Morning markets: wheat prices sapped by autumn seeding hopes

(AgriMoney) – Wheat prices have discovered a bit of a penchant for downwards movement.

Of the last nine sessions in Chicago, they have fallen in eight, albeit with the single upward move being a sizeable one.

On Wednesday, the grain set course for further losses, as investors reacted in part to the improved rainfall in parts of the US as farmers gear up for planting the first of their 2013 crops.

Furthermore, external markets continued to be subdued by poor manufacturing data on Tuesday, notably from the US.

Shares fell in Asia, while the safe haven of the dollaradded 0.3%, reducing the appeal of dollar-denominated assets, such as many crops, as exports.

‘Wide swathe of rain’

“Drought-relieving rainfall in the US grains belt helped to improve prospects of the US winter wheat seedings,” Lynette Tan at Phillip Futures said.

At Benson Quinn Commodities, Brian Henry said: “Remnants of Isaac offered soft red winter producers in the eastern corn belt some hope as a wide swathe of rain helped soil moisture levels for the time being.”

There is more precipitation to come too.

“In the short-term, weather models have increased the showers and thunderstorms over the next two- to-three days over the western Corn Belt,” WxRisk.com’s David Tolleris said.

World trend

And moist seed beds appear something of a global trend.

The three-month global drought monitor, run by University College London, “indicates that most fall planting areas in the northern hemisphere are not currently in one of the drought classification,” Mark Welch at Texas A&M University said.

Agrimoney.com can vouch that moisture is not in short supply in the UK, after the wettest summer in 100 years.

OK, parts of Russia still show up on the dry side, and India too, and within the European Union, Spain still. But farmers in most northern hemisphere wheat areas look placed for large sowings, if they desire, to cash in on elevated prices.

‘Yields are in jeopardy’

That is not to say the grain is without its weather worries.

“The major wheat growing areas with the greatest moisture concerns are in the crop-maturing southern hemisphere,” Dr Welch said, Australia being one country investors are worried about,

And Gail Martell at Martell Crop Projections noted that too much rain is an issue for parts of Canada still undertaking harvest.

“Crop quality and yields are in jeopardy from extremely wet growing conditions in northern Saskatchewan,” where June-to-August rainfall came in at 150-200% of normal, Ms Martell said.

“Numerous reports of flooding and disease have been issued as grain swathing began the last week of August.”

‘Stiff competition’

However, as an extra reason to sell, it is not as if investors are overly impressed with demand for US wheat, after Black Sea states proved their competitiveness at an Egyptian tender at the weekend.

“There is lots of world business being done, but the US is not getting much of it,” Mike Mawdsley at broker Market 1 said.

And the likes of Russia and Ukraine are defying expectations of giving up on shipments too, following a poor harvest.

“Despite constant talk of the Black Sea leaving the export market, they continue to offer very competitive prices with a distinct freight advantage,” Benson Quinn’s Brian Henry said.

In the US, “the spot market shows little hope at this time as mills are getting all the offers they need,” he added.

‘Noose around corn’s neck’

Furthermore, technicals were hardly positive for wheat either.

Chicago’s December lot, having surrendered 10- and 20-day moving averages, is coming close to its 50-day too, at some $8.78 a bushel, below which it has not finished since mid-June.

The contract stood at $8.81 ¾ a bushel as of 09:00 UK time (03:00 Chicago time), a loss of 0.8%.

And that was hardly positive for corn either. Wheat, as Mr Mawdsley noted, has been “a noose around corn’s neck”.

December corn, which has closed lower on seven of the last nine trading days, was 0.7% down at $7.99 ¼ a bushel.

‘Intense rainfall’

Corn had its own reasons for weakness too, such as ample moisture in Argentina, where “field moisture has been completely restored following a serious winter drought, suggesting corn plantings may increase this season,” Ms Martell said.

“Rainfall was so intense in August it completely wiped out a five-inch moisture deficit in Junin, Buenos Aires, the major corn province, even creating a moisture surplus.”

Furthermore, while US harvest yields are confirming poor expectations, demand is not impressing either, with weekly US corn exports, as measured by cargo inspections, coming in at 6.37m bushels, half trade expectations, data on Tuesday showed.

Data scheduled for Wednesday include FCStone crop estimates, following on from the results of an Allendale survey which showed a corn crop of 10.33bn bushels, at a yield of 118.2 bushels per acre, and soybean crop of 2.60bn bushels, on yield of 34.9 bushels per acre.

‘Optimistic’ reports

Corn’s drop left soybeansas bulls’ great hope in Chicago. But these weakened too, down 0.5% at $17.59 ¾ a bushel for November delivery.

And there are, after all, still some hopes around for the US crop after late rains, particularly for states such as the Dakotas and Minnesota, where some harvest activity has begun, two weeks ahead of normal.

“Northern harvest activity is still in preliminary stages and yield reports vary, but are optimistic for a good northern crop,” Benson Quinn Commodities noted.

The weakness in soybean prices spread through the oilseeds complex to Kuala Lumpur palm oiltoo, which dropped 1.3% to 3,018 ringgit a tonne for the benchmark November lot.

The contract felt pressure too from expectations that forthcoming data on Malaysian palm oil which show stocks remaining above 2m tonnes last month.