(Agrimoney) – There were some factors that would imply pressure on agricultural commodity markets on Tuesday, that favoured day of the week for price turnarounds in Chicago.
There was some poor data on Chinese manufacturing, with HSBC/Markit’s “flash” PMI survey coming in at 49.6 for this month, up from 49.4 in May but below the level of 50.0 that separates expansion from contraction.
Markit economist Annabel Fiddes said that “manufacturers continued to cut their staff numbers, with the latest reduction the sharpest in over six years.
“This suggests that companies have relatively muted growth expectations as demand conditions both at home and abroad remain relatively subdued.”
With China the top buyer of many commodities, including ags such as cotton, soybeans and rubber, poor economic news on the country was hardly a positive for crop values.
Crop setbacks
As an extra negative, the dollar got off to a strong start, gaining 0.5% against a basket of currencies, so making dollar-denominated exports, such as many ags, that much less competitive.
Still, grains managed headway nonetheless, helped by US Department of Agriculture data out overnight which underlined crop setbacks thanks to the unusually wet weather of late, including last week when Tropical Storm Bill brought inundations to some regions.
Data on winter wheat, for instance, showed a harvest which was running late, at 19% complete, behind an average of 31%, and the 21% that investors had expected.
“Farmers have had to delay harvesting in both hard and soft red winter wheat regions because of heavy rainfall and the resultant boggy fields,” said Tobin Gorey at Commonwealth Bank of Australia.
And it showed a crop rated 41% in “good” or “excellent” condition, down 2 points week on week, and implying weakened yield prospects.
‘Going backward fast’
Ratings for soft red winter wheat states in particular “showed a crop that is going backward fast”, said Brian Henry at Benson Quinn Commodities, terming deteriorating in hard red winter wheat areas “manageable”.
The data were reflected in a relatively strong performance by Chicago soft red winter wheat for July, which gained 1.3% to $5.07 ¾ a bushel for July delivery as of 07:40 Uk time (01:40 Chicago time), rising back above its 100-day moving average.
The better-traded September gained 1.3% to $5.12 ½ a bushel, just falling short of regaining its 100-day line, after retaking its 40-day and 50-day moving averages in the last session.
Kansas City hard red winter wheat for September, meanwhile, gained 1.1% to $5.26 ½ a bushel, remaining below most of its main moving averages.
‘Threat to crops is growing’
Minneapolis spring wheat made ground too, despite a 1 point rise to 71% in the proportion of US crop rated good or excellent.
Still, there are still concerns that conditions in Canada, a huge producer of spring wheat, are unduly dry, contrary to the wetness further south.
Over the weekend, the “Canadian Prairies received light rains considered disappointing”, said CHS Hedging.
“Weather forecasters expect Canada’s dry Prairies to remain that way and so the threat to crops is growing,” CBA’s Tobin Gorey said.
Still, canola, also threatened by Canadian dryness, eased back 0.3% to Can$514.00 a tonne, feeling a touch of vertigo after reaching Can$518.30 a tonne earlier, the highest for a nearest-but-one contract since September 2013.
Planting setbacks
Sticking with oilseeds, soybeans for July gained 0.4% to $9.93 ½ a bushel, while the new crop November contract added 0.7% to $9.65 ½ a bushel.
The USDA data showed setbacks here too thanks to wetness, with only 3% of the US crop planted in the week to Sunday, taking the total finished to 90%, behind the average of 95% and the 92% forecast.
The 10% not sown is equivalent to approaching 9m acres.
“Planted acres were outside most of the expected ranges on the low end,” Benson Quinn Commodities said.
Crop condition decreased 2 points too, to 65% good or excellent, in line with forecasts, although well below the 72% a year before.
Yield question
At Futures International, Terry Reilly said that, based on the data, he pegged the US soybean yield this year at 44.0 bushels per acre, 2.0 bushels per acre below the USDA estimate.
“The question remains will USDA adjust their soybean yield in its July Wasde report,” Mr Reilly said.
“We think there is a 50:50 chance.”
Still, gains in soybeans were limited by headway the contracts have already made.
Technically, key to the future progress of the price rally looks breaching 200-day moving averages, at $9.71 a bushel for the November lot, and $9.66 ½ a bushel for the July contract.
The contracts have not closed above their 200-day lines for a year.
Corn gains
This time corn outperformed its fellow row crop, gaining 1.0% to $3.63 ¾ a bushel for July, just above its 50-day moving average, while the September lot was 1.1% higher at $3.68 ¼ a bushel.
Corn was rated 71% good or excellent, down 2 points week on week and 1 point below market expectations.
OK, on the negative side, CHS Hedging noted that “Brazil is considering raising the tariff on ethanol imports coming from the US” to 11.75%, implying less import demand for of the biofuel, made in the US mainly from corn.
The US shipped 357m litres of ethanol to Brazil in the first five months of 2015, CHS said.
Still, US exports of corn itself have proved decent, with data on Monday showing export inspections of 1.11m tonnes last week, above the 1.0m tonnes that analysts had expected at best, and just ahead of the rate needed to meet USDA estimates for shipments for the whole of 2014-15.
And there was the pull to prices from fellow grain wheat too.
Acreage shortfall?
Among soft commodities, cotton for December eased 0.4% to 64.53 cents a pound in New York.
The USDA crop progress data showed US cotton rated 55% good or excellent overall, the same as the previous week, but with a shift towards the proportion rated excellent.
Still, sowings, at 94% complete, were lagging, with plantings usually finished by now.
“With all crop insurance planting deadlines having been passed,” the shortfall in sowings, “gives us encouragement in our estimate of US planted area near 9.0m-9.1m acres,” said Louis Rose at the Rose Report.
The USDA has pegged seedings at 9.55m acres.
