The three major ag commodities continued this week’s trend of a sharp fall from last Friday’s highs, with row crop futures dropping faster than wheat, although the latter was stable yesterday.
There are several factors at play from market fears of the effect of a renewal of Coronavirus restrictions on world markets, particularly crude oil prices, to harvest pressure and a slowing of Chinese orders.
Thursday’s trading saw net selling by funds in corn (17,500 lots) and soybeans (13,500 lots) but net buyers of 1,500 lots of wheat.
Chicago November soybean futures closed Thursday at $10.00/bushel, down 1.4% from the previous day’s $10.14½/bu and a long way from the $10.43½/bu close last week. But early Friday pre-opening business saw a slight rally to $10.01½/bu. The Canadian November canola futures lost 1.7% to finish the day at CAN$511/tonne.
Analyst Agritel said the sharp fall was due to harvest pressure as US yields for both maize and soybeans are “globally satisfactory” as well as a slowing of export demand for beans, particularly from China with no USDA reports of Chines orders for the first time in a fortnight.
“After a week of decline, the largest in seven months, palm oil prices rebound slightly this morning in Kuala Lumpur. Rapeseed prices are under pressure from lower biodiesel prices in a context of falling demand,” noted Agritel.
No change in IGC soy estimate
Yesterday’s monthly International Grains Council (IGC) report kept its global forecast for soybean production at 373 million tonnes, although the global trade and consumption estimates were both raised by 1m tonnes.
The weekly US net soybean sales figure of 3.195m tonnes for 2020/2021 includes 1.879m tonnes of Chinese business. The export figure of 1.283m tonnes included 769,000 tonnes shipped to China.
“Oilseed prices continue to fall from season highs at the finish of last week, with canola prices being led lower by big brother ‘beans,” observed Commonwealth Bank of Australia analyst Tobin Gorey. “Yesterday was the first time for while that the USDA did not announce a hefty sale of US ‘beans to China. But that lack of a sale is more than just sentiment. The absence of a sale at the higher prices prevailing earlier this week is possibly a sign that China’s buying will not continue at any price. The no‑sale day is just one‑from‑one, but the silence is roaring in market ears.”
But Mr Gorey believes that reports of dry weather in South America are putting a bottom in the oilseed market, with weather forecasters expecting little increase in soil moisture for the soy-growing regions for another week.
Brian Henry at Benson Quinn Commodities warns of a “potential lack of interest by China in early October - Chinese crush margins have deteriorated and beans moving into the US pipeline. The market needs to prove that other buyers of beans and meal are ready to step in”.
The December CBOT corn position finished Thursday at $3.64/bu, a 1.4% fall on the day and well down on the previous week’s $3.78½/bu close. Early Friday trades were up at $3.65½/bu.
IGC drops corn by 6m tonnes
The IGC has revised its global maize harvest estimate down by 6m tonnes to 1160m tonnes, with reductions for the US, China and EU crops, but increases for Argentina and Brazil in South America.
Agritel reported that corn (maize) harvesting in France continues, but “with many disappointments in terms of yield”. It adds that corn sowing in Argentina is 11% advanced, with production estimated at some 50m tonnes.
US weekly net corn sales of 2.139m tonnes for the 2020/2021 year were again primarily for China with 566,400 tonnes. The weekly corn exports of 845,200 tonnes included 204,400 tonnes of Chinese orders.
“Long liquidation continues in the row crop markets - they haven’t kicked out enough length, while also trying to prove to the trade that they still have value,” commented Mr Henry at Benson Quinn.
“Corn and beans remain under pressure in what looks like a cleansing process. Regardless of the scenario, eventually the market makes being long hard also. Despite today’s weakness, I am not convinced enough length has been liquidated in either of these markets. Given the recent trend, this was a bad day to not have (US) sales announced. Corn and beans have to prove they have value once again.”
He would say that, wouldn’t he
Mr Gorey observed that China’s agriculture minister “said that the steep rise in China’s corn prices was mostly due to ‘market speculation and irrational hoarding’. While the minister’s view might not pass the Keeler criteria, we do have some sympathy with that explanation of short‑term price swings in China.”
The nearby Chicago wheat contract closed Thursday at $5.49¾/bu, 0.1% up on the previous day’s $5.49/bu but down on the previous week’s $5.75/bu.
In its monthly report, the IGC left its estimate of world wheat production unchanged at 763 Mt with higher production forecasts for Russia and Australia offset by cuts for Argentina and Canada.
Agritel said US winter wheat sowing is continuing, although 34.6% of Kansas fields were experiencing a situation of hydric stress, compared to 29.6% in the previous week. The Russian wheat harvest is 93.9% completed with 84.6m tonnes of wheat harvested. Japan has bought some 86 000 tonnes of milling wheat from the US and Canada.
US weekly net sales of wheat totalled 351,200 tonnes for 2020/2021, up 5% on the prior week, but 34% down on the last 4 weeks. The US wheat exports, at 469,100 tonnes were 17% lower than the previous week and 21% below the last 4-week average.
“Wheat saw another blah week of exports,” noted Mr Henry. “US wheat isn’t priced to move. US exporters are not focused on providing capacity. Some white wheat sales, that’s the best seller, is the exception. Other demand doesn’t support higher futures values at this point. Weakness in corn and beans is an anchor.”