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Morning markets: Tired markets need firmer direction


Uncertainty over the US corn crop – particularly the effect of future weather patterns on the developing crop and tension between USDA and analyst estimates of the planted crop area – make it difficult to set a market direction.

This lack of clarity is spilling over to wheat and oilseed values, with all three down in the US on Wednesday, but strengthening in Europe, largely for currency reasons as the euro slid against the dollar.


“Markets feel tired and lack fresh supportive inputs,” observed analyst Benson Quinn Commodities International.

The Chicago September corn contract continued its downward trend, closing Wednesday at $433¾ per bushel with the December position down 2¾c at $4.38¾ per bushel. In Europe, the Paris maize September futures contract was E0.75 higher at E178.25 per tonne at Wednesday’s close.

The nearby CBOT contract was slightly down to $4.33½ per bushel early Thursday.

Last week’s weather market was based on fears that Hurricane Barry storms could move northwards and damage developing crops. As this threat recedes, attention switches to the planted area for corn after the seeding delays caused by the extremely wet, late spring across much of the midwest.

Plant Prevent area underestimated?

The USDA’s Risk Management Agency has estimated the Prevent Plant (PP) area for corn at 7m acres to 8m acres and the PP soybean acreage at 2 to 3m acres for early July, with the USDA undersecretary indicating that the numbers are likely to increase. The PP program insures growers for their lost crop acreage.

Benson Quinn’s Brian G Henry believed “most of the trade has addressed a total of 10m acres of PP for all crops. It feels like the corn market is biding time until fresh news, either bullish or bearish, develops.”

He added: “Weather, which looks OK from the temperature standpoint next week, but leans supportive from the standpoint of precipitation, will remain the focus. Export values are not competitive and global values haven’t stabilized - I look for both beans and corn to try to consolidate near current levels.”

Terry Reilly at Futures International commented that a US weather forecast calling for hot and dry temperatures could underpin corn and soy prices. “Now that remnants of Barry are nearly dissipated, traders are worried the undeveloped corn crop across the Eastern Corn Belt will suffer from crop stress over the next seven days.”

Commonwealth Bank of Australia’s Tobin Gorey noted the CBOT December corn position has settled back at just above $4.40 per bushel. “Prices around that level seem to be the market’s comfort zone when it is only guesstimating the crop impact of delayed planting in the US Midwest.

"We do not think though that means the market has peace of mind. Crops that are well behind normal development schedules can be vulnerable to only slightly abnormal weather. And this comfort zone comes with a ‘use‑by’ because the USDA will publish new survey data in August."

In Europe, a forecast of more hot weather is supporting corn futures, with the Euronext November maize position above E176 per tonne for the first time since the beginning of July.

Wheat could lose 10-15 cents in heartbeat

September Chicago wheat closed $5.03¼ per bushel Wednesday, with the December position 2½c per bushel lower at $5.14¾ per bushel. Early Thursday, the nearby CBOT was running at $5.02¼ per bushel. The Euronext contract for September gained E1.25 to E176.75 per tonne on Wednesday.

Agritel stated that the Chicago wheat market is flat during the harvest, adding the September 2019 deadline appears to have stabilized above the $5.00 per bushel support level. But Brian G Henry said: “the wheat charts look like they could give up 10 to 15 cents in a heartbeat”.

Chicago August soybeans closed at $8.80½ per bushel Tuesday with the September contract 1¾c per bushel lower at $886½ per bushel. Wednesday’s opener was up at $8.82¾ per bushel.
Canada’s ICE canola November contract closed 0.3% down at Can$444 per tonne. The August Paris rapeseed position closed E1.50 higher at E374.50 per tonne, with the November contract E2.50 higher at E375.25 per tonne.

Euronext rapeseed highest since Oct

Like corn, “weather conditions have also to be followed to see the potential of soybean production,” noted Agritel. “For the moment, the soybean prices in the USA are decreasing, thus erasing the entire upward movement of the past week. Indeed, the prices for November 2019 contract are back to test the support level of $9.00 per bushel.”

Mr Gorey said Winnipeg November Canola is close to recent lows, adding: “Soybean’s modest fall still left prices with a substantial planting‑delay premium”.

Agritel reported that the European rapeseed harvest is confirming weak production potential, which is supporting futures prices - the August 2019 Euronext position is close to the highest levels since last October.

Terry Reilly said the US weather outlook for the next seven days sees rain for the northern US states, with hot temperatures into the weekend but cooling off next week. “The 6 to 10 and 8 to 14-day forecasts offer average to below average temps for much of the Corn Belt. Cooler temps would take some of the sting out of the average to below average precip that is expected through much of the Corn Belt into early August.”

He added that Canada’s prairies will see some rain in the coming week, while Europe will see rain across the UK, Germany, Poland, Hungary and northern Romania from Friday to Sunday. But France will remain dry.

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