Finally, one the biggest data days of 2018 for grain investors has arrived.
After seeing limelight stolen by a series of unexpected events - including the return of Brent crude temporarily above $70 a barrel, surprise US crop export data and talk of Nafta implosion which sent February lean hog futures down 2.1% to 70.975 cents a pound on Thursday – the US Department of Agriculture is preparing to issue a series of key reports.
These include the monthly Wasde briefing, anyway a highlight of the ag investor’s calendar, but also statistics on US winter wheat sowings, and data on grain inventories which, in offering an insight into harder-to-track demand trends, have a history of prompting price swings just by themselves.
China soy import surge
And, perhaps predictably, ahead of that data spree, grain markets were becalmed.
Not that there were no other factors for trade.
The soybean market, for instance, had strong Chinese import data to suggest, with buy-ins of the oilseed touching 9.55m tonnes last month, up 10% month and month, and 6% year on year.
The figure, the second biggest monthly performance on record (after July’s 10m-tonne haul) too China’s total soybean imports for last year to 95.54m tonnes, a rise of 13.9% from 2016.
And it comes at a timely moment, with fresh talk around on Thursday of disappointing Chinese import orders and a back-up of soymeal supplies in the country.
Still, Chicago soybean futures for March edged just 0.25 higher to $9.50 ¼ a bushel as of 09:15 UK time (03:15 Chicago time), with more focus for now on the prospect of a Wasde expected to lift considerably the forecast for US stocks as of the close of 2017-18.
And while there is talk of a downgrade to the estimate for Argentine output, “a bigger Brazilian crop will mostly offset any reduction to the Argentine crop”, Benson Quinn Commodities said.
While there was some action happening in the oilseeds complex, it was in palm oil, which dropped 0.5% to 2,555 ringgit a tonne in Kuala Lumpur, amid continued volatility as investors weigh up the negative of large stocks in Malaysia (and reportedly Indonesia) against the prospect of Chinese buying ahead of February’s lunar new year.
Signally, May futures on China’s Dalian exchange dropped 1.1% to 5,280 yuan a tonne overnight.
Back in Chicago, corn retained its slothfulness, edging just 0.1% higher to $3.49 a bushel, continuing to struggle through ample supplies.
“For Friday’s report feed use could be better, exports could be worse, ethanol, after a hot start appears to be cooling, call that unchanged,” said benson Quinn Commodities.
“No matter how you slice corn stocks, whether it’s 2.3bn bushels or 2.5bn, left over, it’s still enough.
“It will remain a buyer’s market until such time we see a more direct threat to meaningful supply.”
Sowings data ahead
Large supplies are of course a feature which has been holding back the wheat market too.
But the prospect of US winter wheat sowings data later, expected to come in at the lowest in more than a century, adds extra spice to the prospect of trading in this market.
So too does the weather in the southern US Plains hard red winter wheat country, which suffered high profile frost last week.
Still, it is longstanding dryness which looks more of a concern, according to US Wheat Associates, which promotes US exports of the grain (so for which Thursday, and its dismal US export data, may not have been the best day).
‘Hurting and turning blue’
“Of all the threats to wheat, winterkill is not making the top of the list for farmers,” US Wheat Associates said.
“What is keeping more of them up at night now is the lack of moisture.”
The group quoted former chairman Don Schieber, a Kansas farmer, as saying that “I think if we lose wheat, it will be from dry conditions rather than winterkill.
“Some of the wheat that was planted early is big, but some is hurting and turning blue.
“It is so dry that some farmers have stopped grazing their fields because the cattle are pulling whole wheat plants out of the ground.”
Official Drought Monitor data on Thursday did little to dispel such fears, showing 41.5% of the High Plains in drought, up 12.3 points week on week, with the figure for top growing state Kansas at 52.4%, up 19.7 points week on week.
In the South, drought spread to 45.3% of area, up a more modest 2.7 points week on week, including a hefty 82.7% of second-ranked wheat growing state Oklahoma, up 5.5 points.
Chicago soft red winter wheat futures for March edged 0.1% higher to $4.33 ¾ a bushel for now, while Kansas City hard red winter wheat for March was flat at $4.40 ¼ a bushel.
‘Qualifies as a bull market’
Cotton showed more definite direction, upwards, soaring a further 2.3% to 84.54 cents a pound for March delivery, the highest in nigh on eight months for a spot contract, and adding to the limit-up close to the last session.
The gains have been spurred by strong export data on Thursday, gaining extra fuel from ideas of mills being caught short on their purchasing.
“The market has certainly regained its footing this week and will close higher tomorrow for the 11th week in the last 12,” said Ron Lee at McCleskey Cotton, adding that “I think that qualifies as a bull market.
“Mills continue to be caught flat-footed with an enormous amount of on-call purchases that are waiting to be priced in the March, May, and July contracts and the long speculator continues to drive the bus at the moment.”
Still, the Wasde data later “can always turn the market on its head, and the cotton market is already frothy enough without that component being thrown into the equation”.
Will the cotton rally reverse? Stay tuned.