(Agrimoney) – Unfortunately for the southern US Plains, forecasts for supremely heavy rains over the long holiday weekend proved correct.
At least five people died in Texas and Oklahoma, and hundreds of homes were destroyed, as flash flooding caused by rains of up to 10 inches hit parts of the states.
Texas Governor Greg Abbott, who declared states of emergency in parts of the state said that homes that were “completely wiped off the map”.
“This is the biggest flood this area of Texas has ever seen,” Mr Abbott said, speaking of the area south of Austin.
“It is absolutely massive – the relentless tsunami-type power of this wave of water.”
More rain on its way
The extent of the damage supported grain futures, a bit, in early deals.
Not just prices of wheat posted some gains, as a grain nearing harvest and so particularly vulnerable to wet weather, but row crops too.
“Excessive weekend rains across the central US, causing flooding in several wheat areas, and preventing summer grain planting progress, could give US ag futures a higher open for the Tuesday session,” Terry Reilly at broker RJ O’Brien said earlier.
And the deluge has not ended, although the forecast for next week in the southern Plains has tended a little drier, MDA said.
“Showers should build across much of the [Plains] region Thursday through Saturday,” the weather service said, saying that coverage will be “general” and with amounts that in some areas could hit 3 inches.
“Heavy rains in southern Oklahoma and Texas have resulted in widespread flooding, and more wetness is expected this week,” the weather service added.
Ukraine upgrade
There were some price negative factors for markets to factor in too, such as an upgrade by 2.6m tonnes to 54.9m tonnes in UkrAgroConsult to its forecast for the Ukrainian grains crop this year.
That said, the revision reflected largely a lift to 21m tonnes in the forecast for the Ukrainian wheat crop which UkrAgroConsult made last week.
Then there was dollar strength to consider, with the greenback up 0.5% against a basket of currencies, helped by a drop in the yen to a seven-year low, and a dent to the euro from a fresh round of concerns over Greek debt default.
A stronger dollar cuts the competitiveness of dollar-denominated assets such as many commodities to buyers in other currencies.
Demand signs
Still, there are some signs of demand around nonetheless, with Japan tendering for 100,262 tonnes of milling wheat, and South Korea’s MFG purchasing 69,000 tonnes of feed wheat.
Iraq has issued a tender for at least 50,000 tonnes of wheat, and likely to be a multiple of that.
And in France, silo operator Senalia said that it was resuming taking milling wheat at Rouen, one of the points for grains for delivery against Euronext futures, and seen as a sign of revived export demand from the port creating fresh storage space.
Soft red winter wheat (as grown in the Midwest) for July actually lost early gains to stand 0.3% lower to $5.13 ½ a bushel in Chicago as of 09:30 UK time (03:30 Chicago time).
But hard red winter wheat, as grown in Oklahoma and Texas did better, adding 0.5% to $5.49 a bushel, climbing back above its 100-day moving average.
‘Drowned-out holes, yellow plants’
Corn and soybean futures rose too, with the US flooding representing a rare setback for a row crop sowing season which has seemingly proved largely ideal, giving enough rain to banish moisture concerns (south of the Canadian border) but not significantly to hamper sowings in most areas.
Still, have investors proven too blasé about the benign weather picture?
At Global Commodity Analytics, Mike Zuzolo said that a crop tour (made before the latest band of rains) showed that “corn and soybean fields of eastern Kansas/western Missouri are not close to the productive levels they were a year ago.
“Drowned-out holes, yellow plants, unplanted areas are all major features to the current crop in this part of the country.”
Record net short
More on this will be revealed later, after the market close, with weekly US Department of Agriculture crop progress data expected to show a strong, and potentially record, rating for corn.
But for now, corn for July added 0.2% to $3.60 ¾ a bushel.
Soybeans actually did better, with latest regulatory data showing that hedge funds have taken out a record net short position in the oilseed, a factor which might rattle nerves among some investors.
The risk of record net short, or net long, holdings is that appetite for such positions has been spent.
‘A lot of negativity baked in’
And investors with short positons in soybeans anyway have reason to take profits, Mr Zuzolo said.
“Looking at the price of cash soybeans for fall delivery,” coupled with recent and expected weather concerns, “I am of the view that taking some profit and reducing hedge levels in soybeans for the next 20-30 days is warranted,” he said.
And with strong Argentine and Brazilian production estimates having already been flying around for a while, “this makes me think that a lot of negativity is already baked into the price heading into the next USDA supply-demand [Wasde] report” next week.
Soybeans for July gained 0.4% to $9.27 ¾ a bushel.
Palm up
The oilseed got extra support from a strong performance by palm oil, which gained 2.2% to 2,184 ringgit a tonne in Kuala Lumpur, receiving continued support from data on Monday showing a rapid acceleration in Malaysian exports of the vegetable oil.
ITS put the month-on-month increase at 53% for the first 15 days of April, while rival cargo surveyor SGS put the rise at 55%.
On China’s Dalian exchange, palm oil for September closed 2.3% higher at 5,022 yuan a tonne.
July futures in rival vegetable oil soyoil gained 1.3% to 32.06 cents a pound.
Cotton clings on
Among soft commodities, one crop in which one would expect a reaction from Texas inundations is cotton, with the state the top US producer of the fibre.
In fact, cotton managed to pull out of a decline which saw it lose 5.3% last week, but only just, adding 0.1% to 63.39 cents a pound.
The fibre has been weighed by concerns of the strong dollar denting US exports hopes. The US is the top cotton exporter.
