ao link

Markets

Linked In
RSS
https://twitter.com/Agrimoney
http://www.newsnow.co.uk/h/Industry+Sectors/Agriculture

Morning Markets: Futures drift down on lack of China buying news

TwitterLinkedineCard

USDA crop projections from yesterday’s Outlook Forum have weighed on futures prices with wheat, corn and soybeans all down on the day. Traders are concerned at a lack of firm orders to support the promised major resumption of Chinese purchases following last month’s Phase 1 trade agreement.

 

The USDA Outlook Forum in Washington DC, which continues today, saw the agency publish its crop area estimates for the next year. It projects 2020 US wheat plantings of 45.0 million acres (45.2m acres in 2019); 94.0m acres of corn (89.7m last year); and 85.0m acres of soybeans (76.1m acres). This would see the wheat area remain at a century low - the smallest area since 1919 - while the row crop area recovery compares to 2019’s late spring that left a greater than normal area fallow.

 

Based on these estimates, the USDA has forecast crop prices for 2020/21: wheat at $4.90/bushel; corn at $3.60/bu and soybeans at $8.80/bu.

 

World soybean demand is projected to increase by 36m tonnes to 153m tonnes in 2020/21, with China accounting for 26m tonnes of the total. The USDA posited a post-ASF drop in China’s domestic pork production to 40m tonnes from 55m tonnes before the disease outbreak, which is bearish for feed protein demand. But China’s sow herd numbers appear to have grown by 1.4% for a fourth consecutive month.

 

USDA secretary Sonny Perdue told the Forum that the estimates didn’t include Phase One trade detail, stating the US has no timeline showing when China will step up its purchases of US goods.

 

No check from Sonny

 

“All in all, no real surprises from the early USDA data but enough overhead resistance to keep prices in check for the session,” commented Lael Weselmann at Benson Quinn. “Most believe Prevent Plant acres from 2019 will tilt toward soybeans. Also, Sonny says don’t currently look for any additional checks in the mail this year to offset trade problems.”

 

Weselmann added that trade estimates point to just $14 billion worth of ag product demand targeted for China, which raised questions over the Phase 1 deal. “$14 billion is up a bit from baseline numbers but well off the numbers discussed post-signing of the agreement,” when a figure of $40bn had been bandied around.

 

Thursday trading saw the Chicago March 20 SRW wheat contract lose ground for a second day, closing at $5.60/bu from Wednesday’s $5.65¼/bushel. Funds sold 4,000 lots of wheat.

 

Early Friday business saw the contract slide further to $5.59¼/bu.

 

“Wheat ended the session lower, as hopes of ‘new China biz’ fizzled once again, said BQCI’s Lael Weselmann. “Supportive talk had circulated that China was looking to buy beans, corn, high protein wheat DDGS and meats but so far only a hand full of sorghum cargoes have been confirmed.”

 

In Europe, the Euronext March 20 wheat position gained €0.25 to close at €196.00/tonne, although the September 20 contract lost €0.5 to finish at €184.50/tonne.

 

Smaller 2020 wheat crop for Europe

 

The EU grain trade body Coceral has issued its first estimates of EU crop production for harvest 2020. It predicts that European soft wheat production will fall to 137.9 million tonnes (145.7m tonnes in 2019); barley down to 60.8m tonnes (62.2m tonnes), but a bigger corn crop at 65m tonnes (61m tonnes). Coceral said the very wet autumn has caused a significant cut in the winter cereal area across much of France, Germany, Denmark and the UK, which will be reflected in a smaller harvest.

 

Analyst Agritel noted that weather conditions remain favorable in the Black Sea region, with the vegetative development of cereal crops is advanced compared to previous years, due to mild temperatures.

 

Thursday saw the Chicago March 20 corn position fall back to $3.78½/bu from Wednesday’s $380½/bu. Funds divested 11 000 lots of corn. CBOT March corn was $3.78¼/bu in early Friday trades.

 

The Euronext March position lost €0.75 to €168.50/tonne over Thursday.

 

“The trade is waiting to see if China will buy a large amount of US grain,” observed Terry Reilly at Futures International. Meanwhile, “Large South American corn production prospects continue to hang over the market”.

 

US soybeans lost ground after gaining earlier in the week. Thursday’s session saw the CBOT March 20 soybeans fall back to $8.92¾/bu from the opening $8.97¼/bu, reversing a two-day rally. Fundholders sold a net 6,000 lots of soybean.

 

Early Friday saw contracts marginally lower at £8.92¼/bu.

 

Doubt China will buy large US soy in coming weeks

 

“Soybeans traded 4.50-5.50 cents lower on large South American crops; ongoing concerns over China protein demand; and doubt that China will buy large amounts of US soybeans over the coming weeks,” commented Terry Reilly.

 

Europe’s rapeseed futures lost €0.25 to close at €401.25/tonne.

 

Coceral forecasts that European rapeseed production will increase to 17.1m tonnes in 2020, compared to the 16.7m tonnes for 2019.

 

Agritel said a slight rebound in palm oil values followed an increase in export volumes from early February. This, plus India’s phasing out import restrictions, were largely supportive of rapeseed prices.

 

Reuters reported that favourable rains could lift the Argentine soy crop potential - soil moisture levels are up in three key soy-growing provinces, according to the Buenos Aires Grains Exchange. “Soybean plantings in Entre Rios, southeastern areas of Santa Fe and southern parts of the ‘breadbasket’ province of Buenos Aires have benefited from recent showers of varying intensities.”

 

Bullish biofuel news

 

Two biofuel developments could be bullish for the oilseeds sector, although in the longer term.

 

The USDA has announced a target for 30% biofuel inclusion (B30) in domestic transport fuels by 2050, “a move that could bolster an industry that has been otherwise battered by the Trump administration” sates Reuters. US inclusion rates are currently around 10%.

 

Malaysia is to implement a B30 palm oil biodiesel mandate in its transport sector by 2025 or even earlier, as part of its National Automotive Policy plan launched by prime minister Mahathir Mohamad. The policy will be supported by an R&D programme to facilitate the move.

TwitterLinkedineCard
Related Stories

Producer, merchant positions in ags for week to April 13

Markets Extra lists the latest official data on commercial positions in ag commodity derivatives

Hedge fund positions in numbers for week to April 13

Markets Extra lists the latest official data on hedge fund positions in ag commodity derivatives, and how they have changed week on week

Evening markets: Grains suffer touch of late-week profit taking

The likes of corn and wheat trade lower in closing deals of a positive week. But the vegetable oil complex, and canola, stay strong

Soybeans vs corn deadlock breaks in battle for acres

There has been some movement at last in the new soybeans-versus-corn price ratio, seen as an influence on sowing area. Cotton stakes its claim too
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© Agrimoney.com 2021

Agrimoney.com and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of AgriBriefing Ltd
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069