(Agrimoney) – The big question for grain markets on Monday concerned the US frost at the weekend.
Was it a crop killer?
The answer appears to be “no”, at least not on any large scale.
“Locally we had some frost but I don’t think it did much damage,” said Mike Mawdsley at Iowa-based broker Market 1.
In fact, it looks like there was a small pocket around northern Minnesota where temperatures fell below 30 degrees Fahrenheit (freezing is 32 degrees), the kind of level which might cause losses, but that was the exception.
‘No notable crop damage’
Weather service MDA said: “Frost occurred across north central Iowa, north central Minnesota, northwest Wisconsin, and northeast South Dakota on Saturday, but no notable crop damage occurred.”
And the six-to-10 day forecast has trended “warmer” in the Midwest, besides a little wetter in the central and southern Plains, which looks good news apart from for farmers attempting winter wheat planting.
“Active rains… will continue to ease long term dryness, but will slow winter wheat planting,” MDA said.
Still “spring wheat harvesting should continue to progress well in the northern Plains and Prairies”.
China setback
The dollar was a touch stronger too, nudging 0.1% higher against a basket of currencies.
A stronger dollar undermines prices of dollar-denominated commodities by making them less affordable to buyers in other currencies.
And as an extra depressant to crop prices, China, the top importer of many agricultural commodities, unveiled some downbeat economic news.
While Chinese industrial activity rose by 6.9%in August from the same month a year ago, this was a marked slowdown from July’s 9% rise.
RBS economist Louis Kuijs cut his forecast for Chinese GDP growth this year by 0.4 points to 7.2%, below Beijing’s target figure of 7.5%, saying arguing that “very weak real activity indicators for August point to a renewed slowdown in China’s economy”.
Wheat falls
It all added up to a negative backdrop for grain and soybean prices, although it was actually the former which fared worse, and in particular wheat.
Chicago’s December wheat contract, becoming the spot contract after the expiry of September contracts on Friday, lost 1.0% to $4.97 ¾ a bushel, setting a fresh contract low.
The pressure from an accelerated US spring wheat harvest, which got off to a rain-hampered start, is weighing on prices, as are the rains in the southern Plains, which bode well for wheat once it is planted, and signs of accord in eastern Ukraine.
While there were signs of demand, with Saudi Arabia buying 610,000 tonnes of hard wheat from origins including Australia, the European Union and North and South America, this had been expected.
Net long gets longer
Corn fell 0.7% to $3.36 a bushel for December delivery, now the spot contract, as investors removed risk premium after the apparent failure of US frost to reach levels which caused much crop damage.
Investors retain plenty of scope for selling in the grain, which data late on Friday showing hedge funds had actually raised their net long in the grain a touch in the week to last Tuesday, to more than 81,000 contracts.
As late as February, before the wet US spring hampered sowings, speculators retained a net short, which topped 180,000 contracts in October last year.
A net short position means that short holdings, which profit when values fall, exceed long bets, which benefit when prices gain.
Four-year low
For soybeans, however, hedge funds have an unusually large short position, of nearly 40,000 contracts, the biggest since 2006, and raising questions about the appetite for more such holdings.
Indeed, soybeans for November, now the spot contract, dropped a modest 0.3% to $9.82 ¼ a bushel, albeit enough to notch up a four-year low for a spot lot.
As an extra reason for investors to tread with caution, the day will bring data too, with US industry soybean crush data for August, expected to come in at 109.3m bushels, down from 119.6m bushels in July and 110.5m bushels in August last year.
Still, the July data beat expectations.
Data later
Furthermore, Tuesday will see data too, in the form of updated Farm Service Agency statistics on planted acreage, of which the last set suggested that quite a bit of land went unsown in the spring to soybeans (and corn) because of wetness.
“In August, FSA pegged prevent plant acres for beans at 827,000 acres,” Kim Rugel at Benson Quinn Commodities said
“Tuesday’s report will update that data as claims continued to be filed and processed by FSA.”
Still, while “any lower acreage estimate may be short term supportive, as big crops get bigger, higher yield more than offsets lower acreage”.
Palm up
The oilseeds complex also saw some well received data on Monday, with cargo surveyor Intertek pegging Malaysian palm exports at 750,425 tonnes, up 32% month on month.
That was actually well down on the 41% recorded for the first 10 days of the month but, nonetheless, shows quite some impact from Malaysia’s decision to axe palm export taxes this month and October.
In Kuala Lumpur, palm oil for November added 1.1% to 2,106 ringgit a tonne, and is indeed putting together a bit of a bounce, up from a five-year low of 1,914 ringgit a tonne hit early in the month.
Cotton falls
Among soft commodities, cotton got off to a weak start, down 0.8% at 67.44 cents a pound, with the rains in the southern US Plains good news for the crop in Texas, the top US growing state.
December cotton fell 0.8% to 67.44 cents a pound in New York,
Sowings in China are estimated down 8.7%, with yield expected to drop too, the country’s agriculture ministry said.
However, a drop in output has been long expected by the market, given disruptions caused by a change in the country’s subsidy regime, and, indeed, the US Department of Agriculture last week demoted China to the world’s second-ranked cotton producer, behind India.
