In the last episode, corn futures, which have been leading the grain price surge, fell back, leaving them lower for the week.
Does that herald an end to the rally?
The corn market “could be at a key turning point,” ADM Investor Services said, noting that prices had already recovered more than $1 a bushel from a mid-May low, and that funds “are long” – meaning the support from short-covering will be more sparse.
“More normal US summer weather and lower export demand could put a top in prices.”
OK, conversely a “turn to a hot and dry summer or even an earlier than normal fall freeze could push prices sharply higher”.
But the broker said that “current risk is for normal weather and lower prices”.
At First Choice Commodities, Mike Mawdsley was mulling the same topic, saying that “now the question is, is this just a pause in the rally or has it run it’s course and downhill from here?
“Most expect higher or sharply higher prices from here,” he said, although adding: “Could be, but the path and how long it takes is another question.”
Upbeat commentators included Marex Spectron, which said that “we are still of the view that the” dismal, wetness-devastated US spring sowings “issue is under-priced at current levels”.
That said the market “may have to wait until we get past the end-of-month report”, the trading house said, referring to some key data due from the US Department of Agriculture this week.
The USDA will of course later release its weekly crop progress report, which will give an indicator on the likes of soybean sowings and potentially the first US soy crop condition rating of 2019 too.
However, even more keenly anticipated is the prospect on Friday of quarterly data on crop inventories and in particular the annual Acreage briefing, which will update investors on the area of crops that farmers have actually been seeded, and so provide some market clarity.
… although only some. The debate is still likely to rage afterwards as to how accurate the USDA statistics are.
“The unusual weather means the indications we do have probably have unusual interpretations,” said Tobin Gorey at Commonwealth Bank of Australia.
“For instance, when growers respond to [USDA] surveys as ‘100% planted’, what does that 100% refer to?
“Is it 100% of the planting they intended in April? Or is it simply 100% of what growers could do around the weather?”
Six vs 10+
Mr Gorey added that “analyst surveys, on average, suggest the market is looking for a near 6m-acre drop in US corn planting from the USDA’s March planting intentions survey”, which showed 92.8m acres.
(And the USDA has actually adjusted for 3m acres already.)
At Futures International, Terry Reilly said that “the June Acreage report should show a 10m+-acre loss in corn acres.
“But the survey taken during the first two weeks of June may show only a 7m acre decline, amid producers reporting ‘intended’ acres and take prevent plantings.”
Ie the reported area figure on Friday will include some acres which farmers have instead given up sowing on, and opted for so-called “prevent plant” insurance.
Hedge fund position
Whatever, in early deals on Monday, corn actually found a little bit of fresh buying, adding 0.2% to $4.54 ½ a bushel for the December lot as pf 10:10 UK time (04:10 Chicago time).
Mr Mawdsley said that, from a bullish perspective, he would “like to stay above $4.50 a bushel on a close”, although added that if that fails, futures should receive “long-term support near $4.20”.
The spot July lot gained 0.1% to $4.42 ¾ a bushel.
There was also some comment over Commodity Futures Trading Commission data on Friday which showed hedge funds net long 143,515 in Chicago corn futures and options – a 13-month high but, in gaining 32,303 lots, adding less than investors had expected.
“I thought they may have been net buyers of a little more corn,” Benson Quinn Commodities said.
Soybean futures posted modest gains too, gaining 0.4% to $9.06 a bushel for the spot July lot, and 0.3% to $9.30 a bushel for the new crop November contract, amid ideas of further, if easing, rains to slow the last US sowings.
“Forecasts of further rain in the US Midwest mean that growers may not get to plant all the soybean they had planned,” CBA’s Tobin Gorey said.
ADM Investor Services noted that while “most guess for US soybean acres near 85.0m acres” in Friday’s report, up 400,000 acres from a March briefing (boosted by some switching from corn) “there are though some that could see US famers unable to plant 1.0m-2.0m soybean acres due to the wet spring”.
And with the potential for a yield downgrade too, “some could see US 2019-20 soybean carryout closer to 820m bushels than USDA 1,045m.
“This is still adequate but could trigger more fund short covering.”
‘Fieldwork will improve’
However, Chicago soft red winter wheat futures eased by 0.4% to $5.28 ¾ a bushel for September delivery, weighed by pressure from the US winter wheat harvest.
In the Plains, “rains in eastern areas will keep wheat drydown and harvesting slow, but fieldwork will improve in most areas this week”, Maxar said.
Furthermore, there are a few showers on tap for the Black Sea, where dryness has raised some concerns over wheat (although more over corn and sunflowers).
Less promising is the outlook for Europe, where “very warm and dry conditions will reduce moisture in most areas”, Maxar said.
Agritel said that “the heatwave of this week in Europe will be monitored by producers with possible impact on the crops.
“Traders will now watch the impact of hot temperatures.”