Wheat and soybeans lead grain markets lower

(AgriMoney) – Wheat, softened by Russian victory in an Egyptian auction, and soybeans, hit by forecasts for reviving rain for US crops, led a tumble in grain markets on Monday, notching up losses of some 3% apiece in Chicago.

Wheat took its decline in Chicago in two sessions above 6% as Russia’s victory in an export tender by Egypt, the top importer of the grain, stoked expectations that the Black Sea shipper will remain a fierce contender on international markets for now, despite a weak harvest.

Egypt, in its first order since April, purchased 120,000 tonnes of Russian wheat, priced at $316.47 per tonne, excluding freight costs of a little under $11 per tonne.

The deal was “bearish to both US and EU wheat markets”, Mike O ‘Dea at FCStone said, noting that Russian offers undercut those from Ukraine at about $330 a tonne including freight, “French at $350, US Gulf soft red winter wheat at $379”.

“There was talk of one soft red winter wheat load off the US east coast at $332-35 per tonne. But the bottom line is that when the Russians have grain for sale they hit the bid.”

The comments came even as Agritel lowered its forecast for Russian wheat exports to 8.0m tonnes, and cautioned over upbeat prospects for Ukrainian shipments too.

‘Shift in the weather’

Prices took a further hit with forecasts of rain for southern winter wheat areas preparing for their sowings for the 2013 crop.

“The US weather models are pointing to increased moisture in the US southern Plains, and that has pressured the market today,” Darrell Holaday at Country Futures said.

Indeed, losses in futures in Kansas, where hard red winter wheat is traded, and Chicago, the home of dealing in soft red winter wheat, outpaced those in the Minneapolis spring wheat market, where the benchmark September contract dropped 2.6%.

Midwest rains over the weekend, with more expected, undermined soybeans too, stoking ideas that the crop will show an improvement in a weekly crop condition report due later from the US Department of Agriculture.

Soybean condition, as measured by the proportion of the crop rated in “good” or “excellent” condition fell for six successive weeks until stabilising in the last report, last Monday.

“The shift in the weather is pushing soybeans lower,” FCStone’s Mr O’Dea said.

Political factor?

The rains are seen as coming too late to save corn crops, which have already passed through their heat-sensitive pollination period.

However, the grain fell in line with the broader market, besides fears that the US may yet waive minimum restrictions on ethanol use to curb demand on corn for use in making the biofuel.

A report that the G20 is to attempt to draw up a response to elevated food prices also encouraged selling across a range of crops.

“With markets overbought, key technical objectives reached and talk of possible intervention by world governments to protect domestic supplies has quelled the market for the short term,” Benson Quinn Commodities said.