(Agrimoney) – Data overnight offered some hope for grain bulls.
The US Department of Agriculture said that the condition of domestic wheat had not improved, overall, despite the return of rains to the drought hit southern Plains.
The national rating stayed at 42% of the crop seen as “good” or “excellent”, with a 2-point fall in the figure for Kansas, the top wheat-growing state, and a 1-point drop in Texas offsetting improvements in states including Nebraska and Oklahoma.
For corn, the USDA report showed plantings 9% complete as of Sunday, below the average of 13% by then, and behind market expectations too.
Southern and eastern Corn Belt states, including Indiana and Missouri, were well behind on sowings, thanks to wet conditions.
Short covering
And this when hedge funds have built up a record short net short position in Chicago wheat futures and options, and a substantial one in corn.
Or at least had, as of last Tuesday, the date for which latest weekly regulatory data (released late every Friday) are valid.
One issue for the grain bulls hoping that the extent of hedge funds’ bearish positioning will prompt them to reconsider and close a stack of short positions – forcing prices higher – is that many already have.
Open interest, ie the number of live contracts, in Chicago wheat futures fell by 13,646 lots on Monday, in a shift deemed down to short covering, and which indeed pushed prices higher on the day.
‘Worries unlikely to return soon’
And there did not seem the appetite on Tuesday for that trend to continue, in the face of expectations of continued rains for the dry southern Plains.
“Weather forecasters continue to see further useful rain looking out a week so worries about US wheat are unlikely to return soon,” said Tobin Gorey at Commonwealth Bank of Australia.
There are decent crop prospects elsewhere too.
“Negative fundamentals are not hard to find as much of US hard red winter wheat country enjoys ample rainfall, EU/Black Sea weather has been favourable and weekend tender activity saw anyone invited offer at a cargo or two below replacement [cost],” said Brian Henry at Benson Quinn Commodities.
Rapid plantings
The lack of competitiveness of US supplies in export markets, confirmed in offers to an Egyptian tender at the weekend, continues to attract comment.
Meanwhile, returning to the USDA weekly crop progress data, the report showed another strong week for US spring wheat sowings, which are now 36% completed, well ahead of the average of 19%, so a reason to withdraw risk premium.
Dryness in the northern Plains is allowing rapid fieldwork, but has not, yet, provoked crop concerns.
In fact, Minneapolis spring wheat for July was down 0.2% at $5.50 ¼ a bushel as of 09:30 UK time (03:30 Chicago time).
Kansas City hard red winter wheat for July fell 0.2% to $516 ¾ a bushel, with Chicago soft red winter wheat, the speculators’ favourite, faring worst in dropping down 0.5% to $4.96 a bushel, suggesting a hedge fund appetite for fresh short positions.
Corn vs sorghum
Corn dropped too, by 0.7% to $3.75 ¼ a bushel in Chicago for May delivery (which remains the best-traded contract).
OK, the slow US plantings are raising concerns of farmers switching to later-sown crops.
“We are hearing a lot of land was washed out across parts of the Delta will be planted to milo [sorghum] and/or cotton,” said Terry Reilly at Chicago-based Futures International.
After all, “some producers are forward selling the crop [sorghum] at a $1-a-bushel premium to corn,” Mr Reilly said.
“It’s less expensive to produce and takes a fraction of water that is needed for a good yield for corn.”
‘Weather outlook improves’
Still, the is a relatively unimportant region, compared with the Corn Belt proper, and Mr Reilly said that he was “less worried about the corn crop getting into the ground across the eastern Corn Belt than that of late last week.
“The US weather outlook improves.”
CBA’s Tobin Gorey said: “Weather forecasters continue to forecast improving conditions for fieldwork a week out – although they seem to have been saying that for some time now.”
And there are plenty of other factors for bears to feed on.
At Benson Quinn Commodities, Brian Henry said: “Oversold conditions, slow producer movement, below average planting progress and funds holding sizeable short positions might not be enough to push corn higher considering the slow demand, weak export sales, and large expected carryouts.”
Easier soy
Nor could soybeans fund the strength to progress, and take aim at a sixth successive positive close, with little to suggest slow Mississippi Delta sowings had spread to the oilseed as well.
Although Louisiana growers are well behind, plantings 16% of their soybeans compared with an average of 27%, those in Mississippi itself are ahead, at 32% completed, up from an average of 24%.
And a seasonal drop in US exports of the oilseed, evident in data on Monday, is weighing too, despite some hopes that harvest delays in Argentina, and another potential truckers’ strike in Brazil, might drive buyers back to the US.
Still, soybeans for July were modest in their decline, dropping 0.1% to $9.78 ¾ a bushel for July, offered some support too by a stronger Dalian market in China, and by gains elsewhere in the oilseeds complex in palm oil.
Palm oil futures for July rose 1.3% to 2,183 ringgit a tonne in Kuala Lumpur, helped by a retreating ringgit.
‘Possibility of prolonged delays’
However, cotton futures did take some strength from the USDA data, which showed domestic plantings of the fibre behind, at 8% completed as of Sunday, compared with a typical 11% by then.
In Texas, the top cotton-producing state, sowings were, at 7% finished, running at half the normal pace.
“Weather forecasters see continued rainfall in the US Delta and South East for the rest of the week,” CBA’s Tobin Gorey said.
“The possibility of prolonged delays to cotton planting remain.”
Cotton for May added 0.1% to 63.44 cents a pound in New York.
