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Morning Markets: Early trading recovery for wheat and corn after Red Tuesday


A big fall in US corn futures prices yesterday has pulled wheat values down with it in all the major producing regions of the world. Soybeans were down sharply too.


Favourable weather conditions are underpinning large production estimates for corn and soybean crops, while US wheat prices are under pressure as export activity lags previous campaigns.


Tuesday’s activity saw funds net sellers of 32,500 lots of corn, 12,000 lots of soybeans and 10,500 lots of wheat.


The Chicago September SRW contract lost 2.4% Tuesday to close at $5.08¼ a bushel. It is a significant fall from last week’s ending price of $5.31¼/bu and marks the contract’s lowest level since July 8th. Early Wednesday trading saw the September wheat futures recover slightly to trade up at $5.10¼/bu.


European values are following the CBOT down, although not so sharply - the nearby Paris wheat futures ended Tuesday at €179.75/tonne from the previous day’s close of €180.25/tonne, after the position lost €2.50/tonne in Monday’s business.


The US winter wheat harvest is 85% complete, with a start to the US spring wheat harvest – now 5% complete, although 5 points behind an average season. The US spring wheat crop is rated 73% good to excellent.


Black Sea yields mitigate Europe’s shortfall


The Russian and Black Sea wheat harvests appear better than originally feared, which is mitigating the poor yields reported in some European countries – especially France and Romania. Agritel estimates French output at 29.2 million tonnes and the Romanian crop at 5.5m tonnes.


Egypt has launched a new wheat tender, which traders expect to be met from competitive Black Sea origins. Thailand is in the market for 192 600 tonnes of feed wheat and 107 700 tonnes of feed barley and Jordan requires 120 000 tonnes of wheat.


Benson Quinn analyst Brian Henry observed: “US wheat futures are shattered from a technical standpoint.” He said traders are arguing whether the Russian production will be 76 or 80m tonnes, although “both estimates look like plenty to me”. While the EU exportable surplus is tighter, the Ukraine crop should meet expectations at 17 to 18m tonnes.


“While there is some disappointment in crops at a couple major exporters, there isn’t an overall supply issue”, Mr Henry advised. “It is simply too early to shift focus to Southern Hemisphere. Bob Uecker’s lesson on catching a knuckleball may work for wheat – ‘Wait for stop and go pick it up’”


Commonwealth Bank of Australia’s Tobin Gorey added: “The big fall in US corn prices implies that the US will have even more wheat to offer for export”.


Corn prices fall heavily


US corn vales also fell sharply on Tuesday. The September CBOT corn futures closed Monday at $3.17½/bu only to close the day at $3.08¼/bu. Early Wednesday activity saw the contract up to $3.10/bu.


The Paris nearby maize contract had gained €4/tonne to finish Monday at €182/tonne but was back down to €180/tonne by Tuesday’s close.


“Corn futures prices fell heavily on Tuesday - Chicago September and December both made clear new lows for this season,” observed Mr Gorey. “The market is running out of time for any weather event to curb the huge prospective US crop. The other issue is that more US lockdowns are likely to curb gasoline/ethanol use, and so corn consumption.”


Mr Henry also believes the corn market is suffering from a lack of demand. “The story in corn is similar to beans in terms of production but may not be as rosy from a demand standpoint. Despite China having been a very good of buyer of corn this summer, the corn market lacks a primary global destination - lower prices could help with that.


“The question is whether or not the yield is a record and where does corn find the demand it needs to offset growing supply.”


Ukraine’s corn production is expected to reach a record high of 38.9m tonnes, with a potential exportable volume of 33m tonnes. But ongoing drought in France is lending some support to European corn prices, despite large harvest prospects in the US and Black Sea regions.


US soybeans cheapest for a year


Soybeans saw significant falls yesterday. The Chicago August position had risen to $9.03/bu in early Monday trading only to fall back since, closing Tuesday at $8.83¾/bu. Early Wednesday trading was at $8.84/bu. In Europe, the Paris rapeseed contract lost €2/tonne over the session to finish at €382/tonne.


“Soybean prices fell sharply, taking them away from recent highs”, said Mr Gorey. “And with that US soybeans look the cheapest they’ve been in almost a year – not unusual for this time of year.”


By contrast, canola prices traded slightly higher, at Can$491/tonne for November on fears that dry conditions across Canada’s prairies will see yield potential reduced.


Brian Henry noted that US soybean futures remain under pressure from increasing crop size, failing technicals and few signs of confirmed Chinese buying interest.


“If China isn’t going to play and production is increasing, the board is doing what it needs to do to get them back in the game. That said, the potential for beans and meal still looks promising. Brazil is tight. Argentina doesn’t seem to have a good plan. Maybe meal can become a positive story,” he said.


Agritel reported that rapeseed values continue to be supported by the firmness of the palm oil market.

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