Wheat ends winning streak, but soy holds on

November 30th, 2012

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Category: Grains, Oilseeds

(AgriMoney) – If there is one fair bet for the next round of US Department of Agriculture crop estimate revisions, it is that the forecast for US soyoil shipments in 2012-13 will be raised.

After all, with 121,500 tonnes sold in the latest week, the US has already beaten the total 540,000 tonnes the USDA has forecast for 2012-13 –two months into the season.

“The total sales and shipments are already 4% above the USDA estimate for the entire crop year,” Darrell Holaday at Country Futures said.

The splurge has been promoted by the fall in US prices below those of Argentina, the top-ranked soyoil exporter, and Brazil, the second biggest, after South America’s weak soybean harvest earlier this year, Oil World explained earlier this week.

“People felt at below 47-48 cents a pound it was dirt cheap, and thought we better grab some of that,” Jerry Gidel at broker Rice Dairy said.

Strong crush rate

And it is a positive for prices of soybeans themselves too.

“The soyoil export sales number,” coupled with a strong figure for soymeal too, the other product of soybean processing, “indicates the US crush rate is going to remain very strong for the next three months”, Mr Holaday said.

Mr Gidel said: “The number for November looks like it is going to come in strong.”

But hopes of a positive close even within the soy complex were undermined by comments in Washington from John Boehner, the Republican speaker of the House, who said that no substantial progress had been made between US politicians over measures to avoid the US falling over its fiscal cliff.

This after a more positive tone from Boehner on Wednesday.

Paul Georgy at Allendale said: “News headlines are going to be a market mover until a solution is found in Washington.”

Lost customer

Disappointment over the talks was one reason that grain and oilseed markets, in which long investors have some profits to take following late-November recoveries, fell back.

But another was export sales data which, for the grains, were poor.

For wheat, export sales came in at 271,000 tonnes, below estimates of 350,000-425,000 tonnes, while for corn the 236,000-tonne result was less than half some forecast.

“Brazil is buying wheat from Germany when they are supposed to be buying from us,” Mr Gidel said.

Even the number for soybeansthemselves disappointed, at 319,000 tonnes, below the 500,000-625,000 tonnes that the market had expected.

‘Heavy resistance’

“Export sales this morning were poor across the board and halted the overnight advance,” US Commodities said.

“It is evident that the exporters are price-selective buyers.”

Indeed, the data gave crops no help gaining the strength to cross some key technical resistance levels which lay ahead,

“The market is again nearing heavy resistance and stall-out zones,” US Commodities said, saying that, for corn, the level of $7.60-$7.70 a bushel for the front contract “is tough resistance”.

“The same is true for the wheat market at $9.00 a bushel.”

‘Brown wheat’

OK, the worries about US winter wheat seedlings remain, given drought conditions in the Plains which show no sign of waning.

In parts of Kansas and Nebraska, “there is some brown wheat there, it did not make it”, Mr Gidel said.

But concerns over wheat prospects for 2013, on a global scale, received some late reassurance when the International Grains Council forecast a harvested area for the grain of 223.2m hectares in 2013, the highest in 15 years.

This included an estimate for an extra 500,000 hectares of US wheat or so making it into the combine.

Winning streak ends

Wheat for March closed down 0.6% at $8.85 ¾ a bushel in Chicago, the first negative close in eight sessions.

The lot fell back below its 100-day moving average, after a one-day sojurn above it, but managed to bounce off its 50-day line.

The price drop was 0.8% to E273.25 a tonne in Paris, for the January contract, although London wheat, helped by prospects for the worst sowings for 2013 in more than a decade, rose 0.1% to £228.50 a tonne for May delivery.

That is a far cry from the £165 a tonne that HSBC forecast for next year, but then if world wheat area really does rise…

‘Heavy rains’

Among row crops, March cornfell 0.7% to $7.58 ¾ a bushel, taking little comfort in data from the Buenos Aires grains exchange showing sowings advancing just 2.4% last week, albeit during a period when many growers avoid planting for fear of having a crop pollinating during the hottest summer period.

But soybeans edged higher, by 0.2% to $14.48 a bushel for January, with the Buenos Aires grains exchange data showing Argentine seeding progress remaining 11% behind normal.

They are being slowed by rainfall of which more are forecast, with “heavy rains, ranging from 10mm-75mm” expected during the next week in many areas, the exchange said.

Soyoil itself succumbed to profit-taking, falling 0.5% to 50.12 cents a pound in Chicago, for January delivery, but still up some 7% from a low hit two weeks ago.

‘Exaggerated fashion’

Soft commodities enjoyed a better, making better use of a slightly weaker dollar, whose decline makes dollar-denominated exports more affordable.

Arabica coffeeextended its recovery to a second day, rising 1.0% to 156.40 cents a pound for March delivery, helped by an estimate from Cooxupe, Brazil’s largest coffee cooperative, that the 2013 harvest in the regions it represents (responsible for some 10% of the national crop) will shrink by 25%.

The forecast, on which Cooxupe did not elaborate, contrasted with upbeat estimates from many other commentators expecting rains during flowering to boost production.

March raw sugaradded 0.9% to 19.34 cents a pound, although conviction seen as lacking in the rise.

“Volume has been low of late, and any size orders have tended to push values in an exaggerated fashion,” Nick Penney, Sucden Financial said.

“It seems that without fresh news, the markets may continue in these tight ranges up to the holiday period.”

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