(Agrimoney) – Corn and wheat rallied as traders squared positions ahead of Friday’s monthly Wasde report from the US Department of Agriculture, which is expected to show cuts in European production prospects.
But soybean futures turned lower, with no fresh demand news to help markets overlook the size of the US crop.
Energy markets turned bearish later in the session, thanks to some bigger than expected US stocks numbers.
Brent crude oil futures fell by some 3%, after the US Energy Information Administration reported that US crude inventories rose by 1.1m barrels in the week ended August 5, where analysts expected a 1.0 million-barrel fall.
Brent crude futures were down 2.1%, at $44.03 a barrel, as Chicago markets closed.
Wetter Midwest
The unthreatening weather outlook for US soybeans is weighing on prices.
“Weather models continue to get wetter for the next five days and through the rest of August,” said Darrell Holaday, at Country Futures.
“Weather in the next five days may be more important to the soybean complex than Friday’s USDA numbers.”
Mr Holaday said that if rain in the Midwest disappoint “then the soybean complex is going to rally”.
“If it meets the expectations of the models, then it is going lower,” he said. “I feel this is true no matter what USDA says.”
No new export sales
And Mr Holaday said that a lack of fresh export sales hit soybeans.
The USDA has announced new soybean export sales at the start of the previous ten sessions, supporting prices.
The break in this streak was “a psychological negative,” Mr Holaday said.
Room to make up
Paul Georgy, at Allendale, pointed out that “US soybean sales appear to be very strong but we need to be in order to meet USDA projections [for 2016-17]”.
“Only 10.95m tonnes of soybeans had been booked which is 402m bushels as of July 28.”
“When adding in recent announcements it could bring the total sales for 2016-17 to 487m bushel,” he said, noting that the USDA’s projects is 1.92bn bushels of exports for the full marketing year.
Richard Feltes, at RJ O’Brien, said it was “difficult to assess whether market is focused more on expanding new crop supply or brisk new crop demand”.
“We should know more after the August crop report,” he said. “Frantic US sales pace may slow if importers get confirmation of another record US soy yield.”
November soybean futures finished down 0.6%, at $9.82 ¼ a bushel.
Wasde support for short wheat market
But the Wasde is providing a touch of support for US wheat markets, with a big downgrade to European prospects expected due to the heavy rains in France this summer.
True, the rain damage is old news by now, but hedge funds are massively short in wheat, so pre-report profit taking will prove bullish for wheat futures, particularly as the industry reports the stirring of export demand.
September wheat futures rose 0.8%, to finish at $4.21 ¾ a bushel.
Marking time
Corn markets proved more subdued, despite the USDA announcing the sale of 143,650 tonnes of US corn to Mexico for shipment in the next marketing year.
“The order flow seems content to mark time in front of the USDA report on Friday,” said CHS Hedging.
US ethanol output was reported at 1.02m barrels a day, up 14,000 barrels a day from last week.
But stocks were down by 143,000 barrels, to 20.46m barrels, reflecting steady demand.
US ethanol was down 0.5%, $1.408 a gallon, under pressure from the crude oil slump.
December corn futures finished up 0.2%, at $3.33 a tonne.
Sharp technical sell-off
Sugar futures turned rapidly lower, after trading over the previous two session’s failed to break through the near-four year highs put in at the start of July, bouncing off some technical resistance at the 21 cent a pound level.
Jack Scoville, at Price Futures Group, reported “speculative selling,” in the previous session, and the selling only accelerated on Wednesday, as the front month contract broke back through the 20 cents a pound level.
October raw sugar in New York settled down 3.7%, at 19.64 a pound.
October white sugar settled down 3.4%, at $530.50 a tonne.
Arabica slumps, but robusta doesn’t follow
Arabica coffee futures turned sharply lower as well, with the September contract settling at 138.65 cents a pound, down 1.6% on the day.
But September robusta futures saw smaller losses, as I & M Smith noted that farmers in Vietnam, the world’s top robusta grower, are “continuing to show price resistance and are looking to carry good volumes of coffee stocks into the new crop”.
The trader suggested that “with forecasts for a marginally smaller new Vietnam robusta coffee crop due to come to the fore over the last quarter of this year, there is good reason to hold onto stocks and feed the market in an orderly and relatively good value manner”.
“This stance that is being taken within Vietnam can thus for the foreseeable future, provide something of a supportive factor for the fortunes of the related London market.”
