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Morning markets: Midwest rains dampen sentiment in grain markets

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Rain fell in parts of the Midwest over the weekend, meaning weaker grain prices, with the precipitation easing the concerns which had buoyed futures on Friday.

 

“Looks likes rains fell in many parts of the Corn Belt,” said Mike Mawdsley at First Choice Commodities.

 

WxRisk.com said that “the impressive but short-lived heatwave over the Plains and the Midwest broke over the weekend, and the cold front is actually driving into the east coast on Sunday night into Monday”.

 

Nor is threatening weather expected to return for now, with Maxar saying that in the Midwest “cooler conditions this week will ease stress on corn and soybeans”, although further ahead “somewhat drier weather… will allow moisture to decline again”.

 

China soybean purchases?

Nor were there any further obvious developments on another story that buoyed markets in the last session – the ideas of revived Chinese demand for US soybeans exports.

 

Terry Reilly at Futures international flagged “two rumours floating around” late last week – the first that China bought US soybeans out of the Pacific North West, and the second that China was considering dropping the added import tariff on US soybeans.

 

He added that there were “three cargoes of soybeans being loaded in the Pacific North West destined for China, and one cargo along with a partial cargo out of the Gulf”.

 

More may be known later on with weekly US crop export data for last week, as measured by cargo inspections, although the above shipments may show up next time.

 

Data later

Still, there is more interest in what the weekly US Department of Agriculture crop condition data will show, with an apparent range of opinion on what corn and soybean figure will show.

 

Benson Quinn Commodities for instance, noted “ideas that the [soybean] crop will be downgraded” in crop ratings terms “due to hot weather”, but added that “some believe the corn crop has developed enough to cover up the drowned out spots and offer better ratings”.

 

The broker itself was looking for “minor changes” in the figures, which will be released after the close of Chicago markets.

 

‘Leans supportive’

The greater concerns over the soybean crop, combined with residual hopes for US-China trade, helped futures in the oilseed perform relatively well in early trading, in shedding 0.6% to $9.13 ½ a bushel for November delivery, as of 09:10 UK time (03:10 Chicago time).

 

This kept the contract above a clutch of moving averages, including the 40-day and 100-day, regained in the last session.

 

Also viewed as somewhat helpful were Commodity Futures Trading Commission data late on Friday showing that hedge funds retained (as of Tuesday) a longer net short in Chicago soybean futures and options than many investors had expected.

 

“I believe the bean position leans supportive” for prices, said Benson Quinn Commodities, although adding that it “is manageable”.

 

‘Ammo to the demand bears’

Chicago corn futures for December, meanwhile, shed 1.6% to $4.29 a bushel, dropping back below their 50-day moving average regained in the last session.

 

Ditto the spot September lot, which dipped 1.3% to $4.25 ¼ a bushel.

 

Concerns of elevated prices deterring users are in play too, with Mr Mawdsley noting that “talk of [US] ethanol production being cut due to negative margins will give ammo to the demand bears”.

At least, from a bull’s perspective, concerns remain about European Union corn prospects, with FranceAgriMer on Friday cutting the rating for the French crop by 4 points to 74% “good” or “excellent”, and with further weather tests on the way.

 

Agrigtel said that forecasts for “another heatwave in the north of Europe are raising worries on spring crops and especially on the corn in this period of flowering”.

 

French corn crop ratings “should degrade further after last week’s drop”.

 

Soaring freight

Chicago wheat futures fell in sympathy with their revival grain, dropping 1.0% to $4.97 ½ a bushel for September delivery, losing most of the ground gained in the last session.

 

One worry for bulls is the recovery in shipping rates, which will do little for US chances of picking up demand from unusual, distant markets.

 

The Baltic Dry index ended last week at its highest since late 2013.

 

“The capesize index gained 123 points, or about 3%, [on Friday] to 4,379 points, a peak since October 2010,” Mr Reilly noted.

 

However, more supportive are the ideas that the Russian harvest, coming in at a yield of 3.75 tonnes per hectare, may not prove as large as some had expected.

 

“The estimated yield to this point, is roughly 3% below the prior year,” Benson Quinn Commodities said, adding that “the current estimates indicate Russian production estimates near 74m-75m tonnes are more accurate than the 77m-78m tonnes the trade had settled on for a couple of months.

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