(Agrimoney) – Tuesdays, by repute, bring reversals to Chicago’s grain market.
And this one, in early deals, lived up to the Turnaround Tuesday tag – helped by a stronger dollar.
The greenback jumped 0.9% against a basket of currencies, and in particular against the euro, in which confidence has been dented by ideas that the European Central Bank may expand its bond purchasing programme.
Russia vs US
A stronger dollar makes dollar-denominated assets, including many ags, that much less affordable to buyers in other currencies.
And it was not as if some US-traded grains were looking that competitive anyway, after their rises over the past few sessions.
Terry Reilly at Chicago-based Futures International noted that Russia, now free of its wheat export tax, sold 12.5% milling wheat cargo to Oman “at $210 a tonne or less, far below the world market.
“Number 2 US hard red winter wheat Cif Nola was running at around $240-245 a tonne as of early Monday,” Mr Reilly said.
‘Business not being directed to the US’
And it was not only in wheat that demand ideas were re-emerging into investors’ thinking.
In soybeans, for instance, Brian Henry at Benson Quinn Commodities said that industrial action in Argentine was not seeing importers switch demand to the US, as had been hoped.
“It seems some of the potential effects of Argentine strikes [in boosting prices] are being offset by the fact that business is not being directed to the US, and Argentine producers remain engaged,” Mr Henry said.
‘Additional freezes’
That is not to say that some of the supply worries that have been dominating market thinking, in terms of weather threats to crops, have gone away.
Indeed, as Agrimoney.com writes, the US is being beset by cold which, depending on how chilly it gets, could cause some crop damage.
“Cooler temperatures and some snow across the Dakotas are slowing emergence and germination for the summer crops,” Mr Reilly said, noting that temperatures reached around 19 degrees Fahrenheit (-7 Celsius) on Sunday night in parts of Saskatchewan.
“Additional freezes are expected Monday night in the northern US Plains and again in a part of the Canadian Prairies.
“Extreme lows in the middle and upper 20s Fahrenheit will occur across North Dakota and northern Minnesota.”
Corn vs wheat
Then there are the worries over heavy rains – worries for wheat at least, with the precipitation largely a bonus for crops already in the ground.
Indeed, for corn “outside of the cold temperatures expected tonight, weather is generally viewed as favourable due to recent rains and warming temperatures,” Mr Henry said.
That said in spring wheat country, “heavier rain totals through the northern Plains have some of the newly emerged spring wheat standing in water,” he said.
“Especially the low areas that had not been planted in a couple of years.”
Still, for wheat, the main worry about the rains is their impact on more mature crops, in the autumn-sown crop further south.
“The potential effects of another round of heavy rains through northern Texas and central Oklahoma merits some attention as those areas are saturated,” Mr Henry said.
“Weather forecasters continue to expect soggy – and so worrisome – conditions in US hard red winter wheat regions,” said Tobin Gorey at Commonwealth Bank of Australia.
And there are some concerns outside North America too, with Mr Reilly noting “dry forecasts for parts of Western Europe and Russia”, and rains which have flooded parts of central Europe.
Crop improvement
Still, bears gained reassurance from the stronger dollar, and a US Department of Agriculture crop report overnight which showed US winter wheat improving in condition, by 1 point to 45% rated “good” or “excellent”.
This included a 2-point rise to 29% in the rating for much-watched Kansas, the top US winter wheat producing state.
Furthermore, with open interest in Chicago wheat futures falling fast, now down by more than 20,000 lots in three sessions, there are ideas that much of the support to prices from fund short-covering has been spent.
Chicago wheat for July fell 1.3% to $5.14 ¼ a bushel as of 09:45 UK time (03:45 Chicago time), back below its 100-day moving average, which it closed above in the last session for the first time in four months.
‘Easy money is over’
And with that, other grains fell too.
Corn for July fell 0.9% to $3.64 ¾ a bushel, albeit outperforming wheat, and reducing somewhat the discount of the yellow grain to the bread-making one, which in the last session jumped above $1.50 a bushel for the first time in four months.
In fact, there is a “strong tendency for July wheat futures to gain on July corn into late May before correcting sharply late May into the June crop report”, said Richard Feltes at RJ O’Brien.
However, given the rise of nearly $0.50 in two weeks, “we suspect the easy money in wheat/corn is over”.
That said, “we cannot rule out another $0.10-0.20 a bushel gain in wheat versus corn given the magnitude of managed fund wheat short in Chicago, and the prospects for continuation of the wet weather across the southern Plains through late May”.
USDA data on corn overnight showed sowings 85% complete as of Sunday, below some forecasts, but still well ahead of the average of 75% by then.
‘Largely benign to helpful outlook’
And with grains lower, there was little hope for soybeans.
“If it hadn’t been for wheat and corn, beans would have been lower on Monday,” CHS Hedging said.
Soybean sowings as of Sunday, at 45% completed, were also behind some market expectations, but well ahead of the average of 36% for the time of year.
CBA’s Tobin Gorey said: “Weather forecasters are maintaining a largely benign to helpful outlook for US soybean planting and early development.
“Cold conditions in the soybean crop’s northern reaches are likely to cause some crop damage but it will be modest in the overall US crop context,” especially given that soybeans, as a later planted crop than corn, have largely not emerged yet.
Soybeans for July fell 0.3% to $9.51 ¾ a bushel.
Slow sowings
Cotton got a little support from the USDA crop progress report, which showed seedings at 35% complete as of Sunday, 11 points behind the typical pace, thanks to wetness in parts of the southern cotton belt.
Plantings in Texas, the top growing state, advanced just 3 points to 19% week on week. Typically, the state’s farmers have 36% of crop sown by now.
Cotton for July edged 0.1% higher to 65.00 cents a pound in New York.
Chinese cotton import data came in at 160,800 tonnes for April, down 28% year on year.
But that was at least a better performance than previously in 2015, for which the overall rate of decline is 38% so far.
