(Agrimoney) – The rains in the US southern Plains indeed did the trick, in terms of boosting the condition of dryness-tested winter wheat seedlings.
In Kansas, the top wheat growing state, the proportion of crop rated “good” or “excellent” rose by four points to 41% in the week to Sunday, a US Department of Agriculture report overnight showed.
In neighbouring Oklahoma, also a grower of hard red winter wheat, the rating soared by 7 points, albeit to a still modest 38%.
“The much needed rainfall received last week relieved the most drought-intensive areas of the state with only 18% now rated moderate to exceptional – an 18-point decrease from the previous week,” USDA scouts in Oklahoma said.
‘Flash flooding’
OK, the crop was not all heading in the right direction, from production terms, with the rating for the crop in Washington state cut by 7 points week on week to 49%, although after a week which saw flooding on some areas, although with drought remaining the main issue.
“Winter wheat was reported to be short with some areas still not having emerged” in central areas of the state, a major grower of white wheat.
And, back in hard red winter wheat country, the rating for Texas, the epicentre for storm rains from the remnants of Hurricane Patricia, dropped 4 points to 43%.
“Isolated areas reported flash flooding as rainfall totals reached upwards of 15-20 inches in south east Texas,” USDA scouts noted.
More rainfall
Still, the overall winter wheat rating rose to 49%, down 10 points year on year, but 2 points up over the week, in line with market expectations.
And further improvement may be in the offing, to judge by a damp forecast for many key producing regions.
“Forecasts are calling for an additional 0.25-1 inches over the southern Plains over the week,” said Benson Quinn Commodities.
And there may be some further uplift to come in other regions from recent rainfall too, the broker added.
“Some benefit due to weekend rains can also be expected in the Pacific North West and over portions of the soft red winter wheat crop,” grown in the Midwest.
Richard Feltes at RJ O’Brien said: “US winter wheat ratings should creep higher into late November.”
‘Dismal exports’
That provided little for wheat bulls to feed on, especially after when some particularly poor US export data from Monday, showing shipments of just 170,993 tonnes, continued to attract negative comment.
“Wheat [exports] were light at a dismal 6.3m bushels and a marketing year low,” said CHS Hedging, noting that, cumulatively, shipments are down nearly 18% year on year.
They will “need to average 16.5m bushels per week to meet current USDA projections” for the whole of 2015-16.
However, Terry Reilly at Chicago broker Futures International cautioned that “the dismal US export pace should continue through the end of 2015 unless fob prices decline to match competing offers” from other countries.
Black Sea woes
Sure, news from some other major growing countries remains worrying, with SovEcon cautioning that Russian wheat is heading into dormancy this year worse than a year ago, which was itself a poor year (with seedlings also tested by dryness).
Will Russia see a relatively mild winter again to the dryness feeding through into crop damage?
In Ukraine, where a lack of rain is also an issue, UkrAgroConsult sees the wheat harvest reaching around 19m tonnes next year, sufficient to allow export about 10m tonnes in 2016-17.
That compares with USDA estimates for 2015-16 of 24m tonnes and 16.5m tonnes respectively.
Prices fall
But with a stack of the growing season yet to come, such talk was not enough to prevent December futures in Chicago soft red winter wheat dropping 0.3% to $5.06 ¾ a bushel as of 09:00 UK time (04:00 Chicago time).
That said, the contract, having surrendered its 100-day moving average in the last session, looking to be finding some support at the 10-day line, just above $5.05 a bushel, and remains some $0.40 a bushel above its September low.
Kansas City-traded hard red winter wheat fared worse, amid the reduced concerns over southern Plains crops, falling 0.4% to $4.80 ¾ a bushel, and putting a little bit back into its, unusual, discount to its lower-protein Chicago peer.
Broker estimates
Nor could rival grain corn find any traction, little helped by the USDA report which showed that, while rain had been enough to help wheat condition in many Midwest states, it had not slowed harvesting as much as investors had expected.
Progress reached 85% as of Sunday, up 10 points week on week, 6 points ahead of the average, and 1 point ahead of the market forecast too.
As an extra setback, FC Stone raised its forecast for the US yield this year by 1.0 bushels per acre to 168.0 bushels per acre, in line with the USDA figure, which stands to be revised with next week’s Wasde crop report.
(That said, with area adjustments, the FC Stone increase translated into an upgrade of just 2m bushels, to 13.543bn bushels, in the harvest forecast.)
‘Trade within ranges’
The FC Stone figures are expected to herald a stack more from other brokers ahead of the Wasde, which may have an influence on prices in the run-up to the report.
Futures appear “set to trade within ranges through the week, with private production reports likely to be the most influential to prices direction ahead of next week’s USDA report”, said Benson Quinn Commodities.
Certainly, Chicago’s December contract had lost a modest 0.1%, to stand at $3.76 a bushel, within its recent trading range, offered some support too by ideas of slow farmer selling.
That countered some of the more negative talk around, eg over US exports, which at a cumulative 206m bushels for 2015-16 “are down nearly 24% from last year and will need to make a big comeback to meet the USDA’s expectations”, CHS Hedging said.
There also continues to be mention of the Argentine presidential election run-off later this month, and the prospect for victory by opposition candidate Mauricio Macro, who has pledged to ditch crop export taxes, boosting supplies from the country and farmers’ enthusiasm for planting more.
‘Looks good for Brazil’
Soybean futures eased too, by a modest 0.25 cents to $8.78 ½ a bushel for January, despite at least scoring better on the export side in Monday’s USDA data.
“Large export inspections were announced again this week – they came in at 94.1m bushels, above market expectations,” CHS Hedging said.
“We are now 135m bushels ahead of the projected USDA export pace” for 2015-16.
Still, FC Stone overnight raised by 0.6 bushels per acre to 47.5 bushels per acre its forecast for the US soybean yield (albeit, again, with minimal effect on the production number thanks to area changes).
The USDA yield estimate is currently at 47.2 bushels per acre.
And conditions remain better for the ongoing Brazilian sowing period.
“The next two weeks looks good for Brazil with a mix of sunshine and rain,” Futures International’s Terry Reilly said.
‘Slow progress’
Still, in New York, cotton futures for December fared better, adding 0.2% to 63.40 cents a pound, with the USDA crop progress data overnight providing some bullish fare.
Cotton harvesting reached the 50% stage as of Sunday, but fell 4 points behind the average pace, slowed by the wet weather which helped southern Plains wheat.
“Wet weather delays to fieldwork continue in the US,” said Tobin Gorey at Commonwealth Bank of Australia.
“Last week, the US harvest made slow progress,” said Louis Rose at the Rose Report.
