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Morning markets: November starts on muted note. But will fund buying kick in later?

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New months have a reputation for bringing new money into ag markets.

 

But there were not much evidence of fresh cash flows in early deals, when ags were content not to stray too far from levels at which they ended October.

 

Cotton, for instance, stood up all of 0.02 cents at 64.46 cents a pound in New York for December as of 09:20 UK time (04:20 Chicago time), recovering marginally from its previous session, which brought a soft end to a strong month for the fibre.

 

Weak export sales, of some 130,000 running bales, did the damage last time, being in the words of Louis Rose at Rose Commodity Group “lower than generally expected, and quite disappointing”.

 

They were also below the pace required to meet the US Department of Agriculture’s forecast of 16.5m bales of US cotton exports for 2019-20.

 

“Indonesia rolling 71,300 running bales from the current to next season was disconcerting to traders, because there seem to be quite a few more high priced contracts that buyers would like to postpone,” said Plexus Cotton.

 

‘Soils far too soft’

Still, there are some supply concerns too, over the ongoing US harvest, with Mr Rose also noting that “rain continues to plague the Mid-south, with pickers now likely remaining in the shed for extended periods, with soils far too soft so support them across many areas.

 

“We have collected more than 5 inches of rain in our gauge within the last week,” in Tennessee.

 

Plexus Cotton said that there is “still some uncertainty in regards to the size and quality of the crops in the US and India.

 

“An early start to winter in the Texas panhandle and the late withdrawal of the Indian monsoon have caused some concerns and it will still be a while until we know the final outcome of these important crops.”

 

That said, the UK-based cotton trader was somewhat bearish over prices ahead, saying that “unless the cotton balance sheet becomes more supportive over the next month or two, we feel that supply pressure will eventually force values back towards the 60 cents level”.

 

Meal vs oil

In Chicago, soymeal proved relatively buoyant, adding 0.3% to $305.30 a short ton for the December contract, as spreads against soyoil, which for December eased by 0.1% to 30.71 cents a pound, were unwound.

 

ADM Investor Services noted that “some profit taking is being seen in oil share”, ie the proportion of soyoil in the total value of soybean processing products, as the figure was “up over 3.0%” for October.

 

It touched a December contract high above 34% on Wednesday, before profit-taking began to kick in.

 

Selling in soyoil was also encouraged by some further profit-taking in rival palm oil, which stood 1.0% lower at 2,461 ringgit a tonne in Kuala Lumpur, having proved the top performer among major ags last month, with a 16.4% gain on a benchmark contract basis.

 

Still, there is hope for further gains ahead, with respected analyst Dorab Mistry saying that futures should rise to 2,700 ringgit a tonne by March, helped by ideas of curtailed supplies of rival oils such as soyoil, while palm oil output itself is in seasonal decline.

 

"The market is in a great hurry and has begun the job of rationing supplies by means of higher price," Mr Mistry said.

 

‘Big soybean deliveries’

Soybean futures themselves for January managed headway, but only of 0.1% to $9.33 ½ a bushel, amid continued mixed reports on the prospect for an imminent, interim China-US trade deal.

 

While US soybean export sales data for last week (as released on Thursday) were decent, at 943,600 tonnes, CHS Hedging flagged pressure on values from “US harvest progress and big soybean deliveries” of more than 1,600 lots against the expiring November soybean contract.

 

Also hanging over the market is the prospect next week of the USDA’s monthly Wasde crop briefing, for which data on soybean, and corn, yields are being particularly anticipated.

 

The unofficial starting gun for the pre-Wasde period is set to fire later with the release by INTL FCStone of its own forecasts for the report.

 

Yield talk

“Many have felt the USDA will have to lower corn and soybean yields in this report with harvest yields so variable, especially in the east,” said Benson Quinn Commodities.

 

“But the board has not reflected a lower yield estimate and recent reports we have been getting from some of our contacts in the west are suggesting corn and beans yields are actually a touch better than the disappointing yields we were expecting.

 

“This may keep corn and beans rangebound next week as we lead up to the [Wasde] report.”

 

The Brophy collection of soybean yield data up to October 25 have come in at 59.2 bushels per acre, 12.3 bushels per acre above the USDA’s current forecast.

 

That said, the Brophy readings have a habit of coming in above USDA final estimates - although the average overstatement of 10 bushels per acre over the past decade does suggest still some scope for an upgrade in the Wasde.

 

‘Ongoing nervousness’

For corn, the Brophy yield has come in at 197.3 bushels per acre up to October 25, 28.9 bushels per acre above the current USDA estimate.

 

The 10-year average is for the Brophy figure to end up 25 bushels per acre above the final USDA estimate.

 

That said, whether buyers will be able to get their hands on harvest supplies, with farmers in withholding mode…

 

CHS Hedging noted “ongoing nervousness as to whether there will be ample selling of corn to fill the pipe during the winter months.

 

“Corn buys are said to be a tough go right now with the farmers currently disengaged with the markets.”

 

Still, the broker also noted “some forecasts suggesting better weather for harvesting the crop over the weekend and into next week”, after recent snowfalls, and corn futures for December eased by 0.1% to $3.89 ¾ a bushel.

 

‘Stiff competition’

Chicago soft red winter wheat futures were also marginally lower, down 0.1% at $5.08 ½ a bushel.

 

On the supportive side, the Buenos Aires grains exchange has underlined weakening ideas for Argentina’s wheat harvest, cutting its forecast by 1.0m tonnes to 18.8m tonnes.

 

Still, “the wheat market struggles with a strong dollar, stiff competition from other world players in the export arena and plentiful supplies”, said CHS Hedging.

 

Benson Quinn Commodities took a more upbeat stance, saying that “daily charts are oversold and are supported by upward trend momentum in the monthly charts”.

 

However, if funds do take the bait and engage in some early-month buying, it will likely not emerge until much later in the trading day.

 

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