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Morning markets: Eyes on China trade talks to lift US export prospects

Thursday’s trading saw soybeans becalmed as wheat and corn both lost further ground, although wheat futures prices were rising in early Friday business. Disappointing US weekly export figures were behind yesterday’s drift.

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The Chicago December wheat futures contract, which had gained on Wednesday to close at $5.20¼/bushel, closed Thursday 0.9% lower at $5.16/bu. Early Friday saw the position trading at $5.17/bu.

 

The Euronext December milling wheat position also lost ground, losing €1 to close at €180/tonne.

The latest International Grains Council monthly report reduced its global wheat production estimate by 2 million tonnes to 762m tonnes, primarily due to a downgrading of the Australian crop to 17m tonnes.

 

But this bullish news was offset by weekly USDA crop export figures showing wheat exports of 262,400 tonnes, rather than the 450 000 tonnes expected – exports are down 34% on the prior week and 31% below the four-week average.

 

Black Sea wheat prices firming

 

In Europe, Agritel reported a hardening of Black Sea quality wheat prices, with Ukrainian origins rising by 10.5% over the last month and Russian 12.5% Novorossiysk wheat up 11.7%, plus a 10% increase for feed wheat in both countries. The analyst believes this is due to a lack of availability locally, allied to the fast pace of exports – the Ukraine has already shipped more than half of its annual target in just 4 months. Currency is also a factor, with the grivna strengthening against the dollar.

 

The CBOT December corn contract closed Thursday at $3.86¾/bu, down 0.3%, with the Euronext November position losing €1 at €163.25/tonne. Friday ‘s early business saw no change.

 

The IGC report reduced its global corn production projection by 1m tonnes to 1.098 billion tonnes. USDA weekly corn shipments were 582,900 tonnes against the 650,000 tonnes market expectation.

 

Better weather conditions in North America are allowing the corn and soya harvests to progress in the midwest and Canada, but both are behind the five-year average for the stage of the year, after a late spring and wet weather at the start of harvest. CRM Commodities reports anecdotal farmer estimates that yields are “widely better than the USDA Oct estimate, following a tough season”.

 

“Corn did see an uptick week on week, but a 33% jump from near nothing leaves 491,500 tonnes in new sales, mostly to freight captive Mexico and still trailing year on year pace by 49%,” commented Lael Weselmann at Benson Quinn. “Brazilian corn basis was thought popping today as more South Korean feed mill biz was getting booked there and not here.”

 

 

Soya waits on US: China talks

 

The Chicago November soybean contract closed Thursday virtually unchanged at $9.33¼/bu, with the Euronext oilseed rape November position up €1.75 to €379.50/tonne - continuing its rebound since the beginning of the week, noted Agritel. The ICE Canadian canola contract gained 0.3% to close at Can$464/tonne.

 

The analyst said China’s purchase of 264,000 tonnes of US soybeans was supportive, “confirming a slight relaxation in diplomatic relations between the two countries”. But much depends on the Chinese authorities’ policy on import taxes in the ongoing face-off with the Trump administration – the US‑China trade talks are still a live issue with some confidence that a part deal can be reached.

 

Mr Weselmann notes that traders found support from reports that China is prepared to buy $20 billion of US agricultural commodities in the first year of a new deal, with up to $40bn in the second year and beyond.

 

In the short term, USDA weekly export statistics are disappointing - 475,200 tonnes of soybeans shipped (70% below the week before) against the 800,000 tonne trade expectation. “Some 584k in cancellations did not help matters”, added Mr Weselmann.

 

Better weather is also helping the delayed soy harvest - Canada’s Saskatchewan province reports 83% of the soy crop is harvested, from 69% the week before – although the 5-year average for this stage of October is 93%. In the US, BCQI said the eastern and southern bean harvest should be winding down. “Most of Minnesota’s bean crop should be completed shortly - maybe 25 to 30% remaining. Snow impact in the Dakota’s probably takes at least 10% -12% off the top of bean yields”.

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