(Agrimoney) – Tuesday saw a reversal of fortunes in the ag commodity markets, as grains and softs trimmed the previous sessions gains.
Soybean futures were down, as markets confronted heavy supplies from South America, while wheat and corn had to contend with the good condition and progress of US crops.
US Commodities noted that Argentina will be dry this week, which is good news for the ongoing soybean harvest.
“Good South American harvest progress is expected for the next two weeks as much of Brazil and Argentina is forecast to see a drier bias evolve,” said Tobin Gorey, of the Commonwealth Bank of Australia.
And in Brazil the harvest is now more than half finished, according to AgRural.
Increased crop expectations
Abiove, the Brazilian vegoil industry group, on Tuesday forecast Brazil’s soybean crop at a record 99.7m tonnes.
This is a touch behind the US Department of Agriculture’s forecast, but represents a 1.2m tonne upgrade from Abiove’s forecast last month.
And the group lifted its forecast for exports this year by 0.7m tonnes, to 55.3m tonnes.
Corruption fears weaken Brazilian currency
More bearish news for soybeans came from the currency markets, with fresh weakness in the Brazilian real.
A weaker real will help exports of the record crop.
The Brazilian currency took a tumble after it was reported that former president Luiz Inacio Lula da Silva would take a cabinet position, in a move that would protect him from investigation in an ongoing corruption case.
Markets reacted badly to the move, with stocks and bonds also sharply down.
The real was down 2.8% against the dollar as Chicago markets closed.
Export competition
So the strong South American export prospects are weighing on the US markets.
“Soybean futures have been faced with a slowdown in exports due to competition from South America,” noted Paul Georgy, at Allendale.
US Commodities drew attention to Monday’s low US soybean export inspections, with buying “switching to South America quickly”.
The broker noted that no US soybean export vessels were booked for April.
Crush exceeds expectations
One piece of news that might have cheered soybean bulls was Feburary soybean crushing data for the US from the National Oilseeds Processors Association.
True, the crush number was down 4m bushels from January, at 146m bushels, but this was a full 6m bushels above market expectations.
But as Darell Holaday, of Country Futures, pointed out, “when you have a larger crush and you do not see larger movement than expected, then the inventories of soymeal and soyoil are larger than expected”.
And indeed, the Nopa data showed soyoil stocks were significantly higher than expected, choking off a rally in the futures market.
May soyoil futures finished up 0.1%, at 32.49 cents a pound.
And May soymeal futures were down 1.2%, at $268.2 a short tonne.
Falling oil
Crude oil prices lent no support to the complex, down with March Brent crude futures down 2.0% in afternoon deals.
“The crude oil market is likely reflecting the fact that balance the global crude oil market will not be a clear-cut process given the multitude of players and varying economics”, said Tregg Cronin, of Halo Commodities.
May soybean futures in New York were down 0.4%, at $8.92 a bushel, after hitting a 3-month high in the previous session.
Good plains condition
Wheat futures were down as well, as the US Department of Agriculture reported good conditions in the Plains.
The USDA reported that winter wheat in Kansas was at 56% good or excellent, in line with last week’s conditions, despite dry weather.
This compares to 41% good or excellent at this point last year.
And in Oklahoma wheat condition were 67% good or excellent, up from 66% last week, and 27 percentage points above the levels seen at this time last year.
Chicago wheat finished down 0.4%, at $4.77 ¼ a bushel.
Texas planting progress
In Texas, meanwhile, a crop report showed good progress in corn planting, despite the recent wet weather.
Corn in Texas is now 20% planted, 2 percentage points ahead of the five-year average.
May corn finished down 0.1%, at $3.68 ½ a bushel.
Softs rally stalls
The retreat in the real was bearish for sugar and coffee, of which Brazil is the world’s top exporter.
May robusta settled down 1.0% at $1,423 a tonne, while May arabica fell 1.2% to settle at 125.70 cents a tonne.
And Mr Gorey saw “a couple of signs” that support for sugar might be getting “wobbly”.
One factor is that investors who were short on sugar have now closed out their positions “so there is not the auto‑pilot buyer to propel the rally”.
And Mr Gorey also pointed to the signs that “physical prices are not following futures higher”.
“Given that, the rally might well lose momentum shortly.”
May raw sugar settled down 0.7%, at 15.32 cents a pound.
And cotton futures ended a three day bull run, as Chinese customs data showed February imports down 65% year on year.
May cotton futures finished down 0.1%, at 58.14 cents a pound.
