(Agrimoney) – Grain futures could not for the whole session maintain their early resilience against a stronger dollar.
One issue was that the dollar turned up the heat on its recovery, standing up 1.7% against a basket of currencies in late deals.
(A stronger dollar undermines prices of dollar-denominated commodities by making them less affordable to buyers in other currencies.)
Benson Quinn Commodities said: “It looks like the dollar has stunted the trajectory of the move higher” in grain prices.
‘Sowings no problem’
Another was the release by official US meteorologists of their forecasts for spring – ie for the key sowing period for corn, soybeans etc, which for plantings at least appeared reasonably promising from a growers’ perspective.
On the more worrying side, the NOAA said that “there is a 50% chance of exceeding moderate flood levels in small streams and rivers in the lower Missouri River basin in Missouri and eastern Kansas”.
However,” these areas typically experience minor to moderate flooding during the sprin”g.
“Getting crops in timely looks to be no problem for much of the Corn Belt,” said Mike Mawdsley at Market 1, viewing such a forecast as “bearish” for prices, if also cautioning over a forecast of dry weather for later in the year for the upper Midwest.
“Some areas are starting the year on the dry side and that pattern looks to persist into the summer.
“That makes for some possible excitement later this year”
‘In a losing battle’
Then there was the issue that US weekly export sales data offered little for bulls, only heightening market sensitivity to dollar strength.
For corn, export sales last week of 502,300 tonnes were right at the low-end of market expectations.
“US corn is in a losing battle with Ukraine and Brazil for export market share,” said Richard Feltes at Chicago-based RJ O’Brien.
Furthermore, ethanol lost early gains, feeling pressure from falling crude prices to close down 0.5% at $1.449 a gallon for April, weighing on margins for producers, who in the US use corn as their main feedstock.
Corn for May fell 0.3% to $3.73 ½ a bushel, albeit with a late revival, as some of the raised number of shorts in the grain were recovery, taking it 3 cents above its intraday low.
China setback
For soybeans, old crop sales of 342,000 tonnes were comfortably within expectations for 250,000-450,000 tonnes.
However, net cancellations of 37,300 tonnes in orders from China, the top importer, cast a cloud over the figure.
“That made the number feel a little more negative,” said Darrell Holaday at Country Futures, noting that “some were anticipating some new purchases by China”.
Indeed, the data played to concerns over the extent of trade switching to South America, where export supplies are being replenished by the harvest.
“Brazil’s soy shipment pace is lagging last year, but a rapid catch-up is in progress with new loaders/ports coming online,” Mr Feltes said.
“March soybean exports could approach 7.5m tonnes.”
‘Slow fieldwork’
The news was not all so negative, with Brazil’s harvest likely to remain slowed by rainfall.
MDA said: “Rains over the next several days will maintain slow fieldwork across northern and eastern Mato Grosso, Goias, Minas Gerais and Sao Paulo,” ie a huge swathe of the Brazilian soybean belt.
But ideas of a dent to Argentine production from heavy rains were undermined late on when the Buenos Aires grains exchange kept its forecast for the harvest unchanged at 57m tonnes, while the Argentine government maintained its estimate at 58m tonnes.
Chicago soybeans for May ended down 0.3% at $9.61 ¾ a bushel, although again closing well above their intraday low.
Frost damage
For wheat, however, the bearish case was not so clear cut.
US export sales of 391,900 tonnes for old crop were just about OK, and new crop sales of 142,900 tonnes promising.
There were some signs of demand around, with Syria issuing an international tender for 150,000 tonnes of soft wheat, and Japan bought 67,511 tonnes of U. wheat and 30,746 tonnes of Canadian wheat.
Meanwhile, a Kansas State University agronomist said that signs of frost injury to winter wheat from a cold snap in the autumn were beginning to become evident in parts of Kansas, the top US wheat growing state, as seedlings emerge from dormancy.
‘Bias remains dry’
And then there was the weather to factor in.
Short-term, the lack of rains for much of Plains winter wheat country remains an issue.
“The bias on the forecast for the southern Plains remains dry despite chances today and early next week to pick up moisture,” Benson Quinn Commodities said.
“These systems are not very organized and tend to offer light precipitation and relatively poor coverage over the next 10-14 days.”
Texas improvement
Furthermore, the weekly drought monitor showed an expansion of drought in Kansas, with 54.0% of the state viewed in drought, up 9.5 points week on week, while the figure for Oklahoma stayed at 70.5%.
However, Texas showed some improvement, with drought area down 1.2 points to 39.9% of the state.
And further rains could be in the offing, to judge by the NOAA spring forecast, which said that “above-average precipitation is most likely for… Texas”, as well as the South East.
And there was minimal flood risk shown for northern spring wheat areas.
Mixed prices
Kansas City-traded hard red winter wheat, as grown on the southern Plains, dropped 0.7% to $5.54 ¾ a bushel for May.
Minneapolis-traded hard red spring wheat for May fell 1.1% to $5.75 a bushel.
Chicago-traded soft red winter wheat did manage a gain of 0.2% to $5.12 a bushel, just enough to retake its 40-day moving average.
In Paris, milling wheat for May gained 1.2% to E194.50 a tonne, supported by euro weakness, and by further strong European Union exports of 780,000 tonnes this week, taking the total for this season to 23.7m tonnes, up from 21.9m tonnes at the same stage of 2013-14.
Six-year low
Among soft commodities, raw sugar struggled against a falling real, which dropped 2.7% against the resurgent dollar, so reducing the value in dollar terms of assets in which Brazil is a big player – eg sugar.
Furthermore, data from Cosan raised some doubts about a switch by mills in cane usage in 2015-16 towards making ethanol rather than sugar.
Raw sugar for May ended down 0.9% at 12.62 cents a pound – the lowest finish for a spot contract in nearly six years, although getting towards an area that Societe Generale said could represent a price floor.
SocGen even forecast a rebound in prices ahead to back above 14 cents a pound.
‘Weak demand’
And cocoa ended lower for a 12th successive day, finishing down 1.6% at $2,715 a tonne in New York for May, amid ideas of more balanced supply and demand after weather improved in West Africa.
“Overall, the fundamentals are about the same as traders expect less world production to go against weak demand,” said Jack Scoville at Price Futures.
“There is no real sign that the world economic picture has changed in a way that would push demand higher.”
Ivory Coast, the world’s top cocoa grower, “appears to be on track to produce about the same as last year at just over 1.3m tonnes”.
‘Renewed buying interest’
But arabica coffee defied the weak real to extend its rally, rising 2.9% to 144.15 cents a pound for May delivery, as investors injected risk premium back into prices, amid fresh doubt over the ability of recent rains to revive Brazilian production.
“Roasters are showing renewed buying interest as a low could be forming on the charts,” Mr Scoville added.
