Corn Futures Hit 7-Year Low, Despite Good Export Demand

August 5th, 2016

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Category: Grains, Oilseeds

corn450x299(Agrimoney) – Soybean futures kept their heads above water, just about, thanks to good US exports, but heavy world supplies weighed on corn futures, which seven-year lows, under pressure from the heavy US crop prospects.

The US Department of Agriculture announced the sale of 252,000 tonnes of soybeans to China, and 129,000 tonnes of corn to unknown destinations.

“Another lovely round of daily reporting,” said Kim Rugel at Benson Quinn Commodities, noting “thoughts of strong export demand due to multi-year low prices offering support”.

Exports beat expectations

US soybean export sales came in at 542,200 tonnes for the current marketing year, compared to analyst forecasts of 300,000 to 600,000 tonnes.

This brings in total soybean commitments for 2015-16 at 107.3% of the USDA’s forecast exports for the season.

And sales for the new marketing year were toward the top end of expectations, at 1.13m tonnes, with analyst expectations ranging between 800,000 and 1.20m tonnes.

This was the biggest new crop sale so far this year.

New crop soybean product sales also beat expectations, with 19,000 tonnes of soyoil, and 140,500 tonnes of soymeal, booked for export.

Range bound trade

But despite the good export demand, soybean markets are struggling to rally, with the risk of rising soybean yields.

Richard Feltes, at RJ O’Brien, asked “are markets settling into a range trade ahead of crop report or merely taking a breather before going lower?”

“With tight cash markets, positive August soybean seasonal and the torrid pace of soybean export sales, we lean toward more range trade,” Mr Feltes.

But he warned that “confirmation of another record high US soy yield would certainly inflict more pain on the remaining soybean managed fund longs”.

November soybean futures finished unchanged on the day, at 9.56 ¾ a bushel.

Strong export sales

“Corn export sales were good this week,” said Joe Lardy, at CHS Hedging.

2015-16 sales came in at 331,1000 tonnes, toward the low end of expectations, but new crop corn sales were a hefty 896,300 tonnes, ahead of analyst expectations of 500,000 to 700,000 tonnes.

This is the biggest new crop sale of so far this year.

Beneficial rain

But the market remains under heavy pressure, from US crop prospects.

“The market is most focused on rainfall in the eastern Corn Belt,” said Darrell Holaday, at Country Futures.

“Rain in the next 2-4 days would be beneficial to a few dry areas in those states and would really finish much of the state that is in very good condition,” Mr Holaday said.

“There is plenty of rain in the forecast for the Plains and the central and western Midwest,” he added.

Good corn prospects

“Prospects in Midwest corn are favourable, a result of wet summer weather,” said forecaster Gail Martell, also noting the good condition of corn, as revealed in the latest set of USDA crop ratings.

“Corn pollination has reached 91% complete,” Ms Martell said. “This points to a very favourable crop in the making.”

“The corn yield outlook was boosted by recurring strong showers in July,” she noted, with “85% of the Midwest receiving above average rainfall”.

December corn futures finished down 1.3%, at $3.31 a bushel, the lowest finish for the second-month contract since 2009.

Wheat sales miss expectations

Wheat futures fell, under pressure from heavy world supplies and some disappointing US exports sales.

Wheat export sales came in below expectations, at 326,500 tonnes, where analysts projected sales of 350,000-650,000 tonnes.

September Chicago wheat futures finished down 1.7%, at $4.03 ¼ a bushel.

Brazilian real rallies…

Arabica and sugar futures rallied late in the session, thanks to a rally in currency of Brazil, the top exporter of both commodities.

The Brazilian real was up 0.9% against the greenback in afternoon trading, at 3.3065 to a dollar.

Aside from two sessions in late June, this is the strongest the real has been since July 2015.

The strength in the real was driven by the news that the Bank of England cut its interest rates, for the first time in seven years, and would extend quantitative easing.

…lending support to arabica and sugar

The prospect of a wave of looser monetary policy across the developed world weighed on bond yields there.

The move sent speculators flooding into higher-yield environments such as Brazil.

The strength in the real was supportive for coffee and sugar futures, as it reduces real-denominated returns for Brazilian growers, discouraging production and exports.

September arabica KCc1 settled up 1.2%, at 142.10 cents a pound.

October raw sugar futures settled up 3.5%, at 19.7 cents a pound.

Technical buying

Cotton futures surged on technical buying, helped by strong US export sales.

The USDA announced net cotton sales of 226,700 bales of cotton for the 2016-2017 marketing year.

December cotton futures broke out of their previous trading range, triggering fund buying.

The December contract settled up 2.1%, at 75.82 cents a pound, its highest level since June 2014.

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