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Morning markets: Grain futures revive, helped by revived US crop concerns

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Tuesday began as a good old turnaround one.

 

And with some identifiable cause too, other than just to comply with the Chicago adage of the second session of the week reversing the trend of the first.

 

Broader market sentiment remained more risk-on, after decent gains overnight in Wall Street stocks, and helped by the Trump administration giving Huawei another 90-day reprieve, extending a window for US companies to sell equipment to the Chinese technology giant.

 

“Risk assets have awoken from the weekend in a much better mood,” Deutsche Bank said, adding that “the only real news that markets had to feed off was the slew of positive trade (and economy) comments from the US administration”.

 

‘Yields below average’

In ag markets, there was some other news to focus on, with early noise from the ProFarmer crop tour allowing bulls at least some hope that the US Department of Agriculture’s corn and soybean yield estimates, which sent prices plunging last week, will prove too optimistic.

 

“North western Ohio corn yields were below average,” said Terry Reilly at Futures International, adding too that “scouts along the eastern Corn Belt route found large pockets of unplanted fields”.

 

Benson Quinn Commodities reported that “early numbers had 134.98 bushels per aacre in in Ohio counties Allen, Delaware, Hardin, Marion and Wyandot that compares to last year’s 177.29 tour findings, and a 163.29 three year average”.

 

The broker added that in South Dakota, the “early look from the ‘Tour of Truth’ finds lots of prevent plant.

 

“Corn that is in to require an extra couple weeks, maybe three to finish well. Decent stands reported in planted fields, but concerns remain over variability, tip back, and disease pressures.”

 

‘Must-sell producer bushels’

As another cause to question USDA corn yield hopes, the department in its weekly crop progress briefing trimmed by 1 point to 56% its estimate for the proportion of the crop rated in “good” or “excellent” condition.

 

That contrasted with investor expectations of a flat reading, and was down 12 points year on year.

 

The report “may provide some support” for prices said Benson Quinn Commodities, and Chicago corn futures for December indeed added 0.7% to $3.77 a bushel as of 10:00 UK time (04:00 Chicago time).

 

That said, the broker also cautioned that “until some demand surfaces back in the US, price advances will be met with must-sell producer bushels”.

 

Poor demand for US corn exports, for instance, was underlined by data on Monday showing shipments last week at 510,334 tonnes, below market expectations – and less than half the level of the same week of 2018.

 

“Brazil and Black Sea corn prices remain a discount to US,” ADM Investor Services noted.

 

‘Crop is struggling’

Somewhat the same picture was evident in the soybean market too, with the USDA crop progress report showing an unexpected 1-point decline to 53% in the proportion of the US crop rated good or excellent.

 

And results from the ProFarmer tour showed that “the crop is struggling with pod counts well below that of last year” said CHS Hedging, albeit adding that “recent rain events should help with pod filling going forward”.

 

(Benson Quinn Commodities - while noting tour pod counts in Ohio, at 445.8, down from 1,199.6 a year ago, and below an average of 1,132.9 – also said that “the lateness of the crop had plants still blooming, which could lead to further pod set going forward”.)

 

Furthermore, there is a demand debate going on here too, with a decent picture painted by US soybean exports last week of 1.16m tonnes, up from 660,000 tonnes for the same week of 2018, tainted a touch by the level of orders ahead going to Argentine and Brazil origins.

 

‘Big buyer’

“While China is taking several soybean shipments from the US over the past 5-6 weeks, they have been a big buyer of South American soybeans,” said Terry Reilly at Futures international.

 

“They bought 28-32 cargoes last week out of South America and Sunday night/Monday morning they booked at least 3 cargoes out of South America.

 

“We look for US exports to be relatively slow at the start of the US harvest season into late October.”

 

Karl Setzer at AgriVisor said that “China is clearly favouring Brazilian soybeans over those of the US for import, which limited any trade development news support”.

 

Still, soybean futures for November stood up 0.8% at $8.73 a bushel.

 

Trade battle

Wheat futures posted gains too, albeit more modest ones, with the Chicago December lot edging 0.2% higher to $4.73 ¼ a bushel.

 

Not so helpful was USDA data showing a 1 point improvement to 70% in the proportion of US spring wheat rated good or excellent, against expectations of a flat reading.

 

Also in focus are declining Black Sea prices, although the rouble did recover 0.4% against the dollar in early trading, undermining Russian competitiveness which has only been helped by its currency trading at six-month lows against the greenback.

 

Agritel saw some better news for European Union exports, saying that “the tracking of port shipments is showing that barley and soft wheat will be sent to China”.

 

Furthermore, “the volume of shipments toward Algeria remain important for our origins and 150,000 tonnes will be loaded at this beginning of the second part of August.

 

“The good quality of the 2019’s French crop will be able to match most of importers’ specifications.”

 

Cotton condition tumble

In New York, cotton futures managed gains, but only modest ones, ticking up 0.2% to 59.33 cents a pound for December delivery.

 

This despite a seven-point plunge, to 49%, in the proportion of the US crop rated good or excellent – led by a 10-point tumble in Texas.

 

Still, factoring in last week’s Wasde too, and the latest world economic jitters, Louis Rose said that “the market now has new information upon which to trade, and almost all of it is bearish.

 

While the crop rating decline “seems likely to cause some upward trading in the overnight session, we think that the overall effect will prove muted”.

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