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Morning markets: Return of focus to demand factors overshadows grain markets

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For grain bulls, the trouble with Thursdays is that they return focus to the demand side of the balance sheet.

 

It is on Thursdays that the US Department of Agriculture releases its weekly briefing on US export sales.

 

And these are something of a source for concern, with the more elevated prices seen in the US, following its dismal spring sowings season, driving importers elsewhere, and not a plus for domestic demand either.

 

Take, for instance, the weaker-than-expected weekly US ethanol production data on Wednesday, and the talk of southern eastern US protein producers importing two cargos of South American soymeal.

 

Wheat retreat

So it was not too much of a surprise that many ag contracts made a bit of a tentative start to trading, with wheat notably soft, as investors took profits on gains made in the last session on weakened expectations for Russian output.

 

The Chicago September wheat contract stood down 0.9% at $4.93 ½ a bushel as of 09:45 UK time (03:45 Chicago time), although staying comfortably above its 100-day moving average.

 

Not that the weakened Russian crop expectations are immaterial - with export forecast downgrades likely to follow, and a potential shift of some demand to other exporters.

 

Still, that is for later. USDA wheat export sales data for last week are expected at 200,000-450,000 tonnes, compared with 347,290 tonnes the week before.

 

Other factors being watched by investors include Europe’s heatwave, although that is very much of an issue for corn and sunflowers, still in their growing phase, rather than wheat, much of which has been harvested.

 

Benson Quinn Commodities noted “frost in Brazilian wheat country” as a “spark to push wheat values higher” in the last session.

 

‘Scorched fields’

As for corn itself, US export sales last week are expected at 150,000-400,000 tonnes for 2018-19 (as ends next month for the crop, and soybeans) and 100,000-300,000 tonnes for next season.

 

That compares with the, hardly impressive, figures of 200,009 tonnes and 132,997 tonnes revealed for the previous week.

 

“We look for poor USDA export sales to be reported,” said Terry Reilly at Futures International.

 

Still, Chicago corn futures for December posted a modest loss of 0.1% to $4.30 ½ a bushel, protected from profit-taking by its soft performance by the last session, and also offered support by Europe’s heatwave.

 

ADM Investor Services noted “record-breaking temperatures across Europe leaving scorched fields and frustrated farmers.

 

“Some farmers in France and Germany may harvest corn early for silage to build animal feed supplies rather than collecting crops as grain to sell on the open market.”

 

Resilient soy

Soybeans, for which there could be a better demand story unfolding, fared better, adding 0.3% to $9.11 a bushel for November delivery, nudging back above its 20-day moving average.

 

Not that US soybean export sales for last week, at up to 300,000 tonnes both for old crop and new, would be monumental.

 

(The previous week’s, at 127,890 tonnes for 2018-19 and 198,367 tonnes for next season, were hardly wonderful either.)

 

But there are ideas that a renewal by the US and China of talks on a trade deal could encourage a bit of demand from Chinese crushers, the world’s top importers.

 

‘China bought three cargoes’

Futures International’s Terry Reilly noted talk that “China bought three cargoes out of the Pacific North West”, as some $0.75 a bushel above November futures, for October loading.

 

“This would have been about $0.10 cheaper from what was offered prior to the sale.

 

“We could not verify this sale, but it makes sense since Brazil could run out of soybeans to export by the end of October,” with the South American country’s export supplies weighted more to earlier months in the calendar year, reflecting the timing of its harvest.

 

On our cash sheet, Brazil has no offers for 2019-20 [on a February-to-January basis] after October 2019.”

 

Vegoil recovery

The oilseeds sector is also gaining support from buoyant vegetable oil prices, gaining support from factors including the weak EU rapeseed harvest, the poor monsoon in top vegoil importer India and reviving oil prices (with vegoils used largely in making biodiesel).

 

Chicago soyoil futures for December added 0.5% to 28.95 cents a pound, also seen as gaining from spreading (or unwinding of spreads) against soymeal, values of which have been depressed by the talk of US imports from South America.

 

Soymeal for December actually stood unchanged at $312.80 a tonne.

 

In Kuala Lumpur, palm oil gained 0.5% to 2,040 ringgit a tonne, hitting a six-month high.

 

And this despite some soft data on Malaysian palm exports from cargo surveyors, with ITS putting shipments for the first 25 days of July at up 0.7% month on month, compared with an 11.6% pace of increase as of July 15.

 

Amspec Agri saw exports falling 4.3% month on month as of July 25, compared with a 3.0% pace of increase as of July 15.

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