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Morning markets: Soybean futures outpace sinking grains


There remained plenty of talk of the time being ripe for a pullback in grain futures.


Mike Mawdsley at First Choice Commodities talked of corn and soybean markets “overdue for a correction”.


“Soybean futures were very overbought,” said Steve Freed at ADM Investor Services.


At AgriVisor, Karl Setzer said that “fundamentally nothing has changed in the market”.


However, corn and soybean futures had “both worked into overbought territory”.


For wheat, meanwhile, there are ideas of pressure from the extent of global stocks, even if these are weighted towards countries such as China, and not readily available to the world market.


Ethanol setback

Early on Wednesday, corn and wheat futures extended their losses of the last session.


Chicago corn futures for December shed 0.6% to $3.64 a bushel as of 10:05 UK time (04:05 Chicago time), weighed by profit-taking, encouraged by the boost to supplies from the accelerating US harvest, and too by concerns over demand of the grain for making ethanol.


Benson Quinn Commodities flagged “resistance” in from “the energy sector, as the global outlook for ethanol production remains constrained from the effects of the Covid-19 slowdown”.


Mr Setzer said that “data indicate global ethanol production is down 20% this year from last. This is from a lack of travel and has led to the closing of 250 ethanol plants worldwide”.


More on the US ethanol market will be known later, with production and stocks data for last week.


‘Farmer will soon turn to selling’

Chicago soft red winter wheat futures for December shed 0.6% to $5.35 a bushel – having surrendered their 200-day moving average in the last session, they set up a confrontation this time with their 50-day and 100-day lines, at about $5.33 a bushel.


Mr Freed flagged market ideas that “wheat futures are overvalued due to record large world supplies”.


Mr Reilly flagged pressure on prices from the “good start to US winter wheat seedings”, noting too, an “upward revision to Kazakhstan’s grain crop” to 18m tonnes, up some 600,000 tonnes year on year.


CHS Hedging in fact reported a “sharp” drop in Black Sea wheat values, “retreating from the past several days of higher prices.


“Ideas are that the farmer will soon turn to selling along with a potential market shift in where the buyers look to source their needs from.”


More on wheat prices from the Black Sea, and potentially elsewhere, will be known later with the results of the latest tender by Egypt’s Gasc grain authority.


Soymeal support

However, Chicago soybean futures traded higher, by 0.2% to $9.93 ¾ a bushel for November delivery, bucking the grains weakness, and recovering some of the ground lost in the last session.


The headway was helped by strength in soymeal, which added 0.4% to $320.60 a short ton for December delivery, appearing to react, somewhat belatedly, to the one bullish facet of US crush data for August, as released on Tuesday by industry group Nopa.


“Soybean meal exports were a large 754,600 short tons, second highest for the month of August in history,” Mr Reilly said.


Overall, “the report was seen a little friendly for soybean meal over soybean oil”.


Seasonal trade

However, a lower-than-expected crush number “and high soybean oil stocks relative to the crush rate looks like it adds to the negative sentiment see for the overall soybean complex”.


Whether this means that a seasonal trend of soybean selling is poised to kick in after all…


Mr Mawdsley flagged a seasonal trade of selling soybeans “September 17, Thursday, into October 2.


“This has worked 13 out of the last 15 years, and average drop is around $0.42 a bushel.”


One counter to this trend this year, of course, is the recovery in Chinese soybean imports, and their return to the US for a stack of supplies.


Talk of purchases remains ongoing, with Mr Reilly reporting that “we heard China bought 5-6 Gulf soybean cargos late Monday, and at least two May Brazilian cargos”.


Rain damage

In New York, cotton futures joined soybeans in posting small gains, adding 0.3% to 66.62 cents a pound, as investors continued to assess potential damage to the US crop from Hurricane Sally – which Mr Reilly said was a “slow-moving storm and will cause localised flooding”.


“Sally’s projected path is little changed - the storm will pass over or near a lot of the US south east’s cotton crops,” said Tobin Gorey at Commonwealth Bank of Australia.


“The further problematic development is that Sally will become a slow storm/depression at that time.


“So, not only will heavy rain fall, it will do so for longer. And that is a worse outcome for crops where bolls are open to the elements.”

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