There was an air of Groundhog Day more than Turnaround Tuesday in early deals.
Grain prices made headway, but not as much as cotton, as was the case 24 hours ago.
But will the gains stick this time?
One hope for bulls was the US Department of Agriculture’s weekly Crop Report briefing overnight which showed US corn and soybean crops not improving in condition as investors had expected.
Instead, the US corn crop remained at 56% “good” or “excellent”, and the soybean one at 54%, the lowest readings for the time of year since 2012.
“For the most part, the best rated crops would be considered fringe states for corn production,” said Benson Quinn Commodities.
“The traditional Corn Belt states were unchanged to lower,” with Illinois and Indiana readings, for instance, down 5 points and 4 points respectively, although the Iowa one gained 2 points to 64%.
Farm effort ‘Herculean’ after all?
Then there is top factor in the continued scepticism over the USDA’s Acreage briefing on Friday, which showed US corn sowings at 91.7m acres – 1.1m acres below the March reading, but 1.9m acres above a revised figure from the USDA issued three weeks ago.
The estimate, which compared with a market consensus of an 85.6m-acreage figure, “implied a Herculean effort on the part of farmers to plant a record number of acres of corn in June”, said Steiner Consulting.
At Commonwealth Bank of Australia, Tobin Gorey said: “Many, the USDA included, are sceptical of the Acreage survey results.
“The unusual weather and consequent planting delays do up the chances of a rogue poll.”
That said, he added that “we have a lot of sympathy for that idea but are not ‘all in’ on it.
“We are mindful that this is a bet against farmers, something we have learned not to do.”
‘Upward revision to price prospects’
Then there were the quarterly stocks data from Friday, which came in lower than expected for corn, soybeans and wheat, implying use in the three months to June 1 greater than investors had expected.
For the next USDA Wasde briefing, due on July 11, “the uptick in usage should lead to downward revisions in the amount of corn on hand at the end of this crop year, on September 1,” said Steiner Consulting.
“This could also warrant an upward revision to price prospects that would be more in line with futures prices trends since May.”
Key chart point
And Chicago corn futures indeed stood up 0.4% at $4.17 ¼ a bushel for September delivery, as of 09:50 UK time (03:50 Chicago time), while the new crop December lot was up 0.4% at $4.24 a bushel.
A key price point for the December contract is $4.20 a bushel, the bottom of a chart gap dating from last month, and a level Mike Mawdsley at First Choice Commodities said was “key to stay over on a closing basis”.
Benson Quinn Commodities said that if this chart gap is “filled and the market finds support, corn could start to round out a bottom.
“If filled with little to no support, corn will have to prove that it has value in the eyes of the trade.”
‘Burned one too many times’
Soybean futures for August traded up 0.4% at $8.93 ¼ a bushel, while the new crop November lot added 0.4% to $9.12 ¼ a bushel, earlier finding its 100-day moving average a barrier to further upward progress.
The market also has to factor in the latest China-US trade rapprochement, and a Beijing promise, according to US President Donald Trump, to buy “large amounts of agricultural product from our great Farmers”.
However, Richard Feltes at RJ O’Brien flagged a report that Shanghai-based JCI Intelligence believes that “China is unlikely to start purchasing large amounts of US farm products anytime soon despite Presidents Donald Trump and Xi Jinping agreeing to a truce in their trade war”.
Benson Quinn Commodities said that “the trade isn’t going to fall for positive news towards China. Burned one too many times on that one”.
The broker noted too that, even after cuts to US soybean sowings estimates following an unexpectedly low USDA Acreage plantings figure, “even the smallest potential soybean carryout estimates indicate ample supplies”.
And this sowings figure could be too low, given that CHS Hedging was “hearing that soybeans are still getting planted this week, despite being past prevent plant dates”.
Wheat futures, meanwhile, stood up 0.3% at $5.13 ½ a bushel for Chicago soft red winter wheat for September, and by 0.7% at $4.47 a bushel for September Kansas City hard red winter wheat.
This despite USDA data overnight showing US harvest progress, while delayed, proceeding at the expected pace, and with an unexpected upgrade, of 2 points, to 63% of the crop rated good or excellent.
This tallies with talk too from the field, with Benson Quinn Commodities, for instance, noting that “relatively early reports indicate the yield is as big as expected.
“To this point, I have heard of few quality issues. Test weights tend to impress,” although the broker did add that it did “not expect this crop to be as uniform as usual.”
‘Quality is very good’
Meanwhile for Russia, it said that “early harvest data indicates that Russian quality is very good with some 13% protein noted”.
And Agritel reported that in Ukraine, harvests are gaining momentum”, with results “positive so far without reaching record levels”.
For wheat, it reported a yield of 3.25 tonnes per hectare for the first 11% of area cut, compared with a figure of 2.97 tonnes per hectare a year ago.
Still, at least, from a bull’s perspective, there are signs of demand too, with Egypt in for a fresh tender, following Saudi Arabia’s 730,000-tonne purchase revealed on Monday.
‘Could see short covering’
In New York, cotton futures for December again outperformed in trading up 1.1% at 67.33 cents a pound, and back above their 40-day moving average, if well below their early-2019 trading range.
CBA’s Tobin Gorey noted that the cotton market’s “sensitivity to the temperature of US-China trade talks” had been “demonstrated again”, even if not to the extent of provoking a significant price rebound, with the countries after sealing “just an agreement to talk about an agreement”.
Louis Rose at Rose Commodity Group said that “soybeans and cotton could see short covering ahead of the holiday weekend”, ie with the July 4 US holiday looming large