(Agrimoney) – Turnaround Tuesday on grain markets transformed into Groundhog Day, as early gains evaporated, leaving futures to chalk up a fresh series of contract lows.
Actually, bulls emerged with some honour, as old crop August soybean futuresfelt some further support from 120,000-tonne US sale to China announced on Monday, closing up 0.7% in Chicago at $11.84 a bushel.
In Paris, rapeseed for November bounced 2.0% to E322.25 a tonne, filling in a chart gap left by a tumble in the last session, when French co-operatives were said to be in selling mode.
Ditto, milling wheat for November which gained 1.0% to E178.00 a tonne for November, amid growing concerns over the extent of rain damage to the European Union harvest, including the French crop, the bloc’s biggest.
Quality factor
Besides the comments from Europe reported by Agrimoney.com, the EU quality concerns are making waves in the US, with Richard Feltes at Chicago broker RJ O’Brien for instance, reporting that “the wet EU wheat harvest weather could drive more high quality wheat business to the US”.
In Kansas state, Darrell Holaday at Country Futures said that “there are some EU weather concerns developing which is putting in some support in for better quality US wheat”.
In Minneapolis, Benson Quinn Commodities said: “Wet conditions continue to plague wheat harvest in portions of the EU, which is putting more focus on quality.”
Yield talk
Not that this appeared to make much of a difference to investor thinking, as they returned to liquidation mode, encouraged by yet further talk of huge US corn and soybean yields.
“Can the national corn yield be 185 bushels per acre?” Paul Georgy at broker Allendale said, citing a figure well above the record 165.3m bushels per acre that the US Department of Agriculture is factoring in.
The USDA figure is widely seen as an underestimate, with considerable talk of 170 bushels per acre, and even a little above.
Mr Holaday said it was “not very difficult to get to” to a yield estimate of 171.5 bushels per acre, but “is also fair to say that it may be hard to get to a number over 175 bushels per acre”.
‘Will become much more critical’
Whatever, it wasn’t the kind of talk to get buyers excited, and signal a floor to prices, even when some cracks are emerging in ideas of perfect US corn and soybean growing weather.
“If we don’t see better rain than is projected in the next five days in the Plains and western Midwest, the rains later next week will become much more critical for the soybean crop,” Mr Holaday said.
Mr Feltes said that the weather outlook “leans positive” for prices, in showing a “drier tone to the western US over the next 10 days”.
Still, any weather setbacks would occur at a time when the condition of US crops is at historic highs – for corn and soybeans at least, if not for cotton.
Huge soymeal orders
In Chicago, corn for December closed down 1.0% at $3.68 ¼ a bushel, a fresh contract closing low, and boding ill for the kind of scenario of weaker agriculture growth rates which DuPont cautioned of.
The old crop September contract ended down 1.0% at $3.60 ¼ a bushel, a fresh four-year low for a spot contract.
In soybeans, the new crop November lot ended down 1.3% at $10.57 ¾ a bushel, a contract closing low.
This despite the USDA’s confirmation of talk of buyers around
for soymeal, with export sales of 225,000 tonnes of the feed ingredient for 2014-15 to “unknown destinations”, and a further 180,000 tonnes to Vietnam.
Soymeal gains
Mr Feltes, said that the orders represented a “clear indication” that importers are locking in US supplies amid “heightened uncertainty over the reliability of the world’s largest soy product exporter”, Argentina, which has only just settled its latest strike threat in the transport sector.
The strong soymeal orders also tallied with an observation from Oil World that the high protein feed ingredient is, thanks to pricing differences, set to gain in popularity at the expense of grains.
“Given the magnitude of potential supplies and the resulting pressure on prices, world consumption of eight major oil meals is likely to be boosted to a record,” Oil World said.
“This will occur again under the lead of soymeal, which is expected to garner market share from other oil meals and also from feed grains if prices are attractive.”
Prices fall
Soymeal certainly didn’t shirk from its task of trying to improve its competitiveness, falling 1.5% to $346.80 a short ton in Chicago for December delivery, despite the US export orders.
Nor did wheat allow soymeal to gain too much ground, falling 1.0% to $5.24 ½ a bushel itself in Chicago for September delivery.
Sure, the European wheat harvest is proving disappointing on quality, but US wheat still faces the pull of lower prices of fellow grain corn, and some weight from the US harvest too.
Besides, the Wheat Quality Council has begun its US spring wheat tour which will doubtless underline the fine condition of that crop too.
Cotton outperforms
Among soft commodities, forecasts of rain in drought-hit Brazil were blamed for a decline of 2.7% to 168.30 cents a pound in New York arabica coffee futures for September delivery,
Raw sugar for October eased too, ending down 0.7% at 17.16 cents a pound, on profit-taking from the last session, even though, at Commerzbank said, Brazil’s rainfall “is expected to disrupt harvesting this week”.
But New York cotton for December added 0.3% to 67.91 cents a pound, helped by deterioration in the US crop, and showing signs of stabilisation after its fall to contract lows earlier in the month.
