PM markets: grain futures grind lower in a glutted market

(Agrimoney) – Grain markets continued to grind lower, with corn and wheat reaching multi-year lows, in a market that is finding little reason to rally.

US product is finding export demand, but that is doing little to support markets.

The US Department of Agriculture reported the sale of 187,000 tonnes of soybeans to China, the sale of 275,000 tonnes of corn to Mexico, and 138,000 tonnes of hard red winter wheat to an unknown destination.

But the market is still much more concerned by the heavy US stocks, which are only going to get larger as the year goes on.

“The grain and soybean markets continue to adjust to large production and big carryouts,” said Kim Rugel, at Benson Quinn Commodities.

Shrug at Chinese purchases

On Tuesday a Chinese delegation announced 4.0m tonnes of soybean purchases from US farmers, in a ceremonial announcement.

“We felt the 4m tonne number was an expected number, but we are hearing rumblings of disappointment within the industry in that many anticipated a larger number,” said Darrell Holaday, at Country Futures.

But Mr Holaday downplayed the importance of the announcement, saying “the whole think is a joke anyway as they have already bought the soybeans”.

Bumper crop

More important are the very strong soybean prospects in the US, with no weather worries seen before the crop is harvested.

“Bean yield seems to be getting bigger each day with weather supporting potential for record crop and record yield,” said Ms Rugel.

November soybean futures closed down 1.0%, at $9.43 a bushel, a four-and-a-half month low for the front month contract.

Glutted market

Wheat futures continue to find new lows, in a glutted global market.

“It’s safe to say wheat is the most shunned commodity on the planet right now and more than likely close to a bottom,” said Tregg Cronin, or Halo Commodities.

There was more pressure on wheat as exporter’s shunned a tender by Egypt, in the wake of a decision to reinstate a zero-tolerance policy on ergot contamination by the world’s top buyer.

Only one cargo of wheat was offered, as traders stayed away out of fear that cargoes might be rejected, due to trace contamination by the fungus.

“It would appear that until Egypt revises their ergot policy, they won’t be receiving offers from most trading companies and for good reason,” said Tregg Cronin, at Halo Commodities.

December Chicago wheat futures closed down $3.88 ¼ a bushel, a ten-year low for the second-month contract.

December corn futures finished down 0.2%, at 3.15 ½ a bushel, a seven-year low for the second month contract.

No bullish news for sugar

The bearish mood in grains carried over to cotton which saw end-of-month liquidation.

December cotton settled down 11% at 65.58 cents a pound, an eight-week-low.

And raw sugar futures fell, in a market starved of bullish news with no current shortage of supply

Nick Penney, at Sucden Financial, noted “the combination of a stronger dollar, ample supply nearby in sugar, a top heavy speculative net-long position in both US and London markets which needs to be rolled and no evidence of a ready end user willing to take up the slack”.

October raw sugar futures settled down 2.2%, at 20.06 cents a pound.

Cocoa deficit support prices

Cocoa futures edged up, as the International Cocoa Organization raised its idea of the cocoa deficit, the extent to which supply is outstripping demand.

The ICCO saw the 2015-16 global cocoa deficit at 212,000 tonnes, compared to a previous forecast of 180,000 tonnes.

December New York cocoa settled up 0.3%, at $2,898 a tonne.