trump reported, after a meeting with Mr X which was “far better than expected” the US agreed not raise tariffs further on imports of Chinese goods while trade talks between the countries were ongoing.

 

“China has agreed that, during the negotiation, they will begin purchasing large… amounts of agricultural product from our great Farmers.”

 

The USDA already, on Friday, reported a Chinese purchase of 544,000 tonnes of US soybeans, for 2018-19 delivery.

 

Prices rise

Chicago corn futures, helped more by the potential US acreage rethink factor, gained 0.6% to $4.27 ¼ a bushel for September delivery, as of 10:00 UK time (04:00 Chicago time).

 

The better-traded new crop December lot gained 0.5% to $4.33 ½ a bushel, also remaining above its 40-day moving average.

 

Soybean futures, helped more by the China-US accord, added 0.6% to $9.10 ¼ a bushel for August, with the new crop November lot gaining 0.6% to $9.28 ¼ a bushel.

 

The biggest winner was cotton, which is a huge US export to China in normal times, and also saw an in-line acreage number on Friday - while not facing the same threat of a large potential upgrade from the resurvey as the oilseed (if farmers switched some area from corn).

 

New York December cotton futures soared 3.0% to 68.09 cents a pound, soaring back above their 40-day moving average for the first time since April.

 

‘Hopes for feed demand dashed’

Wheat was a little more reluctant to make headway, with Chicago soft red winter wheat for September easing 0.1% to $5.26 ¾ a bushel.

 

Rabobank noting that a USDA estimate of 45.6m acres of all-wheat sowings this year, the lowest since records began in 1919, disguised the face that “winter wheat acreage actually increased 300,000 acres since the last estimate”.

 

Meanwhile, Benson Quinn Commodities noted that “hopes for improved feed demand in the wheat space are dashed by the presence of an apparent corn crop” in the US this year.

ADM Investor Services, meanwhile, noted that “US southern weather should turn warmer and drier”, a factor which “should help winter wheat harvest”, which would in turn weigh on prices as supplies rise as risk premium is removed.

 

Still, Kansas City hard red winter wheat for September did manage a 0.1% gain to $4.61 ¾ a bushel.

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