(Agrimoney) -Month-ends, by repute, bring lower grain prices, as funds sell-up withdraw cash to pay bonuses and customers.
But with hedge funds record net short, or so, in grains, as they were in the latest regulatory data, will that mean a nuance on that dynamic?
They might, after all, be tempted to raise money by taking profits on some of their short positions instead – sending prices higher in the process.
Certainly, grain futures traded a touch higher again in early deals on Thursday, despite expectations of ideal US sowings conditions, for now.
‘Good planting progress’
“Weather forecasters continue to forecast improving conditions for fieldwork over most of the US Midwest, and the soggy conditions that were holding up planting in eastern regions to recede,” said Tobin Gorey at Commonwealth Bank of Australia.
At Futures International, Terry Reilly said: “Good planting progress is expected through Saturday before a shot of wet weather starts Sunday and lasting through May 11.”
Benson Quinn Commodities, noting that the outlook looks “favourable for accelerated planting progress”, said that for corn, “the trade is estimating the US Department of Agriculture to report around 50% complete next Monday versus 19% this week and 42% for the five-year average”.
There also remain concerns over the spread of bird flu in the US poultry herd, and its potential for denting feed demand.
Technical factors
However, there was also a feeling that markets have withdrawn enough weather premium from prices, for now, a sentiment encouraged by some more positive (or at least less negative) technical signals.
In soybeans, for instance, Benson Quinn Commodities’ Kim Rugel noted how futures “took a stab at lower trade testing support at the 10-day moving average, but quickly rebounded and traded through resistance at the 50-day.
“The market attempted a pullback as we neared the close, but end-session buying developed and rallied the board through Tuesday’s highs, with the May contract posting its best close since April 1.”
Dollar decline
And there were some fundamental reasons for investors to go with a more price-positive flow, at least temporarily, with the dollar’s recent losing streak improving the affordability of dollar-denominated exports, such as many commodities, to buyers in other currencies.
(The greenback was in fact only marginally lower in early deals.)
And the data overnight on deliveries against Chicago May contracts, as the expiry process begins, were broadly favourable too, in showing modest numbers.
(Large delivery numbers, in signalling that futures markets are an attractive place to sell, can be taken negatively in grain markets.)
Delivery details
OK, the low deliveries were not so true for wheat, for which there were 295 contract deliveries against Kansas City hard red winter wheat futures, and 184 against Chicago soft red winter wheat.
But that was in line with expectations, with some analysts foreseeing deliveries of up to 500 lots against Chicago wheat.
And against corn, there were no deliveries.
The market has been “expecting 50-100 contracts – some analysts are saying as many as 1,000 corn deliveries”, Fintec Group said on Wednesday.
For soybeans, there was 1 delivery, at the bottom end of the range of 0-50 contracts.
Data later
There have been some decent demand signs too.
Recent buys on international markets include a purchase by Jordan of 100,000 tonnes of hard wheat, and Taiwan of 130,000 tonnes of US corn, although Iraq on Thursday slightly dented the trend on Thursday by cancelling a tender for 50,000 tonnes of hard wheat (and which was expected to have ended up in an order of a multiple of that).
However, more will be known later on exports with the release of weekly data on European grain trade, and in the weekly US export sales report.
US wheat export sales last week are expected at 0-100,000 tonnes for delivery this season (ie until the end of next month), and 100,000-300,000 tonnes for 2015-16.
For corn, sales are expected at 500,000-700,000 tonnes for this season (which ends in August for the grain and for soybeans) and 50,000-200,000 tonnes for 2015-16.
For soybeans, export sales are pegged at 50,000-250,000 tonnes for 2014-15, and 200,000-400,000 tonnes for 2015-16.
Seven-month high
There is also talk around of decent US cotton export sales too, helping New York’s July contract in the fibre standing 0.8% higher at 67.61 cents a pound as of 09:10 UK time (03:10 Chicago time).
Earlier, the contract hit a seven-month high of 67.77 cents a pound, in a rally deemed also to be getting help from technical factors, after the contract on Monday escaped from a trading range that had been constraining it since September.
Some fundamentals are not so positive, with US cotton-planting progress expected to pick up after a slow start.
“Weather forecasters expect drier conditions in the US Delta and South East from today,” CBA’s Tobin Gorey said.
“Farmers should now be able to accelerate planting.”
‘Threats of another strike’
In Chicago, soybean futures for July added 0.5% to $9.92 ½ a bushel, also given some help by a strike by pilot boat operators at the main Argentine grains port of Rosario, and by dock workers who are member of the CGT union.
“There are also threats of another strike beginning at midnight Monday involving crushing plant workers,” broker Jefferies said.
Furthermore, futures on the Dalian exchange in China, the top soybean importing country, soared 1.8% to 4,296 yuan a tonne for September delivery.
Grain prices
Chicago wheat for July added 0.7% to $4.87 a bushel, amid some concerns too that rains which are improving conditions for drought-hit southern Plains crops are boosting disease outbreaks too.
“Disease and insect pressure in some hard red winter wheat growing areas may be the lead concern as rain chances improve into the weekend from Nebraska to Texas,” said CHS Hedging.
Chicago corn for July gained 0.5% to $3.69 ¾ a bushel, although the new crop December lot, up 0.3% at $3.86 ½ a bushel, continued to underperform its November soybean peer (as discussed in Agrimoney.com on Wednesday).
The new crop soybean: corn ratio returned to an elevated 2.50, territory viewed as encouraging soybeans rather than corn in planting programmes.
Export dip temporary?
In Kuala Lumpur, palm oil rose too, by 0.9% to 2,100 ringgit a tonne, despite some downbeat data on Malaysian exports from cargo surveyor ITS, showing shipments falling 7.2% month on month in April.
That appears to indicate a dramatic drop in shipments, with exports as of April 25 running 5.6% higher month on month.
However, there are ideas that exporters are delaying shipments until next month, when an export tax returns to zero, from 4.5% imposed in April.
