Ags open Thanksgiving week on negative note

November 24th, 2014

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Category: Grains, Oilseeds

Young man in wheat field 450x299(Agrimoney) – Wheat managed to show a bit of resilience in early deals on Monday.

But that was somewhat against the grain, as it were, of a lower ag market price trend.

Chicago soft red winter wheat futures for March added 0.1% to $5.54 a bushel as of 09:30 UK time (03:30 Chicago time), given support by some weather fears.

“Global wheat markets continue to respond to northern hemisphere weather concerns,” Rabobank said, highlighting the poor state of Russian wheat seedlings heading into winter.

“Of particular interest are growing conditions across the Black Sea region, which to date have been cooler and drier than ideal.”

US freeze

There also remain some market fears over the potential damage to US wheat from this month’s freeze, with the eastern Corn Belt and north west Midwest received further sub-zero Celsius temperatures, although not as severe as Friday, when -20 Celsius or so was seen in a pocket around Minnesota and Wisconsin.

Still, temperatures are expected to fall again through the week, with MDA forecasting a wide band of the northern US seeing -15 degrees Celsius, with -20 Celsius creeping into northern-most areas by Wednesday.

And, looking ahead, while the six-to-10 outlook is a little warmer than it was, further ahead, the 11-to-15 day outlook has “slightly colder”.

Australian harvest

Meanwhile, in the southern hemisphere, Rabobank noted that “yields for all winter crops [continue] to be revised lower due to drier July-to-September conditions”,

That said, quality from the early wheat harvest overall has, whatever the setbacks in Western Australia, “exceeded expectations, prompting some contraction” in spreads between milling wheat and feed wheat, and between malting barley and feed barley too.

As for the demand side, Saudi Arabia purchased 345,000 tonnes of hard wheat for delivery between February and March from origins comprising Australia, the European Union, and North and South America.

No real surprises there.

Prices ranged from $275.94 a tonne C&F for a cargo shipped to Jeddah in March to $292 a tonne C&F for a cargo headed to Dammam in mid-February.

Short covering spree

But was is more downbeat for prices is a huge wave of covering of hedge funds’ short positions in Chicago wheat futures and options, with the net short down more than 19,000 contracts to less than 12,000 lots as of last Tuesday.

That was the biggest weekly turn bullish (less bearish) in positioning in more than a year.

The soft red winter wheat traded in Chicago is grown in the Midwest where temperatures have been cold and sowings, indeed, slow anyway, creating some worries of underdeveloped crops heading into winter, and of some crop not being planted at all.

The extent of the short covering cuts the potential for further such, price supportive, positional movements, even heading into Thanksgiving, which tends to be a time when investors square up their holdings a bit.

Thanksgiving boost ahead?

Perhaps as some result of this trend, Thanksgiving, which occurs on Thursday (grain markets will be closed then and open for a half day on Friday) also has a reputation for bringing higher soybean prices.

“There is a strong tendency in the beans to close higher on the day before and the day after the Thanksgiving holiday,” said Kim Rugel at Benson Quinn Commodities.

But they were not falling over themselves to turn positive on Monday, standing 0.8% lower at $10.31 a bushel.

Some of the boost from the cut in interest rates in China, the top soybean importer, on Friday wore off, especially as soybean futures in the country itself, on the Dalian exchange, fell.

The January contract settled down 0.8% at 4,488 yuan a tonne.

‘Back to comfortable carryout’

It little helped that, back in Chicago, soymeal dropped, by 0.6% to $376.30 a short ton for December delivery.

The feed ingredient, whose prices have been sent soaring by logistical problems, strong demand and a slow soybean harvest, has been a price leader for the complex and largely for grain and oilseed markets as a whole for the past month or more.

Ms Rugel noted the decline in cash soymeal prices last week, besides indeed, the soft US soybean export sales data released on Thursday.

Another US broker said that, with harvest now just about over, “we are getting back to comfortable carryout levels in the US after an all-time low carryout in September.

“Obviously this transition has been a rough one with the meal problem and many fundamentalists have had to cover bean shorts to let this problem sort itself out.

“But at the end of the day the trend is one where the US is building stocks and… we maintain a bearish stance on soybeans over the next six months,” if with a mind to positioning to “ride out any meal supply problems should they arise again”.

Feedlot data

Corn, as has been typical, took a stance between soybeans and wheat.

It is a competitor with the latter as an ingredient in livestock feed, and with the former in planting programmes, as underway in South America, meaning that prices of the crops do become interlinked.

And on livestock feed, there was actually some positive data late on Friday with the release of data showing more cattle placed on feedlots last month than the market had expected, with the number down only 1% year on year rather than the forecast 4% drop.

Still, Chicago corn for December fell 0.5% to $3.70 ¾ a bushel.

‘Most boring award’

Elsewhere, in New York, cotton futures remained in the narrow trading range they have established since falling to five-year lows mid-month.

Indeed, in the last session, “cotton futures get Friday’s most boring award”, Tobin Gorey at Commonwealth Bank of Australia said.

“Traders exchanged very modest volumes to lift prices very modestly away from the low side of recent trading ranges. ”

Looking ahead, “weather forecasters expect some interruption to remaining cotton harvesting in the US Delta and South East”.

However, in South America, “moisture is fine and forecasters expect further rain to bolster that this week”.

Cotton for March fell 0.6% to 59.16 cents a pound.

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