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Morning markets: Grain futures ease, despite talk of further Chinese buying

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China’s latest spree of buying US ags may not be over yet

 

The US Department of Agriculture on both Tuesday and Wednesday revealed large Chinese purchases of US corn – orders deemed likely spurred as a goodwill gesture ahead of talks in Ankara between Washington and Beijing officials.

 

And “there are rumours there are more announcements of sales to China coming,” said CHS Hedging.

 

Nor might this necessarily be of corn.

 

Steve Freed at ADM Investor Services said that “some report China bought three US cargos of soybeans this week”.

 

Sure, this would be small fry compared with the 2.38m tonnes of corn bought over the two days, but Mr Freed did add that, looking out to May and June “they may need to buy 6m tonnes”.

 

Downbeat Dalian

Still, not all the influences stemming from China are so positive.

 

Dalian corn futures for May shed 0.8% on Thursday to 2,695 yuan a tonne, closing below their 100-day moving average for only the second time for the contract.

 

The grain was hardly helped by a reported drive by China to cut back on corn and soymeal in animal feed, in favour of lower-priced alternatives (whatever they may be).

 

Dalian soymeal for May shed 0.5% to 3,251 yuan a tonne, while soybeans themselves for May tumbled by 2.0% to 5,726 yuan a tonne.

 

May soyoil ended 1.4% down at 9,108 yuan a tonne (although rival palm oil managed to limit losses to 0.2% for May, settling at 7,776 yuan a tonne).

 

‘Too wet’

And Chicago futures sided with Dalian peers, rather than taking much strength from Chinese buying ideas.

 

One negative factor for prices is rainfall in key US growing areas, just as farmers are preparing for sowings, with the moisture potentially getting crops off to a good start.

 

In fact, there may be too much moisture. Tobin Gorey at Commonwealth Bank of Australia, noting that “season-2021 planting weather in US starting to become more vividly on the radar here in mid March”, added that “for now much of both the lower Midwest and the northern Mississippi Delta are too wet to get any sort of fieldwork done.

 

“Weather forecasters expect more rain through these regions over the next week or so, likely prolonging the delay in fieldwork.”

 

That said, it is too early for now to be getting concerned over sowing delays.

 

‘More important than sowings data’

Interest in the topic is centred on a USDA briefing on March 31 which will detail farmers’ planting intentions.

 

That day will also see a quarterly stocks briefing which too is proving a focus of increasing investor interest, giving a rare insight into the overall extent of grains demand (beyond that which can be gained from eg milling, crushing and export data).

 

In fact, Benson Quinn Commodities proposed that “the stocks report will be more important to the corn market than the acreage number”.

 

It viewed too that latest corn demand news, including a revival in US ethanol output, “suggests USDA is understating demand in 2020-21 by around 200m bushels”.

 

That said, while that might appear to suggest a price-supportive quarterly stocks briefing, the broker flagged too that “USDA has a history of finding and losing and finding and losing stocks in back-to-back reports”. And the last report was a bullish one.

 

‘Larger crop’

Meanwhile, South American weather seems to have turned into a persistent pressure on prices, with Karl Setzer saying that “improved weather conditions that will allow for accelerated harvest in Brazil was the primary factor” in dampening the soybean market in particular in the last session.

 

“Not only is harvest advancing, but some analysts are now projecting a larger Brazilian soybean crop than what the USDA did a week ago.”

 

With an accelerating soybean harvest clearing the way too for safrinha corn sowings (albeit late ones), Chicago corn for May eased by 0.2% to $5.57 a bushel.

 

Soybean futures for May fell by 0.4% to $14.12 ¾ a bushel, with soyoil hardly helping by dipping 0.8% to 54.19 cents a pound, extending its retreat from its eight-year-high finish set on Friday.

 

Rival vegetable oil palm oil plunged by 3.6% to 3,796 ringgit a tonne in Kuala Lumpur, amid ideas that Malaysian output is showing a rapid uptick – at a time when exports aren’t.

 

‘Improved crop conditions’

Chicago soft red winter wheat, meanwhile, shed 0.6% to $6.36 ¼ a bushel for May, also undermined by the US rains, which are improving hopes for output of southern Plains hard red winter wheat in particular.

 

Kansas City hard red winter wheat futures for May shed 0.9% to $5.95 ½ a bushel, falling below their 100-day moving average, which they have not closed below since August.

 

“Rains across US south Plains continues to weigh on prices,” said Mr Freed.

 

At Futures International, Terry Reilly said that “US weather looks good for the wheat emerging from dormancy and we look for improved crop conditions in coming weeks”.

Data later

Not that all wheat news around was negative, with South Korea on Thursday buying 50,000 tonnes of US wheat, and Japan buying 135,600 tonnes from Australia, Canada and the US.

 

Still, more important on the trade front for markets will be US export sales data for last week due later, expected for wheat to come in at 150,000-500,000 tonnes for old crop, compared with 329,531 tonnes last time.

 

For corn, export sales are expected at 300,000-750,000 tonnes for old crop, and 50,000-400,000 tonnes for new, compared with figures the previous week of 395,506 tonnes and 287,291 tonnes respectively.

 

For soybeans, old crop sales are expected at up to 400,000 tonnes, and new crop at 100,000-400,000 tonnes, compared with figures last time of 350,634 tonnes and 213,200 tonnes respectively.

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