(Agrimoney) – Ag markets are building up for some big data on Friday of course.
But in the meantime, the Malaysian Palm Oil Board gave investors something to think about (other than the usual slew of China news which is taking an ever higher profile these days) with August data on domestic palm oil production, exports and inventories.
The data were not so upbeat on paper, showing inventories of 2.49m tonnes of the vegetable oil, up 10.0% month on month, and above expectations of a 2.41m-tonne figure.
Production soared 13.0% to 2.05m tonnes, but exports eased 0.3% to 1.61m tonnes, falling short of market forecasts.
Still, palm oil futures proved resilient despite the data, standing unchanged at 2,113 ringgit a tonne in Kuala Lumpur as of 09:25 UK time (03:25 Chicago time), up 13.4% from an August 25 low.
Export worries received some tonic with data from cargo surveyor Intertek showing exports so far this month adding 3.7%, compared with the same period of August, while fears of El Nino-induced dryness in South East Asia, where most palm oil is produced, remain alive too.
Brazil estimates
The resilience of palm oil helped rival soyoil another firm start (which it fumbled in the last session), adding 0.5% to 27.04 cents a pound in Chicago for December delivery.
And that in turn fostered some recovery in soybeanfutures, which added 0.3% to $8.75 a bushel for November, after a late retreat in the last session fostered, as ever, by China news.
At ADM Investor Services, Steve Freed noted worries that “small China buyers were having trouble getting letter of credit for new purchases”, a rumour noted by other brokers too.
He also flagged ideas that the “current Brazil weather outlook and currency could increase their planted soybean acres” for the crop of which sowing is about to begin, and which will be harvested early next year.
At Futures International, Terry Reilly said that “widespread rain hitting central Brazil this week is beneficial for soil moisture levels ahead of upcoming plantings”.
Still, concerns on this front spurred by a high forecast from broker INTL FCStone for Brazilian soybean production in 2015-16, of 100.9m tonnes, were eased by an estimate from local analyst Celeres of a 97.1m-tonne crop, only marginally above the US Department of Agriculture figure of 97m tonnes.
‘A little below expectations’
The big issue, however, for grain and oilseed investors is the prospect on Friday of the USDA’s monthly Wasde crop report, and whether, and by how much, this will lower estimates for the yield for US soybeans (and corn).
The forecast is for a small reduction, of 0.5 bushels per acre to 46.4 bushels per acre, in the soybean yield estimate.
Dry weather of late is seen as having lowered soybean production prospects, with early harvest results proving somewhat disappointing too.
“Early yields are a little below what farmers had hoped for,” ADM Investor Services’ Steve Freed said.
CHS Hedging termed “variable” results so far.
‘Stable ratings’
Still, on the most positive side for soybean yield prospects, for a harvest which is still a while from getting to the key production areas, was the USDA’s Tuesday report rating the crop at 63% “good” or “excellent”.
That was in line with last week, defying expectations of a decline.
“With no decline in crop conditions, the trade is beginning to think we won’t see much of a cut in projected yields at this time,” CHS said.
At Chicago broker RJ O’Brien, Richard Feltes said that the USDA appeared “unlikely” to cut its forecast for soybean yields on Friday, “given stable crop ratings during August and early September”.
‘Fundamentals still bearish’
The same went for corn too, Mr Feltes said.
Analysts expect the Wasde to show a downgrade of 1.1 tonnes per acre to 167.6 tonnes per acre in the US corn estimate, according to a Reuters survey.
But US corn condition has remained pretty steady and elevated too, holding at 68% rated good or excellent in the latest data.
Furthermore, Futures International’s Terry Reilly flagged that “US harvesting pressure appears to be around the corner”, with the surge in supplies from the onset of harvesting in earnest weighing on prices.
“Fundamentals still look bearish, in our opinion.”
Satellite estimate
Still, much comment has been made of an estimate from Descartes Labs Infrared, a New Mexico-based analysis group that utilises largely satellite data, that the US corn crop will reach 13.3bn bushels, a downgraded of 40m bushels month on month.
That is below the 13.599bn bushels that investors are expecting, according to the Reuters survey, besides the current USDA estimate of 13.686bn bushels.
Descartes believes that heavy rains earlier in the year leached out nitrogen fertilizers, of which corn (unlike soybeans) have a big requirement, with the result being that the crop is maturing early and so reducing its yield potential.
Corn futures for December fell in Chicago, but by a modest 0.1% to $3.68 ¾ a bushel.
Russian question
Corn was also supported by fellow grain wheat, which gained 0.3% to $4.73 ¾ a bushel for December delivery, regaining about half of the last session’s losses.
There remain worries about tough global competition in wheat markets, underlined by French data on Thursday, and of ample global supplies.
But Russian seedings remain under the microscope too, despite an estimate from SovEcon of a rise in winter grains plantings for the 2016 harvest.
Terry Reilly said that “higher costs, dryness in the southern regions, and low spot export prices have some wonder if the 2016 winter crop will end up higher than 2015”.
Earlier, Sydney wheat for January closed up 1.1% at Aus$279.00 a tonne, despite the lower performance in Chicago in the last session, which it would typically follow.
