(AgriMoney) – Corn, at least, showed some backbone.
For soybean and wheat futures, Friday opened in line with the prevailing trend for the week in Chicago, downwards.
Soybeans, on a spot contract basis, fell below $14 a bushel for the first time in nearly five months, before US drought took hold.
But corn managed to hold out somewhat against the negative mood which remained entrenched in many markets on Friday, with the notable exception of Tokyo shares, which jumped 2.1%, boosted by expectations that December election will herald further monetary policy easing.
Other Asian share markets struggled, and London stocks eased too in opening deals, while the safe haven of the dollar edged 0.1% higher.
‘The best fundamentals’
Corn’s gains were not speculator.
But they reflected the idea that the grain was the best of a weak bunch in Chicago, boosted by slow farmer selling.
“Corn is still viewed as possessing the best fundamentals, confirmed by a four day decline of $0.15 a bushel versus over $0.50 in soybeans and $0.40 cents in wheat,” Richard Feltes at RJ O’Brien said.
“The firm cash corn market, on scant farm sales, is viewed as a key supportive factor,” he added while cautioning that the longer futures prove unable “to post a strong rally, the more producers after January 1 will be prone to sell small rallies”.
Demand considerations
Not that the grain is invulnerable, reflected in the minimal extent of gains, up 0.25 cents at $7.21 ½ a bushel for December delivery as of 09:00 UK time (03:00 Chicago time).
Ethanol demand remains adequate to meet US Department of Agriculture estimates, just, but plants are running in the red, placing a question mark over their continued willingness to maintain current production rates.
More on livestock demand will be known later, when the USDA unveils monthly cattle on feed data.
But the expectations are not so robust, with cattle placements on feedlots expended down 12.7% year on year, with the poultry industry too cutting back, to judge by a 2% drop, year on year, in eggs set in incubators in the latest week.
“Food analysts caution than shrinking consumer incomes portends a steady shift away from higher priced meats,” Mr Feltes said.
“Historically, small crops correlate with lower-than-expected corn feed use,” he said, warning of a “risk” that a key December 1 stocks report will show corn inventories “higher than expected”.
‘Tame rallies’
As for export demand, sure, there is still talk of Mexico on the prowl for US supplies, with Guatemala and Malaysia looking for grain for January shipment.
However, with low Mississippi water levels raising transport costs within the US, reflected in higher Gulf port basis, “corn premiums are widening against South American offers”, Brian Henry at Benson Quinn Commodities said.
“Although South American offers are said to be harder to come by, South Korea managed to secure four cargos this week of South American origin.
“Until the market sees increased world demand for US corn from non-traditional customer’s rallies in the futures will likely be tame.”
More on exports will be known with weekly export sales data later, expecting to come in at 200,000-400,000 tonnes, at least matching the previous week’s 209,000 tonnes.
‘Pressured prices, in general’
For soybeans, an improvement in export sales is expected from the previous week’s, meagre, 191,900 tonnes, to 250,000-550,000 tonnes.
However, ideas of buyers clamouring for the oilseed are taking a knock from better Brazilian weather for sowings, boosting ideas of a strong, and timely, crop.
“Till the South American crops come into the world market by end February/early March next year, the soybean market will likely [see] pressured prices, in general, with variations brought about by export figures and potential weather news coming from Brazil and Argentina,” Lynette Tan at Phillip Futures said.
“Without a weather concern for South American production at the current time, the market will continue to drift lower,” Benson Quinn Commodities said, if noting some potential support from a “lack of producer selling”.
‘Particularly vulnerable’
Furthermore, China’s CNGOIC think talk unveiled the cancellation by Chinese buyers of 600,000 tonnes of orders of US soybeans, reviving fears over demand from the top importing country which had been quelled by a 120,000-tonne export sales deal unveiled on Wednesday.
Nor in the oilseed’s favour is the technical picture.
“The soybean chart looks particularly vulnerable,” Richard Feltes said.
And it was hardly improved by the January lot’s 0.6% fall to $13.94 ¾ a bushel, after reaching $13.93 earlier, the lowest since mid-June for a spot contract, and indeed the first drop below $14.00 a bushel.
Soybeans have not lost some 22% from an early-September record high.
Bottom of the range
Wheat is expected to see a pick-up in US export sales too in Friday’s USDA report, reaching 250,000-450,000 tonnes, up from 220,900 tonnes last time.
However, investors were not holding out too much hope of a bumper figure, selling Chicago’s December lot down 0.4% to $8.42 ½ a bushel.
But then, the US has hardly performed too well in a round of recent tenders from Middle East and North African countries, which have gone to Black Sea and European origin, as might be expected, but eschewing ideas that American wheat yet is competitive outside its normal customer base.
One positive for the grain is that it has not, yet, punched below a four-month trading range, with some investors betting on another bounce from the bottom.
But the August low of $8.38 ¼ a bushel is not far away, a return below which would wreak chart damage.
Profot-taking
The negative feel spread to Kuala Lumpur too, where palm oil returned to the back foot, down 1.2% to 2,431 ringgit a tonne.
Cargo surveyor Intertek put the dampeners on ideas of reviving Malaysian exports by pegging them down 0.1% in the first half of the month.
And in New York, cotton for December rediscovered losing ways, shedding 0.2% to 73.85 cents a pound, amid profit taking following a 3.3% rally in the last session.
That jump was fuelled by ideas of a buying spree by mills which has prompted ideas of strong US export sales data for the fibre later.
