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Morning markets: US crop reports rearrange market directions

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Wheat has arrested Monday’s losses in early Tuesday trading, with little change, while soya lost its recent strength, following the latest US crop condition reports. Corn remains directionless.

 

Mixed Monday trading for US grain futures saw wheat lose 0.63%; corn marginally lower, but soybeans gaining 0.34%.

 

This was despite a cut in Russia’s wheat harvest prospects, allied to fears of a hot dry spell in the US reducing the potential of corn and soybean crops that have already had a late start.

 

The Chicago September 19 wheat contract lost 3.25 cents Monday to close at $5.11¾ per bushel, with the December position down by 2.5 cents at $5.23 per bushel. Early Tuesday trading was at $5.12 per bushel.

 

Brian G Henry at Benson Quinn commented that US grains couldn’t hold their early Monday gains “as the ‘hot during summer’ story failed to attract follow-through buying during the day session”.

 

He added: “this is a very poor time to expect a rally in wheat markets that are overpriced on the world stage”.

 

Russia wheat still in surplus

 

Mr Henry believes SovEcon’s reduction in its estimates for Russia’s 2019 wheat production is insufficient to affect supply fundamentals. “Through the first leg of harvest, the crop has generally been below expectations in terms of yield.

 

Lowering production by 2m tonnes to 77m to 78m tonnes lowers Russia’s exportable surplus from 37m tonnes to 35m tonnes. Neither makes much of a difference in the grand scheme”.

 

But he notes that Russia’s wheat quality is promising, with above average protein levels.

 

The latest US crop ratings put the spring wheat crop at 78% good to excellent, up from the previous 75% score. 56% of the crop was estimated to be at the heading stage, compared to a normal 75%, but this is not seen as a problem yet.

 

Futures International describes US spring wheat conditions as the best since 2010.

European wheat prices followed US values downwards, closing 1.50 down at €176.75 per tonne for September.

 

Corn weather concern support

 

CBOT September corn closed at $4.38¼ per bushel, 0.5 cents lower on Monday, with December corn unchanged at $4.42¼ per bushel. The nearby position was down to $4.36 per bushel in early Tuesday business.

 

CRM Commodities noted that US corn prices did not succumb to the same pressures as wheat, as they are still supported by weather concerns in the US and uncertainty over both the area planted and potential yield.

 

The USDA crop report for corn, at 57% good to excellent, was in line with trade thinking, so had limited effect on values. “Given the lateness of the crop, I am not sure what it all means in terms of potential.

 

That said, the trade won’t be able to fully ignore an improvement,” commented Mr Henry at Benson Quinn.

 

“With the July WASDE on Thursday, I don’t think the trade knows where they want to be in corn.

 

“We’ll get a look at a report that should highlight relatively poor demand for US supplies, acreage numbers that no one believes and an educated guess, at best, on potential yields.”

 

Futures International’s estimate of corn yields is unchanged at 169.5 bushel per acre, while conceding it is a high figure due to the delayed plantings.

 

Euronext August maize futures were unchanged Monday at €178.25 per tonne.

 

Oilseed gains modest

 

September soybeans gained 3 cents to finish $8.85¼ per bushel Monday, with the December contract 2.75 cents up to £8.97¼ per bushel. Tuesday morning saw CBOT Sept beans back down at $8.75 per bushel.

 

Tobin Gorey at Commonwealth Bank of Australia described the gains as “modest to nowhere interesting”. But he added that the USDA’s crop survey, published after Monday trading closed, shows US soy crops are well behind the normal development cycle, which may be supportive to values.

 

The soy crop ratings were 1% lower, against trade expectations of a 1% to 2% improvement.

 

Just 10% of the crop is at the blooming stage, compared to 44% at the same point of 2018 and the 32% five-year average. Futures International has downgraded its US soybean yield estimate by 0.2 bushel per acre to 46.7 bushel per acre.

 

CRM commented that soybean demand remains fragile as Swine Flu continues to spread.

 

It added that the market awaits the August USDA survey for a better picture of the reduction in US soy plantings.

 

Canola prices made sharper gains Monday with a 0.75% gain to Can$446.10 per tonne for November’s ICE contract.

 

“The very small premium in canola prices over soybean prices may have tempted some buyers,” Mr Gorey noted.

 

In Europe, the Euronext August OSR contract was up €1.50 to €364.50 per tonne.

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