Yesterday’s trading saw a further 10 cent fall in US wheat futures to just above the “psychological threshold” of $5.00 a bushel on further news of ample supplies. Favourable weather promising big corn and soya crops also weighs on futures for these commodities.
Thursday saw the funds as net sellers of 7,000 lots of wheat and 2,000 lots of soybeans, but neutral in corn.
The last session saw another sharp fall for US wheat futures, following the pattern of most of this week. The Chicago September SRW wheat futures contract had opened Thursday at $5.10¾ a bushel, a slight gain on the previous day, only to continue its downward plunge to close just north of the $5.00 barrier at $5.01¼/bu. However, the position had rallied in early Friday business, trading at $5.03/bu.
European wheat was unchanged over Thursday’s trading with the nearby Paris futures contract remaining at €179.25/tonne.
The latest US weekly wheat export sales figure, 605,500 tonnes, is variously described as in-line with expectations and disappointing - it is 11% down on the prior week, but 2% higher than the previous four-week average. Actual wheat exports, at 598,100 tonnes, were 18% up on the previous week and by 15% on the four-week average.
Japan, South Korea and Pakistan are reported to be buying wheat in small volumes.
Agritel observed that wheat prices on the Ukrainian physical market continue to decline. Milling wheat lost $2/tonne to close at $190/tonne delivered, while feed wheat is more resilient to downward pressure.
Locusts and drought in Argentina
Dry conditions and locust damage are a concern to both Argentina’s developing wheat and corn crops.
“The wheat market is trading bigger world stocks as prospects for record large Canadian all-wheat crop is piled on to the increase in the Russian crop issued earlier in the week - minimizing the impact of a lower EU crop,” noted Kim Rugel at Benson Quin Commodities.
“Weekly export sales did offer a little support early but beyond traditional business US is still too high priced, even given today’s weaker US dollar trade. Minneapolis and KC wheat traded to new contract lows today while Chicago has reached its downside objective of $5.00.”
The nearby CBOT corn futures contract was little changed Thursday, gaining 25 cents on the day to finish at $3.11/bu, only to lose that quarter in Friday’s opening pre-trades. Values remain just above season lows.
The Paris November maize futures were marginally up with a €0.25 gain to €164.75/tonne.
Analyst CRM says the “disappointing” US old crop weekly net sales of 101,600KT for 2019/2020 were down “noticeably” from the previous week and by 70% on the last four-week average.
US corn exports, at 685,500 tonnes, are 29% lower on the week and down 34% on the four-week average.
China corn import quota could choke demand
“New crops sales for 20/21 are largest to date in 24 years and are second largest on record for the period,” wrote Ms Rugel. “Sales to China for 20/21 marketing year are 5.72m tonnes with 1.3m tonnes outstanding for old crop. With China said to have reached an import quota of 7.2m tonnes for 2020, further demand is uncertain.
“Geopolitical tensions raise uncertainties of more US corn sales. Like beans, Phase 1 exports to China look to have factored in to the 20/21 corn export forecast, with USDA estimating exports to be up 375 million bushels and China 20/21 sales to date equating to 225 million bushels.
“Pile on bigger yield potential and US corn carryout could be up 200 million to 600 million depending on your bias to ethanol demand from the July WASDE.”
Terry Reilly at Futures International said that the sharp fall in wheat prices limited the upside movement in corn prices, despite the good export sales.
“The large sales announcements didn’t surprise given the large China corn announcement last week. Look for a two‐sided trade in corn, soybean complex, and wheat today. US weekly ethanol production reported yesterday was slightly bearish for corn,” he said.
The August Chicago soy contract had a steady session, losing a dollar over the day to close at $8.81/bu, and opening Friday’s trading a further quarter down to $8.80¾/bu.
The Paris oilseed rape contract gained €0.25 to €379.50/tonne over Thursday’s trading, while Canadian canola futures for November gained 0.3% to close at CAN$490/tonne.
China bought 126 000 t of soybeans from the US.
Record US soybean crop?
“Soybean prices fell for the third day in a row. Good crop conditions are suggesting a near record crop in the US for this season. Weekly exports amounted to 1.75m tonnes, at the top end of the expectations’ range,” noted Agritel
Terry Reilly added: “USDA export sales were the best we have seen for most of the commodities in a while.”
“Beans made fresh 3½ week low, as a strong start to the 20/21 export season is not expected to offset the bigger production outlook,” advised Ms Rugel. “New crop export sales are off to the fourth fastest pace on record, but a big year-on-year increase in export demand is already recognized by USDA in its 20/21 balance sheet.
“As geopolitical tensions flare between US and China and China continues to buy from Brazil for next spring, trying to offset a 51 -53 bushel per acre crop - or StoneX’s 54.2 bpa - with bigger exports is a tough case to make.”
Commenting on the unchanged EU rapeseed price, Agritel said the market is still supported by palm oil values but slightly penalised by soybeans.