(Agrimoney) – Grain markets fell on Monday, as data showed a falling speculator net-short in the market, ahead of Tuesday’s US Department of Agriculture February Wasde report.
The monthly Wasde report, which gives US government ideas of world production and demand, can trigger sharp volatility.
And it turns out there is plenty of room for a sell-off in wheat and soybeans.
Bearish bets slashed
The weekly CFTC report, from the US Commodity Futures Trading Commission, showed that speculators cut their bearish position in Chicago corn futures to one-third of those held in mid-January.
A smaller net-short will give hedge funds more room to short the market if Tuesday’s numbers are bearish.
Short positions were trimmed in Chicago wheat as well, and in soybeans, although there the reduction was “a lot less than expected,” Benson Quinn Commodities noted, which meant the news could actually have lent some support.
Argentine rains
But soybeans also had to contend with improving harvest prospects in Argentina, after good weekend rains across the corn and soybean belt.
“Heavy rains will favour central Argentina again today and on Friday, which should further ease dryness,” said Kyle Tapley, of MDA Weather Services.
Further rains are expected in Argentina over the 6-10 day period.
And Mr Tapley saw weather helping Brazilian row crop prospects as well, with dry weather coming to northern Brazil helping the soybean harvest and the safrinha corn planting, while south Brazil gets rains too “favour late growth” for soybeans and corn there.
US soybean exports over the week to last Thursday were reported at 1.17m tonnes.
March soybeans closed down 0.5%, at $8.62 ½ a bushel.
Egyptian concerns
European wheat futures continue their precipitous decline, shrugging off reassurances from Egypt, the world’s top wheat buyer.
Last week the Egyptian state grain buyer cancelled two tenders, one due to a complete absence of sellers, the other due to the high premium being charged by exporters for shipments to the country.
That seller reluctance is due to the perceived risk of cargo rejection, after three shipments were turned away due to ergot contamination, even though levels came in under the levels stipulated in the tender.
A press conference on Sunday, held jointly by supply ministry, which has been issuing the unsuccessful tenders, and the agriculture ministry, which was responsible for rejecting the cargo, attempted to reassure traders that shipments below the 0.05 contamination level would not be rejected.
But Egypt still has a long way to go to reassure sellers.
CHS Hedging said “Egypt’s wheat buying process has been a disaster lately,” although the broker pointed out that so far this season, purchases are only running 7% behind last year at 3.01m tonnes.
Russian cash prices fall
Russian wheat prices also came under pressure over the uncertainty.
Black Sea prices for Russian wheat with 12.5% protein content were at $181 a tonne at the end of last week, down $1 week-on-week, Russian agricultural consultancy IKAR said.
And Russian consultancy SovEcon, saw wheat prices in Black Sea ports down $0.5 at $181 a tonne.
No obstacles intended
Still, with the rouble remaining weak against the dollar, Russian exports are expected to remain strong.
Speaking on Rossiya 24 TV, Russia’s Agriculture Minister Alexander Tkachyov saw exports this season up 3% year-on-year, at 22-23m tonnes.
And separately on Monday, Russia’s first deputy agriculture minister said that Russia was nearing a decision on wheat export duties.
The move will “likely satisfy both producers and exporters”, Yevgeny Gromyko was quoted as saying by the non-government owned news agency Interfax.
“We do not intend to create any obstacles for grain exporters,” Mr Gromyko was quoted as saying.
There has been uncertainty about Russia’s intentions regarding wheat duties, with some speculation that it might be raised to control domestic food price inflation.
‘Flat out depressing’
March wheat in Paris ended down 1.9% at a fresh contract low of E153.25.
This is the lowest level for the front-month contract since September 2015.
US wheat exports in the week to last Thursday were reported at 398,216 tonnes.
“Wheat markets continue to be just flat out depressing,” said CHS Hedging.
“Poor demand, abundant world supplies, no real weather problems in the world and up to this point a strong moisture profile, along with good growing conditions for the new crop in the US, continue to be the weighty issues.”
March Chicago wheat closed down 1.7%, at $4.58 ½ a bushel.
Ukraine lifts corn export hopes
Meanwhile Ukraine has raised its grain export forecast for this season by 1m tonnes to 37m tonnes, Ukraine’s agriculture minister told Reuters, with corn exports seen at 16.7m tonnes, compared to earlier estimates of 16.0m tonnes.
US corn exports over the week to last Thursday were reported at 438,560 tonnes, with a fresh 100,000 tonnes sale to Mexico reported on Monday.
March corn in Chicago closed down 0.9%, at $3.62 ¼ a bushel.
Sugar gains on smaller speculator net-long
Speculators cut their bullish bets in sugar at the fastest pace on record, over the week to last Tuesday, the CFTC data showed.
The 66,823 lot cut in the speculator net-long, to just 51,485 lots, lending support to prices.
And index funds reduced their net-long as well, to below 200,000 lots.
“This is the lowest net long held by Index Funds since January 2012 and reflecting the diminishing appetite for the commodity basket by index traders,” noted Nick Penney, at Sucden Financial.
March raw sugar settled up 1.4%, at 13.45 cents a pound.
Coffee consumption up
The International Coffee Organisation revised up its estimate of 2014 world coffee consumption to 150.2m bags.
March arabica settled down 3.9%, at 115.75 cents a pound.
March robusta coffee settled down 2.9%, at $1,386 a tonne.
But cocoa futures surged as dry weather continued to threaten West African production.
March New York cocoa settled up 3.2%, at $2,870 a tonne.
US cotton sowings will rebound from a 22-year low, the National Cotton Council said, seeing sowings up 6.2% year on year at 9.11m acres.
March cotton settled down 0.5%, at 59.60 cents a pound.
