Strong US harvest pace undermines soy futures

October 6th, 2015

By:

Category: Grains, Oilseeds

Young man in wheat field 450x299(Agrimoney) – Soybeans are getting priority over corn for once in US farmers’ harvesting programmes.

US growers had, as of Sunday, reaped just 27% of their corn their crop, US Department of Agriculture data overnight showed.

That was behind the 30% figure that investors had expected, besides the average of 32% completion.

The lag was not down a lack of corn to harvest, with the proportion of the crop mature, at 86%, 3 points ahead of the average.

Nor was it down to poor weather – farmers certainly managed to make progress on harvesting their soybeans, with 42% of the crop in the barn as of Sunday.

That figure was 1 point ahead of that which investors had expected, and well above the average of 32%.

‘Little bit of a surprise’

“This was a little bit of a surprise given the rain that fell across the eastern Corn Belt over the weekend,” said Terry Reilly at Chicago broker Futures International, although western Corn Belt farmers used drier conditions to their advantage.

Minnesota growers reaped 35% of their soybean crop during the week, with North Dakota farmers getting 37% of the harvest in, and their Iowa peers managing 25%.

Mr Reilly attributed the preference by farmers for getting soybeans in the barn potentially to demand factors.

“The focus on soybean harvesting progress could relate to steady spot demand for the commodity by exporters and crushers, whereas corn demand has been lacklustre,” he said.

“We have not seen a solid US export development in corn in more than a week.”

Export divergence

Certainly, US soybean exports last week, as measured by cargo inspections, came in at a strong 1.12m tonnes, more than twice market expectations, data on Monday showed.

Corn exports came in at a little under 470,000 tonnes, well below a reading above 800,000 tonnes that investors had forecast.

Still, with the US soybean harvest progressing strongly, and the USDA data overnight showing a surprise improvement in the condition of the crop too, by 2 points to 64% rated “good” or “excellent”, futures in the oilseed struggled in early deals.

Chicago’s November contract stood down 0.4% at $8.81 a bushel as of 08:30 UK time (02:30 Chicago time), finding support just above its 10-day and 20-day moving averages, but being capped by its 40-day line.

‘Difficult to source’

Still, there were some ideas limiting selling, with Richard Feltes at RJ O’Brien noting that “end users are well aware that soybeans will be difficult to source after harvest from well-heeled farmers that can afford to delay additional sales until the new taxable year”.

And by that time the market will have a “better handle on South America’s weather pattern”, with the Brazil harvest starting early in the calendar year.

Abiove on Monday forecast the Brazilian crop at 97.8m tonnes, up 3.0m tonnes year on year, but below estimates above 100m tonnes which have been floating around.

Also as a support to prices, AgRural reported that 37% of Brazil’s new crop had been sold as of Friday, up from 13% a year before, and meaning much selling pressure from producers has already been spent.

Corn vs wheat

Corn, with its disappointing harvest progress, did better in Chicago, but only by showing more modest losses, with December futures down 0.1% at $3.93 ¼ a bushel.

That said, forward contracts were faring better, with the May lot up 0.2% at $4.10 ¾ a bushel, encouraging farmers to keep corn in store.

Back to spot contracts, and it was wheat which fared best of Chicago’s big three, by holding firm at $5.15 ½ a bushel for the December lot, amid continued concerns over weather in some major producing countries.

The USDA crop progress data overnight showed only a small lag in US winter wheat sowing overall, with 49% in the ground as of Sunday, compared with the average of 51%.

Hard vs soft

But the lag was more marked in big southern Plains hard red winter wheat producing states, such as Oklahoma, where 46% of the crop was in the ground, behind the typical 50%, and Kansas, where planting were also at 46%, 3 points behind the state average.

It was farmers in the Midwest soft red winter wheat areas which were doing best, with seedings in Illinois at 22%, 4 points ahead of normal, and in Indiana at 25%, an advance of 6 points, while Ohio growers had seeded 36% of their crop, 14 points ahead of the typical pace.

As to whether hard red winter wheat growers will fare better in the week ahead, the dryness which has slowed plantings looks like remaining in place (depending on which commentator you turn to).

“The extended forecast does not offer relief” from dryness, RJ O’Brien’s Mr Feltes said.

In fact, Kansas City-traded hard red winter wheat recovered some of its unusual discount against its Chicago soft red winter wheat peer, adding 0.2% to $5.03 a bushel for December delivery.

‘Disastrous for crops’

Nor are conditions ideal in the former Soviet Union, where growers are also planting winter grains ahead of the 2016 harvest.

“The primary winter wheat production areas of east Ukraine and southern Russia continue to be dry,” said Mark Welch at Texas A&M University.

“Most of this region has received less than 0.5 inches over the last two weeks.”

Meanwhile, in Australia, where harvest is in its very early stages, “winter crop regions around the borders of Victoria with South Australia and New South Wales have seen several days of high temperatures, around 10 degrees Celsius above seasonal norms,” said Tobin Gorey at Commonwealth Bank of Australia.

These conditions, which were expected to continue on Tuesday, will in “areas with little moisture… have been disastrous for crops,” Mr Gorey said.

“And even those with a reasonable moisture profile will have seen yields dwindle over the past few days.”

Sydney wheat futures for January closed up 0.7% at Aus$303.00 a tonne, their best close in nearly two months

Add New Comment

Forgot password? or Register

You are commenting as a guest.