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Morning markets: Soya down as wheat rallies – will Trump back US biofuels?

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Wheat continued to strengthen in Thursday’s trading while corn futures remained at season lows. Soybean prices lost some ground.

President Trump has agreed to discuss support for the US bioethanol sector, which said it is losing out to regulatory support for fossil oil producers.

US weekly ethanol output fell to 7.01m barrels in the last week of August, a 2.41% decrease on the week and down 6.81% from the year before. Stocks are up nearly 5% on 2018 at 23.8m barrels.

President Trump is reported to be meeting US agriculture and environment agency officials over his promise of a "giant package" to US farmers - possibly a plan to lift the requirement for biofuels in the US by 1 billion gallons for 2020. This follows tension between fossil oil producers and the renewable fuels sector over concessions to oil refineries that limit their need to blend biofuels. This could be supportive to corn and oilseed values.

Bargain buying fuels wheat rally

Thursday trade saw the Chicago Board of Trade (CBOT) wheat continue to rally, with the September wheat contract gaining 7.5 cents after the previous day’s 9 cents to close at $4.63¾ /bu on Thursday, a 1.64% rise on the day. The December contract finished 1.19% higher at $4.66¼/bu.

Early Friday business saw the September contract trading at $4.64/bu.

Europe’s wheat values followed the US upwards. The September Euronext milling wheat contract reversed Wednesday’s fall by rising 0.53% to €159.00/tonne while the December contract gained 0.5% to close at €167.25/tonne.

Analyst CRM Commodities said the Chicago gains are due to “bargain buying” lifting demand after values fell to a four-month low at the start of the week. It observed that the CBOT December position has lost nearly 14% so far this year, with Kansas wheat shedding more than 27%.

The Euronext values have followed the US bounce, CRM continued, but the rise will be capped by the Euro’s strengthening against the US dollar.

Saudi Arabia is reported to be in the market for 595,000 tonnes of wheat. It’s recent raising of the contract insect damage threshold to 0.5% will open the way for Black Sea origins, particularly Russia, noted CRM.

Bullish harvest estimates weigh on corn

The Chicago September corn position rose by 0.22% from Wednesday’s close of $345¾/bu to finish at $346¾/bu on Thursday. December’s contract was up by 0.28% on the day to $3.59½/bu. September corn was at $347½/bu early Friday.

The Matif maize contract in Europe increased slightly, up 0.17% to €161.50 for November, and by 0.5% to €167.25 for January 2020

A crop survey by analyst FCStone International forecasts the average 2019 US corn yield at 168.4bu/acre, below the latest USDA figure of 169.5bu/acre. The FCStone estimate would see US corn production total 13.81 million bushels, 92mbu lower than the USDA prediction. The September WASDE is due next week. Meanwhile, the weather forecast is favourable for the US maize crop as it nears its delayed harvest.

Low China demand dents soybeans

Soybean futures fell after a week of gains – the CBOT September contract lost 1.62% to close $8.48½/bu, while the November contract fell 1.66% to close at $8.61/bu.

The September position was trading at $8.49¾/bu early Friday.

The Euronext oilseed rape contracts, already as season highs, were little changed on Thursday – the November contract was static at €383.25/tonne after the previous day’s gain, while the February 2020 position was just 0.15% up to €384.50/tonne.

The ICE canola contract was down 0.3% to Can$445/tonne at Thursday’s close. The canola harvest has started in the Canadian province of Saskatchewan – it is reported to be 1% complete against 19% at the same stage of 2018. The later start is faced with further delay due to rainfall and cooler weather conditions in the prairie.

Benson Quinn comments that US soybean markets reacted to a bearish USDA’s attaché report on Chinese soya demand, reducing the annual figure by 5m tonnes (184m bushels) to 80m tonnes - the lowest import total for 5 years.

The downgrade follows the effect of African swine fever disease and its control on China’s domestic pork production – its national sow herd is reduced by 30%, with a consequent fall in feed requirement. China is also acting to raise its domestic soy production in the wake of President Trump’s tariff dispute.

Euronext rapeseed values futures continue to be supported by Europe’s smaller 2019 harvest, with supplies already being augmented by imports. A 5.4% rise in crude oil values was also helpful.

CRM reports that UK oilseed plantings for the 2020 harvest are higher than expected, with the current crop values encouraging growers who face difficult establishment conditions after the withdrawal of an effective insecticide for environmental reasons. In parts of France, dry conditions are forcing growers to irrigate their recently planted rapeseed.

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