(Agrimoney) – Will the key soybean contract fall back down through the psychologically important mark of $10 a bushel on Thursday?
That was one of the questions that investors had after the poor performance of grain and oilseed futures in the last session, on further improvement in the US Midwest weather outlook.
However, Chicago’s November soybean futures contract actually managed a decent rebound as of 09:00 UK time (03:00 Chicago time), standing up 1.4% at $10.22 ¾ a bushel.
That was after in early deals matching, but not falling below, the last session’s nadir of $10.04 ½ a bushel, offering some hope that selling pressure is spent, at least temporarily.
‘Big-time fund selling’
Still, the contract, and corn and wheat futures, made a firm start to the last session, only to end lower.
Ami Heesch at CHS Hedging said: “Big-time fund selling was noted in the soybean market and sell stops were triggered as prices retreated,” with the loss of the $10.21-a-bushel mark seen as a particular setback by technical analysts.
And it is not difficult to find expectations of further declines.
“There may be more soybean downside if evidence builds of an above-trend US soy yield,” said Richard Feltes at Chicago broker RJ O’Brien.
And for corn, he said that “our big picture perspective is that while majority of the downside correction from the mid-June high for December futures is over, there is more downside into harvest”.
December futures have so far corrected by some 23%, compared with an average seasonal break of 37%, on RJ O’Brien calculations.
‘Funds are just too long’
Benson Quinn Commodities said: “Funds are just too long beans, as weather remains non-threatening production.
“World supplies weigh on corn and wheat.
“Funds are record short wheat and market is oversold, but we see no fundamental reason for funds to cover shorts with world stocks forecast record large.”
Data later
That said, of course, the next roll of the weather outlook dice will be key to price direction on Thursday, and indeed the weekly US Department of Agriculture drought monitor too, which will give insight into Midwest soil moisture levels ahead of the ongoing heatwave.
There was some comment around on Tuesday, after weekly USDA crop progress data, that soil moisture levels in some states appeared a little low for comfort.
But demand will be more of a factor for investors too, with the publication of US export sales data for last week, expected for soybeans to come in at 300,000-500,000 tonnes for old crop, and 500,000-700,000 tonnes for 2016-17.
For corn, the 2015-16 figure is expected at 400,000-600,000 tonnes, and sales for delivery next season at 500,000-700,000 tonnes.
Meanwhile, for wheat, for which 2016-17 has already started, sales are forecast coming in at 350,000-550,000 tonnes.
Chinese imports
In fact, the market has already had some demand data, in terms of monthly Chinese import statistics for June showing, among other things, a 54% jump in sugar imports year on year, and a 440% surge in ethanol volumes.
However, imports of distillers grains (DDGs), a byproduct of ethanol manufacture, tumbled by 76%, amid a Chinese investigation in alleged “dumping” of the feed ingredient.
Soybean imports dropped 5.9% year on year to 7.56m tonnes, although that had already been announced.
Chinese soybean imports are a particularly sensitive market topic after Oil World forecast that the country’s purchases could in 2016-17 fall for the first time in 15 years, as the country unloads supplies from huge state stocks, as it has already done in, for example, cotton, and is doing in corn too.
Feed vs food
Indeed, China’s corn imports tumbled by 92% to 66,942 tonnes, amid the government drive to focus consumers such as livestock producers on domestic supplies – an effort affecting purchases of other feed grains too.
Barley imports dropped 51% to 481,703 tonnes.
Imports of wheat, however, as a food grain bucked the negative trend, gaining 11.3% to 477,554 tonnes, and are up 27% so far in 2016 at 1.78m tonnes.
Still, the bulk of China’s volumes last month came from Australia, with purchases from the US down 28% at 64,459 tonnes.
Grain prices rise
Indeed, that seems a bit of a theme, with Terry Reilly at Futures International noting that while world wheat import demand has “picked up” of late, “much of the business was or will be done out of the Black Sea region”.
Russia is renowned anyway as a supplier of competitively-priced wheat, and this year is expecting a record harvest too.
EU wheat exports have started 2016-17 strongly too, with export licences of 826,000 tonnes of soft wheat granted this week, bringing the cumulative total for the season so far to 1.8m tonnes, up from 1.3m tonnes a year ago.
Still, with so much bad news already dialled into Chicago prices, and with managed money already record net short in Chicago wheat futures and options, the exchange’s benchmark September contract did see a bounce in early deals, by 1.2% to $4.18 a bushel for September delivery.
It helped that rival grain corn was higher too, by 1.1% to $3.48 a bushel for December.
