(Agrimoney) – It’s a big day in the soybean calendar.
Thursday, being September 15, brings the end of Brazil’s soybean-free period, ie the date when farmers are allowed to have live crop in their fields again, after a 90-day annual ban aimed at helping keep disease and pests under control.
This brings another storyline into the market, besides the US harvest and export demand themes also moving prices of late.
And the Brazil script is somewhat bullish of late, in that dry weather, having caused notable damage to the safrinha corn harvest, has hung around in the likes of Mato Grosso, the top soybean-growing state.
‘Little rainfall in the forecast’
At Chicago broker Futures International, Terry Reilly flagged “talk about soybean planting progress in Mato Grosso delayed 1-2 weeks because of dryness”.
At Soybean and Corn Advisor, Michael Cordonnier said that “meteorologists and farm groups though have advised farmers in Mato Grosso and central Brazil to be cautious about rushing out to the field with their planters due to the uncertain weather forecast.
“There were some rains in Mato Grosso during the second half of August, which helped to recharge some of the soil moisture, but it has been dry since then and there is little rainfall in the forecast until the last week of September.
“Meteorologists in Brazil are forecasting that significant summer rains may not materialise until the second half of October.”
US harvest
That said, it will be some time yet before sowing delays are viewed as a big market factor.
Wheat of the other big market themes?
Only early, anecdotal results of the US harvest are circulating at the moment, although there appears no reason yet to doubt ideas of a record crop.
“Harvest in the northern plains should be in full swing by next week,” said Benson Quinn Commodities.
“Rains in next couple days will slow activity but forecast for next week is warm and dry.
“So far, we haven’t heard anything in terms of early yields but quality and moisture have been good for North Dakota, South Dakota and Minnesota beans.”
‘Really needs to see some demand news’
It is on exports that more definite news will be known later, with the release by the US Department of Agriculture of weekly trade data expected to show US export sales of 900,000-1.2m tonnes of soybeans last week.
That would be well down on the 1.78m tonnes the previous week.
But then, “since the beginning of September, there have only been two days with fresh announcements” by the USDA, through its daily alerts system, of the sale of US soybeans for export.
“The market really needs to see some demand news to at least counter the bigger yields” which are being expected, with the USDA earlier this week hiking its forecast to 50.6 bushels per acre, which would set a record by a distance.
China turns to Brazil
In fact, there is talk that China, the top soybean importer, “has been an active buyer of new-crop Brazil soybeans this week”, Futures International’s Terry Reilly said.
Chinese buyers might only be encouraged to turn to the US’s biggest soybean export rival, if they have taken umbrage at Washington’s decision to take China to the WTO over some crop subsidies.
And the foreign exchange markets worked a bit against US exports too early on Thursday, when the dollar was a touch higher against a currency basket, making dollar-denominated shipments more expensive.
Oils recover
While soybean futures for November, now the spot contract, rose, the gains were not huge, with the lot up 0.1% at $9.44 a bushel as of 09:45 UK time (03:45 Chicago time).
The headway was encouraged by firmness in vegetable oil markets, with Chicago soyoil for December adding 0.3% to 31.94 cents a pound, encouraged by some firmness on Wednesday, which could signal that the selling is over which drove the contract down 4.6% in the first two sessions of the week.
Signally, rival vegetable oil palm oil gained 1.1% to 2,591 ringgit a tonne, pulling out of its own decline, prompted by fears for Malaysian exports enhanced by the prospect of an increase next month to 6.5%, from 5%, in a levy on the country’s shipments.
Still, for now export signs proved a little more encouraging (if only thanks to buyers pulling forward purchases to avoid the raised tax).
Malaysian palm shipments for the first half of September fell 8.7% month on month, cargo surveyor ITS said on Thursday – a deceleration from the 16.7% pace of decline seen for the first 10 days.
Corn demand
Crude oil markets – a big influence on markets for ags such as vegetable oils and indeed corn used as biofuels – were flat in early deals, consolidating themselves after declines over the past week.
And certainly this has had some impact on profitability for (corn) ethanol producers.
“Margins remain in the black, however they’ve decreased compared to last week,” Benson Quinn Commodities said, adding that “the lower energy market has softened ethanol margins as of recently”.
Still, with data on Wednesday showing a small rise in US ethanol production last week, of 6,000 barrels a day to 1.004m barrels a day, and stocks in decline, activity has not been undermined too much yet.
Nor are US exports expected to show, in the weekly US export sales data, the same drop as seen in soybeans, with volumes seen coming in at 800,000-1.10m tonnes, potentially matching the 1.09m tonnes seen last time.
Argentine plantings
South American sowings data were modestly supportive for Chicago corn futures too, in that the Rosario grains exchange forecast Argentine plantings of the grain up “only” 18% year on year.
That is below figures of 25% and above which have been circulating.
The exchange pegged the crop at 33m-35m tonnes, well below the 36.5m tonnes expected by the USDA.
Chicago corn futures for December (also now the spot contract) stood 0.5% higher at $3.33 ¼ a bushel, creeping back above their 40-day moving average, but as yet not getting above their 40-day line.
Wheat follows
As for wheat, it found a little support in corn’s gains, adding 0.2% to $4.03 ¾ a bushel for December delivery.
“Volume remains very light, but the market seems to be trying to hold $4.00 in Chicago,” said Benson Quinn Commodities, adding that investors should “expect wheat to remain a follower” of the row crop markets.
This is especially so since wheat, with huge amounts of lower grade supplies globally, is fighting particularly hard to price itself in feed rations, against the likes of corn.
Wheat’s premium to corn, at some $0.70 a bushel, remains relatively weak.
‘Weather premiums to creep back’
In New York, cotton fared worse, dropping 0.5% to 67.19 cents a pound for December delivery, if holding above its 100-day moving average.
The decline came despite fresh concerns over storm damage to the US crop.
“Overnight, a weather disturbance sitting off the coast of Georgia was upgraded and named Tropical Storm Julia,” said Tobin Gorey at Commonwealth Bank of Australia, flagging reports that “south‑eastern Georgia and parts of South Carolina received heavy rain as the storm drifted north.
“The moisture is unwelcome as those regions have only just dried out after Tropical Storm Hermine.
“Some fibre discolouration may result,” Mr Gorey said, adding that “we expect weather premiums will continue to creep back into the market over the next few days”.
‘Quality concerns’
Trading house Ecom said: “some quality concerns continue to exist around the US crop”.
Storm Julia is “predicted to deliver inches of rainfall only a few weeks before harvest over Georgia and into the Carolinas is once again fuelling quality concerns.
Ecom flagged that “demand for physical cotton has surprised to the upside” too, although such ideas will be tested later with the weekly USDA export sales data.
