There was some element of reversal evident in early deals.
The prospect of the weekend, and two days without being able to trade, often tempts investors into a bit of profit-taking, especially in markets such as these, broadly viewed as “choppy” and difficult to read.
And Chicago soft red winter wheat futures, for instance, having gained in the previous two sessions, eased back 0.5% to $4.97 ¼ a bushel for September delivery as of 09:40 UK time (03:40 Chicago time), with the 10-day moving average providing a bit of a ceiling.
Russia export downgrade
The loss came despite SovEcon, having cut its Russian wheat harvest forecast earlier this week by 2.9m tonnes, downgrading its estimate for 2019-20 exports by even more – by 6.2m tonnes from its June figure.
That lowered the 2019-20 estimate for wheat exports from the top exporting country to 31.4m tonnes – a three-year low.
(Shipments last season reached 35.3m tonnes, after the record above 40m tonnes in 2017-18.)
Minneapolis spring wheat found more support rising 0.2% to $5.24 a bushel for September delivery, after the Wheat Quality Council tour of North Dakota, and some of Minnesota, came in with a yield forecast of 43.1 bushels per acre.
That was above the 41.1 bushels per acre reported last year, but below the five-year average finding of 44.7 bushels per acre.
Not that the tour is seen as having the final word, with the US spring wheat yield last year ending up at 49 bushels per acre according to the US Department of Agriculture (although a figure that is disputed some observers as too generous).
‘Enough to keep a lid on prices’
Benson Quinn Commodities said: “I expect that Wheat Quality Council tour has understated the current crop and look for a final yield near 46 bushels per acre, which would put production near 550m bushels.”
Crop expectations look “certainly enough to keep a lid on the current market, if the corn market can’t drag the winter wheat markets higher.
“That said, I am not convinced the spring wheat market has to be much lower at this point,” with the Minneapolis premium over Chicago already a modest $0.25 a bushel or so, and funds having already built a large net short in the contract.
Meanwhile, back to the reversal theme, cotton futures, which eased in the last session, nudged higher this time, by 0.2% to 64.31 cents a pound for December delivery.
Louis Rose at Rose Commodity Group said that “on a positive note with respect to trade, China has granted tariff waivers against the equivalent of 230,000 bales” of cotton imports from the US.
“We see this as very supportive,” he said, noting the large increase in mill on-call purchases (ie for price fixing later against futures) of some 850,000 bales week on week, to 9.15m bales.
“The recent notable increase in mill on-call commitments relays that the market has dipped to a level where significant demand for US bales exists.”
And, back in Chicago soymeal - another underperformer of late, on ideas of US imports from Argentina - at least managed a 0.1% gain to $310.20 a short ton for the December contract, with the spot September lot adding 0.1% to $305.80 a short ton.
To repeat comments by Richard Feltes at RJ O’Brien, soymeal futures have been “once again approaching the $300 area, which has proven since late May to be a great buying opportunity.
“Cash meal traders indicate that meal market is ‘well balanced’ and that there is still an upcoming maintenance schedule that will limit supply.
“Meanwhile, domestic feeding margins are positive” too, ie signalling demand for feed ingredients from protein producers.
‘Prices should find support’
Still, none of the price moves were too impressive, which tallies with another theme, of a market marking time, awaiting in particular the US Department of Agriculture’s August 12 Wasde briefing on world crop supply and demand.
It is hoped this will give clarity in particular to the question of how many acres of corn US farmers actually planted, amid the dismal spring sowing conditions.
“Prices should find support on breaks until the supply story becomes more clear,” said Mike Mawdsley at First Choice Commodities, viewing the market as “rangebound”.
While there was “probably not a lot of reason to collapse from current levels… getting sustained rally doesn’t look likely yet either”.
‘More likely to be cutting production forecasts’
Tobin Gorey at Commonwealth Bank of Australia said that “we suspect the market is on reasonably solid ground here.
“Weather forecasters are anticipating the US Midwest to be largely warm and dry weather from now through mid-August,” conditions that will not be ideal for pollination of the late-developing US corn crop.
“The consequence is that the market is more likely to be cutting US corn production forecasts.”
That said, “demand on a whole is becoming a concern, not just for old crop, but for new crop as well” said Karl Setzer at AgriVisor.
Mr Setzer added that “this is especially the case on soybeans where new crop commitments only total 111m bushels.
“This is the lowest booking total for this date since 2005.
“The real concern with this is that the US is competitive with Brazil for next fall and buyers are still passing the US as a soybean source.”
Still, soybean futures for November edged 0.1% higher to $9.00 ½ a bushel, supported by soymeal stability.
‘Weaker tone in basis values’
Chicago corn futures for December eased, but also not by much, by 0.2% to $4.26 ¾ a bushel, with many observers considering corn in fact facing the more enhanced US demand threat, from the likes of domestic ethanol plants as well as exports.
“The one negative input in corn, which isn’t as prevalent in beans, is the weaker tone in the eastern Corn Belt basis values,” noted Benson Quinn Commodities.
“Posted bids have shown some weakness. The pushes are gone.
“This is being reflected in flat price and the spread.”