(Agrimoney) – Tokyo shares managed a recovery from the slump in the last session, on a surprise fall by Japan into recession.
Helped by firmer stockmarkets elsewhere, the Nikkei index closed up 2.2%, recovering most of the ground lost on Monday.
But grains again struggled for form, weighing on soybeans too, amid some ideas that the rally from late-September lows has gone far enough.
Weather outlooks
Not that all of the worrying fundamental points have disappeared, although there is talk of much-needed precipitation in some Black Sea areas.
“Weather forecasters expect substantial precipitation in parts of the former Soviet Union over the next few days to provide good moisture for strong crop development in the northern hemisphere spring,” said Tobin Gorey at Commonwealth Bank of Australia.
Still, in South America, there remain concerns about too much rain in Argentina, slowing plantings and threatening wheat quality, and too little in parts of Brazil, making farmers reluctant to sow.
“Tuesday through Friday Argentina will see rain impacting most growing areas,” Terry Reilly, at Chicago-based Futures International said.
For Brazil, while the forecast overall is “favourable”, in terms of bringing rain, “some isolated areas could see net drying if rain fails to develop over the two week period”.
‘Higher-than-trend abandonment’
And the US looks in for more of the cold temperatures which have raised concerns for winter wheat seedings and, somewhat, for corn and soybean harvest progress too – besides threatening Louisiana sugar cane.
“Bitter cold temperatures across the upper US will last until Friday,” Mr Reilly said.
For wheat, “adequate snow coverage across the US Plains should protect the winter crop from winterkill”.
However, there is some concern over late-sown wheat.
“Some of the recently emerged crop and wheat crop that did not have time to emerge before the long shot of cold temperatures set in,” a factor which “could lead to a higher-than-trend abandonment this spring.
“But there is no way of knowing any damage, if any, until late this spring.”
‘10.4 degrees below normal’
However, weekly US Department of Agriculture data overnight hardly supported ideas of damage so far, keeping at 60%, as of Sunday, the proportion of US winter wheat rated in “good” or “excellent” condition.
That said, the detail of the report did look more worrying than the headline finding, with condition falling in 10 states, centred on Midwest soft red winter wheat country, but rising in only four, albeit with one those being Oklahoma, a major producer of hard red winter wheat.
Farmers also have 5% of plantings to complete, which may be difficult/shelved with the freeze around.
Illinois, where last week the USDA said that “the average temperature was 31.1 degrees Fahrenheit, 10.4 degrees below normal”, looks a little bit of a troublespot for winter wheat, with condition dropping again, by 3 points, albeit to a still reasonable 57% rated good or excellent.
Plantings, at 90% complete, are five points behind, and only 64% of the crop has emerged, compared with a typical 81%.
Harvest progress
And as for the row crop harvest, farmers did OK.
For corn, they moved ahead of the average pace, getting 89% of the crop in the barn as of Sunday, 1 point ahead of normal, having caught up with mean the previous week.
The result for soybeans was not so strong, with 4% of the crop harvested, putting the total at 94%, and remaining behind the average pace, at 96% done by now.
“The biggest delays are through the mid-South and into the Ohio River Valley,” Benson Quinn Commodities said, noting that Kentucky farmers, at 75% harvested, are 15% off the normal pace, and growers in Ohio and Tennessee behind too.
‘Price highs may be in’
Still, now that hedge funds have covered a stack of their short positions, as highlighted by US regulatory data, and far higher prices, compared with late September, are encouraging growers to sell, there are ideas that future progress in values may be hard to come by.
“I hear more chatter that [price] highs may be in for now – especially in the light of fresh managed fund row crop longs, stepped-up farmer selling, weakening South American soymeal premiums, mostly favourable South American weather and negative chart action,” said Richard Feltes at RJ O’Brien.
“I suspect bulls lack the firepower necessary to penetrate recent [price] highs.”
At Benson Quinn Commodities, Brian Henry, thinking in particular of corn, said that “from a technical standpoint, upward momentum is waning with help from lower trade the last couple of sessions.
“I tend to believe there is more downside as this market tries to carve out a range,” although “sellers may need more encouragement from weaker technicals before tacking on additional sales”.
‘Well off the pace’
In fact, they had only dipped a toe in the negative waters as of 08:55 UK time (02:55 Chicago time), sending corn for December down 0.2% at $3.76 ¾ a bushel, keeping it above its 10-day moving average.
Wheat fared a little worse, down 0.4% at $5.49 ¾ a bushel in Chicago for December, but feeling some further pressure from Monday’s dire US export data for last week.
“Weekly cargo inspections have fallen well off the weekly pace needed of 481,391 tonnes to meet the USDA’s export estimate” for 2014-15, Mr Henry said.
“European Union [export] offers are aligned at a competitive value of $255 a tonne. Russian offers would likely trade a touch cheaper than that, though Russian officials have pointed to a lack of quality as a feature limiting future sales.”
And whatever concerns there may be about Argentine and Australian harvests, “it hasn’t translated into additional business from US shores”.
Strong crush
Soybeans perhaps had a better claim to gains given Monday’s unexpectedly strong data for the US crush last month, of 158.0m bushels.
“Naturally the market assumed higher margins,” stemming from last month’s surge in soymeal prices, “would result in a high crush number,” one US broker said.
But the actual result was well above forecasts of a 150.7m-bushel figure.
Still, “we have to assume that the meal rally will result in some demand destruction especially with how cheap corn and distillers’ grains (DDGs) have been,” DDGs being a byproduct of corn ethanol manufacture which, like soymeal, act as a high-protein feed ingredient.
Mixed price moves
The crush data also showed US soymeal exports more than doubling month on month, and soyoil stocks at 966.1m pounds – well below expectations of 1.06bn pounds.
Still, while soymeal for December managed some gains in Chicago, adding 0.2% to $388.00 a short ton, soyoil for December eased 0.3% to 32.37 cents a pound, giving up part of its headway in the last session.
Soybeans themselves, for January, eased 0.2% to $10.34 ½ a bushel.
Elsewhere in the oilseeds complex, in Kuala Lumpur, palm oil gained 0.6% to 2,244 ringgit a tonne, given support by the headway made by rival vegetable oil soyoil on Monday.
Chinese import slump
Amongst soft commodities, cotton for March added 0.6% to 59.40 cents a pound in New York, despite poor Chinese import data, with the country buying in 81,900 tonnes of the fibre last month – the smallest amount since January 2009.
Still, this is exactly what the market has been braced for in sending cotton prices to a succession of five-year lows, on a spot contract basis.
On a more price-positive note, the USDA data overnight showed US harvest lagging, with only 7% of the crop gathered last week, taking the total to 69%, behind the typical 74%.
In Texas, the top US cotton producing state, just 46% of the crop has been harvested – 23 points behind the usual pace.
