Morning markets: tour data send soybean prices to new high

(AgriMoney) – For a second week running, the ProFarmer tour kicked prices off to a strong start, although this time it was soybeans which led the rally.

A week ago it was the tour’s first observations which got prices moving, as damage to corn crops in the likes of Ohio and South Dakota came in far bigger than investors had expected.

This time, it was the tour results, released late on Friday, which spurred gains. The estimate of 120.25 bushels per acre for the US corn yield, down from a US Department of Agriculture number of 123.4 bushels per acre.

The harvest was put at 10.478bn bushels, some 500m bushels below the USDA figure.

‘Should offer support’

However, the bigger surprise was in soybeans, for which the tour had released pod counts as it went but not a running yield commentary.

The ProFarmer estimate of 34.8 bushels per acre compared with a USDA figure revised to 36.1 bushels per acre three weeks ago, but which many investors have been regarding as something of a low water mark.

Rains of late seen have been seen as offering hope for a recovery in crops from damage from the worst US drought since 1956.

“The market has been trading a soybean yield between 36-38 bushels per acre,” Kim Rugel at Benson Quinn Commodities said, flagging also the ProFarmer estimate of a 2.60bn-bushel US soybean crop, down 92m bushels on the USDA forecast.

“If the ProFarmer production estimate is realised and demand is unchanged from USDA forecast, US soybean carryout falls to near zero with beginning carry-in expected to drop 10m-20m due to higher crush and exports in July and August.

“This lower yield estimated should offer support” to prices at the start of the week.

Market tailwinds

But by how much?

Other commodity markets offered a bit of extra support, with the likes of Brent crude and Shanghai copper, higher after, in China, the state-run People’s Daily newspaper urged action to support the economy.

Economic hopes for China, the top buyer of many commodities, including cotton and soybeans, has a big impact on raw material markets.

Furthermore, there are hopes for further action in the US too, after Ben Bernanke, the chairman of the Federal Reserve, said in a letter to a Congressional panel that the US central bank has scope for additional monetary stimulus.

‘What price does it take?’

As for the chart signals, these suggest for Chicago’s November soybean contract “next upside technical objectives of $17.65, $18.80 and $20 a bushel”, Rugel said.

At broker Market 1, Mike Mawdsley said that if November soybeans set a new closing high, “a run to $18.62 a bushel is possible”.

“What price does it take to ration? The market doesn’t seem to have found it yet.”

In fact, the lot did set a new high, of $17.60 ½ a bushel, in early deals before losing some ground to stand at $17.50 ½ a bushel as of 10:15 UK time (04:15 Chicago time), a gain of 1.1% on the day.

Speculators’ net longs soar

Such gains were ahead of corn, which rebounded 0.6% to $8.13 a bushel for December delivery.

As an extra reason to be a little more cautious, on the grain, regulatory data late on Friday showed that speculators raised their net long position in Chicago corn to a 17-month high of 280,642 contracts.

“The report showed the fund adding nearly twice as much length as the previous week, along with it nearing the physiological 300,000 level in terms of length,” Benson Quinn Commodities said.

A large speculative net long position sparks ideas that they may less willing to further increase their exposure to price gains by buying crop.

Egyptian tender results

Wheat lagged further behind, adding 0.3% to $8.90 ¾ a bushel in Chicago for December delivery.

But then, not only are US, and world, supplies of the grain relatively plentiful, but US values received reminder at the weekend of their uncompetitiveness, which may even have made UK supplies workable into east coast ports.

Egypt, the largest wheat importer, at the weekend purchased a further 180,000 tonnes of the grain from the Black Sea region, from Russia and Romania this time.

US soft red winter wheat offered was, at about $362 a tonne, more than $40 a tonne more expensive than Russian even before factoring in shipping costs.

Even French wheat, at just under $337 a tonne, was substantially cheaper.

El Nino fears

Elsewhere, palm oilrose too in Kuala Lumpur, up 1.2% at 3,106 ringgit a tonne, getting support from soybeans, the source of rival vegetable oil soyoil, but also output fears in the key South East Asian production regions.

Ker Chung Yan at Phillip Futures noted “growing concerns about a developing El Nino weather event that is usually associated with warmer temperatures and scant rainfall in Southeast Asia.

“Drought-like weather in major palm oil producers Indonesia and Malaysia, which together account for 90% of global production, could damage crops and hurt yields, tightening global vegoil supplies.”