There were signs around even amid Monday’s market retreat that bulls were resting rather than having thrown in the towel.
Benson Quinn Commodities, for instance, noted that for corn, there appeared “more bullish news to come”, saying that some of the estimates in the US Department of Agriculture’s Wasde report on Friday “don’t really look like they dovetail with reality”.
“Ukraine production could come down by 3m-4m tonnes” from the 36.5m tonnes currently pencilled in.
“Chinese imports could increase by as much as 15m tonnes for corn,” from the current 7.0m tonnes, with some investors indeed talking of a figure of 20m tonnes or so.
‘Beans in the teens?’
At Walsh Trading, Sean Lusk, underlined the potential for soybean prices from setbacks to Brazil’s crop, given the reduced US stocks, saying that the latest Wasde “leaves very little margin for error now regarding potential weather problems in South America.
“Brazilian exports are not ready until March, or delayed for any significant period, the potential for a tighter US soybean balance sheet due to increased exports to keep China supplied are real and you may hear talk of rationing.
“Add production losses in Argentina and/or Brazil, and it could get crazy.
“Beans in the teens? Don’t rule it out as unimaginable as it sounds now,” Mr Lusk said, noting that funds “love trading soybeans from the long side” but of late “ haven’t had many chances to do that… given burdensome ending stocks and a trade war with China”.
‘Dryness issue does not go away entirely’
Soybean futures actually on Tuesday stood quite way yet from the teens, with the best-traded November contract, at $10.43 a bushel, requiring some 25% yet to get there.
Still, the lot was up 0.6% on the day, recovering a bit of the ground lost in the last session.
Sure, prospects are improved for South American weather, with Tobin Gorey at Commonwealth Bank of Australia noting “substantial alterations to [forecasters’] near-term rainfall outlook for major production regions of Argentina and Brazil.
“The moisture boost is probably enough to more planting (and, likely, some replanting). And also aid existing crop development.
However, the “dryness issue does not go away entirely with these modest rains. And temperatures are still high,” enhancing evaporation.
Besides, even if Brazil’s crop does fine from now, the country is, thanks to a dryness-delayed sowing season, poised for a delayed harvest too and so a late start to its 2021 export campaign, as Mr Lusk was referring to.
As a measure of the delay, AgRural reported 3.4% of Brazil’s soybean crop as planted, down from 11% a year ago.
For top growing state Mato Grosso, Imea reports seedings at 3.0% complete, down from 15.8% a year ago.
Argentina export tax rumour
As an extra help to soybean bulls, there were some doubts over talk of a further cut to Argentina’s soy export tax, beyond the 3-point cut to 30% already proposed, in an effort to entice farmers to sell crop they are hoarding as a hedge against a falling peso.
After this initial cut “did little to entice sales”, Karl Setzer at AgriVisor reports, “over the weekend it was rumoured that Argentina’s soybean tax may now be lowered to just 16% for the next 30 days.
He added that “while this may bump movement, the loss of income it will cause is concerning to government officials”.
Still, at Futures International, Terry Reilly said that “with Argentina on holiday today, this [report] was difficult to confirm. Later we heard it was likely just a rumour”.
Meanwhile, customs data showed Chinese soybean imports last month at a decent 9.79m tonnes, up 1.9% month on month and 19.4% year on year.
And product markets were firm too, in what may well indeed be a sign that markets have doubts over the Argentina rumour, with the South American country the top exporter of both soymeal and soyoil.
Soymeal for December edged 0.3% higher to $355.40 a short ton, while December soyoil added 1.1% to 33.53 cents a pound.
Rival vegetable oil palm oil gained a more modest 0.2% to 2,999 ringgit a tonne in Kuala Lumpur, struggling with the psychologically important 3,000 ringgit-a-tonne mark, and following data showing growing stocks of the oil in Indonesia.
At 4.46m tonnes in August, according to industry group Gapki, inventories were up 23% month on month, a reflecting of easing exports at a time of seasonally growing output.
‘Plenty of export business to be had’
Back in Chicago, corn too staged a bit of a recovery from its weak Monday performance, adding 0.6% to $3.91 ½ a bushel for December delivery.
Benson Quinn Commodities underlined the potential for further Chinese import purchases of corn, at a time when Ukraine, another key origin for the country, besides the US, may have limited extra stocks to sell.
“Given their production issues, how well is Ukraine setup to sell future tenders?” the broker asked.
“I think there plenty of export business to be had in corn. I also think Ukraine’s participation will be limited.”
‘Could hurt the planting season’
Corn also got a hand from rival grain wheat, which added 1.0% to get its head back over the key $6.00-a-bushel mark, if only by 0.25 cents.
Worries remain about winter wheat sowings in Russia, where “significantly below-normal rainfall forecast for the next two weeks could hurt the planting season in [the] key southern wheat belt”, Societe Generale said.
It reminded too that “there is also speculation that Russia might implement measures to curb exports, as domestic prices are surging and are already close to a record high”.
Dryness worries remain live in the US Plains, where sowings are also under way, and in Argentina, where harvest is approaching.
Meanwhile, on the demand side, as Agritel noted “French traders eagerly await the result of the wheat tender” by Algeria’s OAIC grain authority.
“The new requirements from OAIC are allowing Black Sea origins to be eligible, but European origins look competitive enough for now.”
Also awaited by investors are US export data for last week, delayed by Monday’s Colombus Day holiday, as well as any announcements by the USDA of sales by the US of large corn or soybean export orders, of which there has been talk.
These, as well as any changes to weather outlooks, look likely to have a big say in prices later.