(Agrimoney) – Grains and oilseeds may have started firm, but they didn’t end that way.
The drop in palm oil, which closed at a four-month low in Kuala Lumpur, down 0.5% at 2,523 ringgit a tonne, turned out to be a harbinger for what was to come in other markets, including in fellow oilseed soybeans.
Having been something of a comfort for bulls in recent sessions, with their firmness contrasting with weakness in grains, soybeans for July ended down 1.0% at $14.69 ¾ a bushel.
‘Brazilian sales very active’
The decline was in part technically motivated, with the contract failing in an attempt to hold above $15.00 a bushel, getting 1 cent above that level only to slip back rather than uncover buy stops and gain fresh momentum.
“July soybeans tested the $15.00-a-bushl resistance early in the day’s trade, but has backed off of that level quickly,” Darrell Holaday at Country Futures noted.
And there was some fundamental cause for selling too, with South American growers having their selling shoes on.
Broker Fintec flagged that that “Brazilian farmers’ bean sales were very active throughout the day, with estimates of 700,000–1.0m+ tonnes sold”.
Farmers’ concerns
After all, Brazilian farmers may be on for a bumper crop next year, with Instituto Mato-Grossense de Economia Agropecuaria (Imea) analysts forecasting a 27.3m-tonne crop in the state, the country’s top soy producer, in 2014-15, up from 26.04m tonnes this season.
And there is increasing concern in Brazil that the record US crop forecast this year will depress prices.
“Price seasonality in Brazil indicates that, traditionally, sales in the second semester tend to occur at higher prices compared to those observed in the first semester,” research institute Cepea said.
“However, this year, Brazilian players are focused on the possible record production in the US in the 2014-15 season, which might press down quotes in the second semester.”
Furthermore, there is some concern over a policy change in China soybean subsidy policy which might involve measures making imports less appealing.
This offset the boost of a purchase by China of 111,000 tonnes of, optional origin, soybeans for 2014-15.
‘Good planting window’
Sticking, with new crop soybeans, even a 0.5% drop to $12.32 ¼ a bushel in Chicago’s November lot was still not enough to erode the contract’s unusually strong premium over December corn.
While the November lot fell dramatically from an early high of $12.57 ¼ a bushel, the contract still managed to fare better than December corn, which closed down 0.8% at $4.72 a bushel, its weakest close since February.
That took the soybean:corn ratio to a fresh high of 2.61:1.
Although data overnight highlighted that sowings in the northern US states are well behind, even if those in the Corn Belt are running smoothly, there are ideas of an acceleration this week.
“The northern Corn Belt remains the furthest behind on corn planting, but weather patterns looks to provide a good planting window in the days ahead,” CHS Hedging said.
Yield estimate
Meanwhile, the Corn Belt itself rains should improve conditions for crops already in the ground.
Sure, influential crop scout Michael Cordonnier may have trimmed his estimate for the US corn yield to 162 bushels per acre, from his previous estimate of 163-165 bushels per acre, but that is still a big number.
And he is using a bigger estimate for sowing than the USDA, underpinning ideas of strong supplies ahead.
Corn for July was dragged lower too, ending down 0.8% at $4.73 ½ a bushel.
‘Not yet been sufficient rain’
And that was little help to fellow grain wheat, which had gained some support earlier on from US Department of Agriculture data overnight confirming a further deterioration in US winter wheat, despite some rains for the drought-hit southern Plains.
“The latest rainfall has not had the hoped-for positive impact on winter wheat plant quality in the US,” Commerzbank said.
“It would appear that there has not yet been sufficient rain to noticeably improve the yield prospects.”
Sure more rain is on its way, but will it prove too late to revive yield potential?
‘Remains pretty dry’
Dryness in Russia continues to creep up the agenda too, with MDA noting that “dryness continues to build across northern Central Region, north eastern North Caucasus and Volga Valley.
“Little improvement is expected in the drier areas over the next 10 days, and moisture shortages and crop stress will build further,” the weather service said.
Agritel said that southern Russia “remains pretty dry”.
Earlier, Richard Feltes at RJ O’Brien flagged an “unwillingness to retreat further” in wheat markets “with developing former Soviet Union dryness”.
And a dearth of rain in eastern Australia is getting back on the radar too.
Chicago vs Paris
Still, values did fall, hurt by corn’s decline but also by news from an Iraq tender showing US supplies uncompetitive on export markets.
The cheapest US wheat was offered at $378.95 a tonne, well above Russian wheat at $324.55 a tonne, Canadian at $344.75 a tonne and Australian and $371 a tonne.
As for weather delays to spring wheat sowings in northern areas, “forecasters are optimistic that drier and warmer weather in the northern Plains and Canadian Prairies should aid spring wheat planting”, CHS said.
Chicago wheat for July closed down 0.7% at $6.70 ½ a bushel, although Kansas City hard red winter wheat, the type under threat from US southern Plains drought, did outperform in losing only 0.75 cents to $7.68 a bushel for July.
The late decline was at odds with a 0.8% increase to E199.75 a tonne in the November contract in Paris, which earlier crept back above E200 a tonne, amid talk of producer selling drying up – potentially as farmers await further news over Russian dryness, which has a history of sending prices soaring at this time of year.
‘Ivorian auction prices higher’
Among soft commodities, cocoa extended its gains to a fourth session, ending up 1.3% at $2,968 a tonne in New York for July delivery –closing back above its 50-day and 75-day moving averages in the process.
Similarly, London cocoa for July ended up 1.0% at £1,857 a tonne, squeaking back over its 50-day and 75-day moving averages.
Besides technical improvement, stronger values in Ivory Coast, the top producing country, are seen playing a role.
“Ivorian auction prices are higher yet again. They are now back above the 1,500 CFA level, and this is helping to support the market,” said Sterling Smith at Citigroup.
