(Agrimoney) – “Just when you thought there was never going to be any news in the grains and oilseeds other than projected weather changes, the world geopolitical situation slaps you in the face.”
So said Darrell Holaday at Country Futures, referring to the crashing of a Malaysian airline in Ukraine, amid allegations that it had been shot down.
This, in turn, revived the fears over the Ukraine crisis, and the potential threat to grain exports, and to production from a weak hryvnia, high credit costs and civic unrest.
Wheat, which rallied earlier in the year on Ukraine tensions, was the quickest to gain this time too, closing up 2.4% at $5.50 ¾ a bushel in Chicago, speculators’ favoured wheat market. And one in which they held a stack of short positions vulnerable to such bullish news.
In the European Union, likely from a geographic perspective to benefit from switched demand should buyers flee the Black Sea, Paris wheat for November closed up 2.2% at E183.00 a tonne.
Also in wheat bulls’ favour was a report from Strategie Grains voicing concerns over the threat to EU wheat quality from late rains.
Export data
However, the plane crash story actually overshadowed some negative data, in terms of US wheat export sales, which came in at 321,000 tonnes for last week, below expectations of at least 400,000 tonnes, and indicating that lower prices have yet to spark foreign demand for US supplies.
Wheat futures were standing nearly 1% lower before the plane crash news came through.
Conversely, data for corn – at 574,000 tonnes of old crop and 495,000 tonnes for 2014-15 – and soybeans – at a positive 38,000 tonnes for 2013-14 and 561,000 tonnes for new crops – met or exceeded expectations.
And soybeans had the extra fillip of China buying 708,000 tonnes of US, new crop, supplies on the day, as revealed by the US Department of Agriculture.
However, corn and soybean futures found headway difficult, pressed by the background expectations of huge US harvests.
‘May be a good thing’
These were helped by a turn wetter and cooler in the GFS weather model outlook for the Midwest, where corn is pollinating, a process vulnerable to excessive temperatures.
In fact, “it will be a bit warmer next week in a lot of areas, but that may be a good thing in helping crop development”, said Don Roose, president of US Commodities.
There have been concerns over the lack of so-called growing degree days in some areas, ie crops not receiving the solar energy needed to fulfil their potential.
Commodity Weather Group – which late on Wednesday forecast the US corn yield at a record 171 bushels per acre, above the USDA forecast of 165.3 bushels per acre – forecast that July will finish in the Midwest with “no extensive concern” for crops.
Monsoon improvement
Meanwhile, staying on the weather front, the Indian monsoon is expected to keep improving, and narrowing its deficit to average rates, with soybean-producing districts already fingered as having enjoyed better precipitation.
“The slow-to-begin monsoon in India has improved this week. This is likely a bigger feature for their oil seed production,” said Benson Quinn Commodities.
This is in fact co-inciding with some weakening in the El Nino signs, with Pacific water temperatures remaining below threshold levels in the first half of this month. (El Nino is associated with weak monsoons, besides dryness in much of Asia, Australia, and West Africa.)
Certainly, markets lacked the oomph to prevent November soybeans surrendering the $11-a-bushel mark again, closing down 0.7% at $10.94 a bushel, little helped too by bearish analysis by Jefferies Bache.
December corn, pulled higher by fellow grain wheat, actually managed gains, but only small ones, adding 0.1% to $3.87 ¼ a bushel.
Strong cotton exports
Cotton sided with corn, in posting a small gain – of 0.01 cents to 67.54 cents a pound in New York – helped by decent US export sales of 342,786 running bales for 2014-15, which starts in two weeks’ time.
That was the best new crop figure for two years (ie, better than 2013-14 ever achieved before it became the current crop year).
The disappointment was that only 24,800 running bales were bought by China, a particularly sensitive market, as Commerzbank discussed in a somewhat bullish perspective on cotton price prospects.
And arabica coffee extended its recovery from a five-month low of 159.25 cents a pound reached on Tuesday, closing this time up 0.8% at 183.85 cents a pound for September delivery.
“Production and condition reports coming from on the ground are consistently reflecting a weak harvest,” Citigroup’s Sterling Smith said.
‘Maximising sugar production’
Cocoa was little changed ahead of North American grinding data due shortly, with September contracts ending up 0.1% at $3,064 a tonne in New York, and by the same at £1,891 a tonne in London.
Raw sugar for October eased 0.9% to 16.92 cents a pound – the contract’s first close in five months below 17.00 cents a pound amid ideas that Brazilian mills are continuing to favour making sugar, rather than ethanol, from cane.
“With the recent dry weather, millers seem to be maximising sugar production out of the resulting higher ATR [sugar concentration] in the cane,” Nick Penney, senior trader at Sucden Financial, said.
This means that should cane supplies run short, as has been widely predicted after the early 2014 drought, mills “will have enough sugar to take advantage of a resulting rally in price” expected then for sugar.
However, current the ramp up in supplies is for now being “reflected in the lower physical prices, which have not as yet attracted demand, and the weakness has been translated to the futures market both in terms of flat price but especially in the market structure”, Mr Penney said.
While the world’s “near term supply glut has been well documented, we are now seeing weakness into next crop year with the market anticipating a trade surplus into the first half of 2015”.
