US frost fears keep grains revival alive

(Agrimoney) – Grains began this week where they ended the last, supported by concerns over US frost, with cracks in the Ukraine ceasefire adding support too.

It is not as if the forecast for freeze in parts of the northern Midwest is much worse than Friday’s.

In fact, Arlan Suderman senior market analyst for Water Street Solutions, said that frost looked “less risk” than it had appeared on Friday, on updated weather maps.

But DTN said that the latest run of the GFS weather model was “still showing frost risks” for the morning of September 12 over parts of eastern North and South Dakota, Minnesota, northern Iowa and Wisconsin.

The Canada and US weather model ensemble shows frost risk focused more in the north western Corn Belt than the GFS, DTN added.

Furthermore, looking longer term, Professor Elwynn Taylor, agricultural meteorologist at Iowa State University, said that the weather pattern looked similar to that a year ago, which preceded the polar vortex and extreme winter cold, although highlighting that it is early days to be making any firm forecasts.

Risk premium

The prospect of less-than-ideal weather prompted investors to reinject into prices a little of the risk premium they removed over the summer on increasing expectations of huge US corn and soybean crops.

It is not that a frost on September 12-13, the focus period, is deemed as likely to cause catastrophic crop damage.

But it could curtail yield expectations by bringing an early end to growth for US corn and soybean crop which are a little behind the average, in terms of developmental progress.

“It would be the only event that we see significantly reducing crop sizes at this stage in the year,” one US broker said.

Speculator positioning

Corn futures for December edged 0.25 cents higher to $3.56 ¼ a bushel, with soybeans doing better, up 0.5% at $10.26 ¾ a bushel as of 09:00 UK time (03:00 Chicago time).

Soybeans gained extra helped in part from the extent of the net short position that hedge funds have built up in futures and options in the oilseed, of more than 25,000 contracts as of Tuesday, regulatory data late on Friday showed.

That is the biggest net short since October 2006, and offers a raised threat of a spike in prices should speculators be prompted into a short-covering spree.

For corn, speculators raised their net long position in the latest week, by more than 12,000 contracts.

Palm revival

Soybeans also got help elsewhere in the oilseeds complex from palm oil, which added 1.1% to 2,047 ringgit a tonne in Kuala Lumpur, crossing back over its 20-day moving average, on a continuous chart, for the first time in two months.

The vegetable oil is now managing quite a recovery from its five-year low of 1,914 ringgit a tonne hit a week ago, a revival helped by positive comment on price prospects by the likes of Standard Chartered, Fitch Ratings, Morgan Stanley, Sipef, Oil World…

That said, the revival will face a key test this week in monthly Malaysian stocks data from the Malaysian Palm Oil Board.

‘Very good yields’

In China, Dalian soybeans for January dropped 16 yuan to 4,568 yuan a tonne, as investors digested data showing a fall to 6.03m tonnes in Chinese imports of the oilseed last month, from 7.47m tonnes in July.

A decline had been expected, although to 6.2m tonnes.

In Europe, there was also some oilseeds data, with Strategie Grains lifting to a record 23.2m tonnes, from 22.9m tonnes, its forecast for the European Union rapeseed harvest, the world’s biggest.

“Feedback from the fields indicates very good yields,” the analysis group said.

Wheat gains

Back in Chicago, wheat for December added 0.3% to $5.37 a bushel, underpinned by the rise in in fellow grain corn, but also by signs of strain in the eastern Ukraine ceasefire.

The weekend has seen shelling near Donetsk airport in eastern Ukraine, and in the port city of Mariupol.

With Ukraine, and Russia, both major exporters of competitively-priced wheat, the wheat market has been something of a barometer of regional tensions.