Weak demand weighs on row crops

October 16th, 2015

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Category: Grains, Oilseeds

Wheat_Future_Dreams450x299(Agrimoney) – Grain markets weakened on Thursday, with poor demand sapping strength from row crop prices, while the prospect of ample global supplies continued to weigh on wheat.

European wheat prospects were lifted on Thursday, but the prospect of higher French exports, and a weaker Euro, helped Paris wheat outperform Chicago.

Consultancy Strategie Grains raised its estimate of this year’s soft wheat harvest in the European Union by 2m tonnes to a record 149.5m tonnes.

This would leave EU soft wheat production up 400,000 tonnes from last year’s record crop.

French government crop agency FranceAgriMer lifted its estimate for the crop by 291,000 tonnes to a record 40.99m tonnes – a rise of 9.4% year on year.

Sowings gather pace

And prospects for next year’s crop in the world’s largest wheat producer look strong as well, as Strategie Grains kept EU wheat sowings near their current high level.

Wheat sowings were seen at 24.0m hectares, down from 24.1m hectares last year, and a record 24.4m hectares two seasons ago.

FranceAgriMer reported French sowing of winter wheat, to be harvested next year, at 23% complete, compared with 20% this time last year.

And UK wheat sowings were over 30% complete at the end of last month, according to crop agency ADAS.

French exports

But French prices got some support with an upward revision to export hopes.

FranceAgriMer lifted its forecast for French wheat exports to 19.23m tonnes, as prospects for exports outside the EU were lifted by 500,000 tonnes to 11.5m tonnes.

The upgrade took the estimate for non-EU exports above last season’s 11.37m tonnes.

Egyptian buying

A tender by Egypt, the world’s largest wheat importer, showed higher priced bids from sellers.

Gasc, Egypt’s state grain buyer, bought 240,000 tonnes of Russian and Romanian wheat for an average price of $212.16 a tonne, including freight.

This is the most Egypt has paid for wheat since the start of July, and more than $20 a tonne more than their cheapest prices, reached in August.

Currency boost

With strong exports and a weaker currency, French prices managed to rise despite the stronger supply estimates.

The Euro was down 0.8% against the dollar on Thursday.

In Paris December wheat closed up 0.3% at E178.00 a tonne.

But a stronger dollar, up 0.4% against a basket of currencies, and the prospects of ample global supply, weighed on US grain prices.

December Chicago wheat futures finished down 1.1% at $5.02 ½ a bushel.

Disappointing crush

Soybeans were hit by worse than expected soybean crushings in the US.

Oilseed industry body Nopa reported that its member had crushed 126.704m bushels of soybeans, where analysts had expected 132.741m bushels of soybean crushing.

This is still the busiest September since 2007, 27% up from last year.

NOPA members crushed 135.304m bushels of soybeans during August.

Competition warning

And US officials warned that lower soybean prices may be needed to support exports against competition from overseas rivals.

The US Department of Agriculture, explaining a 50m-bushel cut to US 2015-16 soybean export hopes in Friday’s Wasde report, warned that “stronger competition may lead to far less dynamic demand”.

“It may take a further decline in US prices to precipitate a revival of actual sales contracts in the week ahead,” the department said.

Brazilian fears ease

Soybean and corn markets have been worrying about some dry weather in row crop regions of Brazil.

But Kyle Tapley, of MDA Weather Services, points out that “a dry October like this one is not all that unusual across northern and central Brazil”.

“As long as rainfall returns somewhat closer to normal by early November, which we do expect to occur, the dry weather seen during October should not have a notable impact on crops”.

November soybeans weakened by 0.6%, finishing at $9.05 ¼ a bushel.

‘Gasping for news’

Corn markets weakened as continued harvest pressure met weak export demand.

“Our markets are grasping for news, which sounds odd to say given we just received a production report four sessions ago,” said Trigg Cronin, of Halo Commodities.

“Supplies are close to set, which places greater importance on demand and the flow of grain.”

Data from the US energy agency showed stocks of the corn based biofuel rose by 144,000 barrels on the week, to 18.96bn barrels.

December ethanol futures finished down 0.3% at $1.503 a gallon.

‘No export demand’

“The corn market is being overwhelmed with US supplies at this time and there is no export demand to siphon off the excess at this time,” said Darrell Holaday of Country Futures.

Strategie Grains lifted its forecast for EU corn production in 2015 by 200,000 tonnes to 57.6m tonnes, although this is still down 24% from 2014 production.

December Chicago corn futures finished down 0.9% at 3.75 ½ a bushel, a three week low.

Brazil hopes for much needed rains…

Arabica coffee fell, thanks to prospects of rain by the end of the month in Brazil, the world’s tope exporter.

Markets have been eying a spell of dry weather, during the crops’ key flowering period.

December arabica settled down 0.7%, at 133.7 cents a pound.

November robusta coffee settled up 2.2%, at $1,667 a tonne.

…And dryness

In the sugar growing areas of Brazil, where weather has contrariwise been damp, easing rains supported sugar.

“Weather forecasters expect largely seasonable rain in south Brazil’s cane regions for the next week or so,” said Tobin Gorey, of Commonwealth Bank of Australia.

March raw sugar futures in New York rose 0.3%, to settle at 14.13 cents a pound.

Chinese demand

Cotton prices eased as well, as data from the trade website CNCotton showed Chinese imports in September at a record low of just 50,900 tonnes.

“Demand will remain a problem for producers for the future as big buyers like China and big sellers like India work down excessive supplies,” said Jack Scoville, of Price Futures.

December cotton in New York settled down 0.5%, at 63.44 cents a pound.

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