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Morning markets: Grain futures find a floor - although big test awaits

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One of the compensations to grain bulls of recent price declines is that it at least narrows the downside should the long-awaited data releases due later on Wednesday go against them.

 

Nerves ahead of the US Department of Agriculture’s release of briefings on US farmers’ intentions for crop plantings in the opening spring sowing window, and for domestic grain stocks as of March 1, have been blamed for a big part of the easing in prices.

 

With the number of managed money long bets close to record highs, as of Tuesday last week, exits by investors unnerved by the prospect of two briefings which have a history of causing large price swings were always likely to bring pressure on prices.

 

‘Could easily bounce’

Still, “most of the grain markets are now nearing oversold territory, thus could easily bounce if there’s bullish news” in the briefings, said Mike Mawdsley at First Choice Commodities.

 

Benson Quinn Commodities said that while “further liquidation is a possibility… what happens at 11:00 Central US time looks less likely to be extremely negative” given the price falls already in place.

 

“We are pricing in more stocks bushels or acres or both.”

 

Tobin Gorey at Commonwealth Bank of Australia, thinking of new crop December corn futures, said that the “now $0.30-a-bushel decline from the peak has ‘made some room’ for a hefty US corn planting number tonight”.

 

He added that the current “price is just the high side of middling, so it does not scream ‘bullish’ by any stretch”.

For soybeans too, “new crop prices have ‘made some room’ ahead of the USDA’s US 2021 planting estimate”.

 

Soyoil recovers

And certainly, there was a less panicked air around in the markets in early deals on Wednesday, when some regaining of lost ground proved the prevailing trend.

 

This was most notable in Chicago soyoil, which has the most ground to regain after its run of three limit-down closes in four sessions, over which the May contract lost 12.2%.

 

The May lot stood up 0.9% at 50.91 cents a pound as of 10:30 UK time (04:30 Chicago time), after earlier finding support around its 40-day moving average, at 50.37 cents a pound, and helped by a positive performance too in rival vegetable oil palm oil.

 

Palm exports improve

Kuala Lumpur palm oil futures for June gained 0.7% to 3,598 ringgit a tonne, after earlier falling below its 100-day moving average on a continuous chart – which a benchmark contract has not closed beneath in nine months.

 

Data from cargo surveyors showed a late-March improvement in Malaysia’s palm exports, with ITS putting the month-on-month rate of increase at 26.8%, to 1.27m tonnes, up from an pace of improvement of 10.0% as of March 25.

 

(Sure, March has three more days than February, but even accounting for that, shipments showed some late acceleration, with March shipments per day 14.6% above those the month before.)

 

AmSpec put the full-March growth in exports at 27.6%, up from 10.3% as of March 25.

 

In-transit question

With soyoil finding its feet, that helped soybean futures too recover some ground, adding 0.4% to $13.72 a bushel in Chicago for May delivery.

 

That said, there remains talk that the March 1 stocks report may prove larger than had been thought, thanks to the inclusion of some supplies missed in the last report, as of December 1, thanks to being on the likes of barges and trucks.

 

As Karl Setzer at AgriVisor said, “we are seeing some doubt cast over the soybean stocks estimate, with more thoughts it could be higher than estimates indicate.

 

“This comes from the large volume of soybeans that were being exported prior to the December stocks report and how the volume of soybeans in transit may have been miscalculated.

 

“There are thoughts this could add from 50m-90m bushels of soybeans to the current inventory,” which, if added on to the end-stocks number currently forecast by the USDA at 120m bushels would represent a large upgrade, and weaken the case for higher prices.

 

‘May ‘find’ bushels’

 

For corn too, Steve Freed at ADM Investor Services reported “concern that USDA may ‘find’ bushels on the March 31 report”.

 

“A number above 7,800m bushels,” compared with the consensus forecast of a figure of 7,767m bushels, “would suggest USDA may not have counted all bushels in transit versus their lower-than-expected estimate of December 1 corn stocks”.

 

Corn futures saw cautious gains, of 0.1% to $5.39 ¾ a bushel for May.

 

Separate, US ethanol production data for last week are expected to show a rise in production of 12,000 barrels a day from the previous week, and stocks up 62,000 barrels to 21.871m barrels, according to a Bloomberg poll.

 

‘Fund long liquidation’

Chicago soft red winter wheat futures for May gained 0.4% to $6.04 ¼ a bushel, shying away from what would be their first close of 2021 below $6.00 a bushel.

 

As Mr Freed said, “lower world wheat prices and drop in world wheat demand has triggered fund long liquidation and prices trying to find a level that will encourage new demand” for US supplies.

 

That quest was at least helped on Wednesday by an easier dollar, which fell by 0.2% against a basket of currencies, pausing a charge which has taken the greenback to its highest in nearly five months, trimming the competitiveness of dollar-denominated exports.

 

Also, while growing conditions for US winter crop have improved, there are nascent worries over temperatures in Europe – set to go from unseasonally high to unseasonally low.

 

The current “exceptionally high temperatures in Europe are accompanied by fears of a future water deficit,” said Agritel.

 

However, also the “expected differences between today and next week raise worries, with the possible return of negative temperatures [Celsius] in the coming days”.

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