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Morning Markets: Wheat resumes fall as Suez supports soybeans

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Positive weather forecasts were behind yesterday’s US wheat futures falling to a three-month low while corn and soybeans remain supported – the latter helped by the blocked Suez Canal effect on crude oil values. Wheat and corn fell in Europe, while oilseeds continued to strengthen.

 

Today’s weekly USDA export figures will help set the market direction – traders expect impressive corn sales, while wheat and soybean export data will be closely scrutinised for their effect on tight ending stocks as we enter the final quarter of the marketing year.

 

The second day of the large Ever Given container ship blocking the Suez Canal has seen crude oil values strengthen after losing ground in recent days. This is having a positive impact on vegetable oil prices. Early reports that the vessel could be refloated quickly appear to have been optimistic – while analysts are confident this is a short-term problem, every day of blockage sees more vessels building up either side of the Canal, which will interrupt the steady flow of trade deliveries.

 

Funds were net sellers Wednesday of 5,500 lots of wheat and net buyers of 1,500 lots of corn and 4,500 lots of soybeans.

 

After Tuesday’s rally, which saw the Chicago May SRW wheat futures gain 7½ cents a bushel to end the day at $6.34¾ a bushel – with a further rise in early Wednesday trading – the contract closed yesterday at $6.24¾ /bu, its lowest level since December 22nd 2020. Pre trading early Thursday saw the position down further to $6.18½/bu.

 

Wheat prices deter buyers

 

Rainfall forecast for the US over the next week will help the development of winter crops in the ground and spring sowings.

 

Terry Reilly at Futures international commented that the recent historically high wheat prices have seen several countries passing on wheat imports from the US due to the cost.

 

The Paris milling wheat futures lost €2.50/tonne over Wednesday to end the day’s trading at €218/tonne.

Analyst Agritel said European cereals prices have softened due to a lack of physical market activity and favourable weather prospects for growing winter crops and spring plantings.

 

The analyst reported that export taxes in Russia, imposed on March 15th, are now having a visibly negative effect on that country’s export activity. “Wheat shipments in March could not exceed 1.2 million tonnes, which would mean a 60% drop in activity compared to March 2020.”

 

Export tax depresses Russian sales

 

For Russian barley exports, 700,000 tonnes were shipped in the first two months of March, but only 83,000 tonnes between 15th and 24th March. Similarly, 800,000 tonnes of corn were loaded in the first fortnight, but only 25,000 tonnes in the third week.

 

The CBOT May corn position gained 2 cents over Wednesday’s business to end the session at $5.53¼/bu, but early Thursday trades were down to $5.50/bu.

 

“Talk of record weekly US export sales and slow US farmer selling supported the nearby May position” commented Steve Freed at ADMIS. He adds that suggestions that US elevators and farmers may have already sold most of the US 2020 supplies, means, US farmers will be less willing to sell any remaining inventories as the 2021 planting season nears.

 

The weekly US ethanol production figures showed a decrease against analyst’s expectations – output fell by 49,000 barrels to 922,000 barrels when traders had predicted a 3,000 barrel increase. But stocks were up by 469,000 barrels to 21.81 million barrels when the trade expected a 12,000 barrel rise.

 

Futures International said the unexpected drop in ethanol production is slightly bearish for US corn futures but balanced by reported rumours that China will be in the market for June corn shipments.

 

The analyst believes current high corn values will see increased US plantings – it predicts a US corn area of 93.6 million acres for harvest 2021, up from the prior year’s 90.8m acres. Informa has estimated a 94.3 corn crop area this year.

 

Veg oils values to peak this month

 

The Paris EU June corn futures lost €2.00/tonne to close at €215/tonne on Wednesday. Agritel reported demand for corn declining in Europe as prices rose.

 

US May soybeans futures, which closed Tuesday at $14.23¼/bu, had another strong day, ending the Wednesday session at $14.32¾/bu. But early Thursday’s pre-trading saw the contract down to $14.26/bu.

 

Like corn, Mr Freed at ADMIS noted that US farmers may have sold most of their 2020 on farm soybean stocks. “While US soybean exports may be slowing, US soybean crush continues at a strong pace,” suggesting a tightening of US supplies until the fall.

 

In Europe, the Paris oilseed rape May futures rose by €4.50/tonne to end Wednesday’s session at €525.25/tonne.

 

Rapeseed is still supported by firm vegetable oil prices and the rise in crude oil values in the wake of the Suez incident. But Agritel noted a slowdown in crushing activity in Canada and a drop in palm prices this morning in Kuala Lumpur.

 

Oil World estimates that global palm oil production will grow by 3.2 million tonnes in the year ended September 30th 2021, mainly driven by increased Indonesian output. But world palm oil consumption is set to rise by less than one million tonnes in the same period – therefore the journal forecasts that edible oil prices will peak in the next four weeks.

 

 

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