Grain futures rise on bargain buying

(Agrimoney) – The grains complex moved higher late in Tuesday’s session in a flurry of bargain buying and short covering, as some clouds loomed for international supply.

US Department of Agriculture data showed the US corn crop was 59% complete as of Sunday, compared with 42% last week.

This is ahead of the five-year average of 54%.

And the US soybean harvest was 77% complete, up from 62% last week, ahead of a five-year average of 68% at this time of year.

Joe Lardy, of CHS hedging said the figures were “in line with expectations.

Ukraine drought

But there were some worries on Ukraine’s corn prospects, thanks to spell of dry weather in the region.

Ukraine’s agriculture ministry has estimated corn production at 22.9m tonnes, compared to 28.5m tonnes in 2014, with many expecting a lower number.

And MHP on Tuesday warned of the effects of dry weather on their Ukraine prospects, saying that the harvest on their 127,000 hectare corn sowings were coming in at just 7.3 tonnes per hectare, compared to 9.3 tonnes per hectare last year.

The group also said its oilseed yields were likely to be below earlier estimates.

Argentine uncertainty

Influential analyst Dr Michael Cordonnier of Soybean and Corn Advisor left his estimate for 2015-16 Argentine corn production unchanged at 21.6m tonnes but warned that his estimate might be too high depending on the outcome of the pending presidential election.

“If the opposition wins and they carry through on their promise of eliminating the export taxes and stop interfering in the export market, it could be a “game changer” for Argentine agriculture,” he said.

“It would instantly raise prices for corn and soybeans resulting in higher profit margins and renewed optimism for farmers to increase their production going forward.”

“They would probably start planting more corn in order to get back into a more sustainable crop rotation.”

Late sowings

Farmers in Argentina’s main corn producing regions can plant through November, giving them time to adjust their planting intentions after the October 25 election, while southern regions can plant through till late December.

Dr Cordonnier left his 2015-16 Brazilian corn production forecast at 81.2m tonnes, with a neutral to slightly lower bias.

This is slightly ahead of USDA estimates of 80m tonnes.

December corn closed up 1.1% at $3.76 ¾ a bushel.

Brazilian planting

And prospects for Brazilian soybeans also look strong.

A Brazilian official told the Food Outlook Conference on Tuesday that the government was expecting a 1.7% rise in domestic soybean sowings for 2015-16, to 32.6m hectares.

This is to the lower end of estimates from the official crop forecasting agency, but the official said that early on-the-ground reports pointed to a higher figure, and the numbers could see an upward revision.

Soybean sales

There was another flash soybean sale to China, this time of 132,000 tonnes for delivery in the 2015-16 season.

But Darrell Holaday of Country Futures downplayed the export demand, noting that “shipment are just slightly ahead of last year and 80% of those shipments have gone to China”.

“The problem is that Chinese purchases are well behind a year ago…Chinese commitments are the lowest in six years.”

November soybeans closed up 0.9% at $5.23 ¾ a bushel.

And Mr Holaday noted weak exports for other grains.

“Corn and wheat export business continues to be very slow,” he said.

Drought cuts acreage

But wheat got support from the same dry Ukrainian weather that has hit corn.

The country’s agriculture minister said on Tuesday that winter wheat acreage, which is currently being sown for next season, could fall by more than 10%, thanks to the recent drought.

Ukrainian farmers had planned to sow 6.2m hectares of winter wheat for the 2016 harvest, just shy of last season’s plantings.

UK records

But UK is headed for record yields this season, even though the official government figures came in slightly behind those forecast on by the main farmers union.

November wheat in London closed down 0.4% at £112.5 a tonne.

But buoyed by late session bargain buying and a strong grain complex, Chicago wheat closed up 1.2% at $4.91 ¼ a bushel.

Indian supplies loom

Sugar prices fell, as the prospect that India may start to export its huge inventories loomed.

The Indian government had set an export target of 4m tonnes of raw sugar, in order to clear a massive backlog at its mill.

Indian sugar price support has made exports uncompetitive, and there has been scepticism if the mandate would be fulfilled, with no clear penalties and no renewal of export subsidies

But the recent rise in prices could open up arbitrage opportunities, allowing exporters to push their supplies into an already glutted global market place.

“Global market conditions are now better than what we had anticipated because prices have moved up, so now mills will be able to meet their target of 4m tonnes this year,” Abinash Verma director general of the Indian Sugar Mills Association said.

The March raw sugar contract in New York closed down 1.4%, at 14.06 cents a pound.

Coffee diverges

Much needed rains in coffee growing areas of Brazil weighed onrobusta, but arabica kept its head above water.

Kyle Tapley, of MDA weather services, said “much wetter weather” was on its way to central and northern Brazil next week, including the key coffee growing state of Minais Gerais.

Conditions were seen “improving dramatically” over the next two weeks.

November robusta finished down 1.6% at $1,557 a tonne.

But prices edged finished up in Arabica, of which Brazil is the world’s largest exporter, after a three day slide.

New York December arabica finished up 0.7%, at 124.74 cents a pound.