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Morning markets: Grain futures revive, helped by slow US harvest


So that wintry US weather two weekends ago did not do so much damage to crops after all.


The US soybean crop did not decline a little in condition, as investors had expected, but held at 54% “good” or “excellent” week on week as of Sunday, US Department of Agriculture data showed.


Although soybean crops in the Dakotas did deteriorate, with the North Dakota reading down 4 points at 49% good or excellent, ratings for key Midwest states such as the “I states” – Illinois, Indiana and Iowa – improved a touch.


As for corn, its USDA condition reading, rather than falling 1 point week on week as investors had expected, rose by 1 point, to 56% good or excellent – albeit still the worst reading for the time of year in seven years.


Again, losses in the Dakotas were more than offset by gains elsewhere.


‘A real concern’

However, not all the data were so reassuring from a supply perspective, with the US corn harvest, for instance, at 30% complete, running 4 points behind the level investors had expected, and 17 points behind the five-year average.


“Many fields in the Dakotas are still very wet and rain showers continue to develop over parts of the eastern Corn Belt,” said ADM Investor Services.


“There is a real concern about whether the farmer can get all the crops out of the fields before next spring.”


‘Weather is improving’

While there are (some) expectations that growers will catch up a bit, there is a debate as to how much.


“Weather is improving over the Midwest and should allow for fieldwork,” said Terry Reilly at Futures International.


ADM Investor Services flagged too a “forecast of better US harvest weather”.


But MaxYield Cooperative was a little more nuanced in its comments, saying that “rains are impacting part of the Corn Belt, as much as 3 inches can fall over the next few days.


“Other regions of the belt will remain dry and make significant harvest progress.”


‘Difficult balance’

The combined impact of the data was to allow Chicago corn futures to post some gains in early deals on Tuesday, adding 0.6% to $3.89 ½ a bushel for December as of 10:00 UK time (04:00 Chicago time).


Concerns over demand for corn continue to overhang the market, with ADM Investor Services flagging the negative for prices of “slow demand for US corn exports” besides improved forecasts for US harvest and South American sowing and growing.


“The corn market is having trouble balancing slow export demand versus talk of a lower US 2019 corn crop.”


Still, Benson Quinn Commodities saw some positives in that the “pace of corn harvest could yet give basis a boost as corn harvest falls further behind historical norms, and daily feed and ethanol usage consumes available supply”.


‘Slowest since at least 1990’

Soybean futures for November gained 1.1% to $9.43 ¼ a bushel.


While harvest progress data for the oilseed, at 46% complete as of Sunday, was like corn 4 points ahead of market expectations, it remains historically slow.


“The soybean harvest is running at its lowest level since at least 1990,” Mr Reilly said.


Meanwhile, there remains some hope of a US-China trade deal, and talk of Chinese buyers in the market – although investors will, as ever, be keenly watching USDA wires later for any confirmation of such purchases.


As Mike Mawdsley at First Choice Commodities said, it “always seems to take a little wind out of the sails when the day session starts when no sales show up”.


Spring wheat harvest

Wheat futures also gained, adding 1.0% to $5.28 ½ a bushel for December delivery, albeit recovering only a portion of ground lost in the last session.


US spring wheat harvest progress, at 2 points week on week to 96%, remained a touch behind investor expectations, besides representing by far the slowest harvest on data going back to 1995.


It is, for example, running more than a month behind the year-ago pace.


Minneapolis spring wheat for December added 0.7% to $5.41 ½ a bushel.


‘Strong demand’

As for US winter wheat sowings, they were 77% advanced, in line with market expectations, and 2 points ahead of the average pace.


Still, will the slow pace of corn and soybean harvesting take a toll, leaving land tied up with standing crop, and unable to be seeded with winter grains?


Meanwhile, as Agritel noted, “international demand remains strong, illustrated by wheat tenders from Algeria and Saudi Arabia”, besides the likes of Ethiopia and Turkey.


The analysis group added that “for the Algerian purchase, the competition should be stiff between France and Argentina”.


Also helpful for bulls, Ukraine’s state weather forecasting centre said that drought across most Ukrainian regions is likely to reduce the area sown in the 2020 winter grain harvest.


Price ceiling?

In New York, cotton futures - like those of soybeans, another ag in focus for US-China trade deal hopes – edged 0.1% higher to 64.63 cents a pound for December, although recovering only a small portion of ground lost in the last session.


“The market seems to have revealed the 65s cents a pound as the maximum that anyone is willing to countenance on the mere prospect of China buying sizeable amounts of US cotton,” said Tobin Gorey at Commonwealth Bank of Australia.


US cotton condition improved week on week by 3 points to 41% good or excellent, although it looks like methodological volatility may have had an impact – with the Oklahoma rating up 30 points week on week, to 54% good or excellent.

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