MARKET DEVELOPMENT
AM Markets: Grain Futures Ease At Start of Big Data Week
AM Markets: Grain Futures Ease At Start of Big Data Week
09/05/2017 (AgriMoney.com) - A big week for ag data started on a somewhat downbeat note.
This despite some of the early statistics appearing somewhat positive for prices, with China reporting soybean imports of 8.02m tonnes for last month - up 13.4% year on year, and a record for April.
The buy-ins maintained a strong start to 2017 which has now seen volumes for the first four months hit a massive 27.54m tonnes, a gain of 18% year on year.
And imports of vegetable oils were higher too, up 40% year on year, and 24% month on month, to 560,000 tonnes.
Palm up
OK, so palm oil managed some gained helped by this data, which put market focus back on demand at a time of stocking by importers ahead of the Ramadan festival too.
Palm oil futures for July added 1.7% to 2,622 ringgit a tonne in Kuala Lumpur as of 09:40 UK time (03:40 Chicago time), seemingly unphased by the prospect, following Friday's announcement by Washington trade officials, of US import tariffs on Indonesian biodiesel (made from palm oil), as well as that from Argentina (which uses soyoil as the feedstock).
Palm oil closed higher in China too, by 2.1% at 5,318 yuan a tonne on the Dalian exchange for September delivery.
On the Dalian, soyoil futures ended higher too, but by a more modest 1.3% at 5,902 yuan a tonne for September, with the huge soybean imports speaking of large volumes to come from the domestic crush.
'Buy the rumour…'
In Chicago, soyoil managed a smaller gain of 0.7% to 33.13 cents a pound, remaining well below a high of 33.47 cents a pound set in the last session on the US finding that Argentina and Indonesia were guilty of dumping biodiesel on the US, and so should prepare for anti-dumping duties.
These are seen as sending demand for US soyoil higher, as the country produces more domestic biodiesel to make up for the void in domestic supplies.
However, the short duration of the strong gains in soyoil prices following the announcement may have been indicative of a "buy the rumour, sell the fact situation", Benson Quinn Commodities said, with investors having already purchased a number of soyoil contracts in expectation of the announcement.
'Fill the void'
That said, hedge funds remained net short in Chicago soyoil futures and options by 29,388 lots as of Tuesday last week, regulatory data released late on Friday showed.
And some commentators foresee a bigger reaction ahead, with Rabobank forecasting 15-20% price appreciation, based on an idea that US soyoil stocks will turn out 500m pounds lighter than where they would have been, thanks to the extra demand from biodiesel plants.
Terry Reilly at Futures International forecast that "US soyoil for biodiesel demand will increase by a minimum 400m pounds next season, to partially fill the void of sharply lower Argentina imports".
However, he added that "long term, it's hard to predict how soybean oil prices will react".
'Historically a flat month'
But futures in soybeans themselves eased despite the Chinese import data, the boost from which was tempered by a separate report, from the China National Grain and Oils Information Centre, forecasting a 9.2% rise to 14.3m tonnes in domestic output of the oilseed this year.
The forecast reflects an estimate of a 10.5% rise to 7.15m hectares in sowings, as farmers shift away from corn in the face of reduced subsidy incentives for the grain, of which seedings will drop by 3.7% to 36.8m hectares.
Besides, historically, May is "is historically a flat month for soybean price action prior to the typically supportive June price action", Water Street Solutions said.
"The $9.90-a-bushel area will likely be solid resistance for now ahead of some summer weather issue."
Soybean futures for July eased by 0.3% to $9.70 a bushel.
'Fundamental leader to the downside'
There were some jitters ahead of the US Department of Agriculture's Wasde report on world crop supply and demand, due on Wednesday, which be a particularly big edition of the bellwether monthly briefing, in showing the first forecasts for 2017-18.
For soybeans, the US stocks figure for the close of the season is expected at 555m bushels, well above the 438m bushels that the Wasde is expected to show for inventories at the end of 2016-17.
"A 27% increase in 2017-18 stocks projected in the estimates causes me to continue to strongly recommend looking at the soy complex as the fundamental leader to the downside as we head into the post-planting time period," said Mike Zuzolo at Global Commodity Analytics.
"This big… number should hit the trade, especially when viewing these numbers through the lens of how many stocks of soybeans the Brazilian farmer is holding."
'Simply doesn't equate'
The US corn stocks number for 2017-18 is seen coming in at 2.12bn bushels, down a touch from the 2.326bn bushels expected at the close of this season.
That said, this figure "simply doesn't equate in my view", Mr Zuzolo said.
"I recognise that the US corn export demand in the new-crop year is unlikely to be as great as this current marketing year, but there are also likely going to be less foreign supplies outside South America.
"The market must be assuming a top-end yield" for the US corn crop this year.
Sowings progress
Some insight into the chances of getting a big yield may be gained later on Monday, with the release by the USDA of weekly US crop progress data, much watched at this time of year for the advancement of sowings.
The extent of progress by mid-May, for corn, is seen as something of an indicator of yield prospects.
And seeding has been difficult, given the wet and cold US weather, better publicised for damaging winter wheat production prospects.
In fact, Tobin Gorey at Commonwealth Bank of Australia noted that "the eastern US Midwest has seen modest weekend rainfall to date.
"Weather forecasters expected somewhat drier weather over the weekend so the drying out process will have been delayed at least a little more."
'In bad shape'
In Arkansas alone, as much as 1.8m acres of cropland have been "affected" by inundations, according to the University of Arkansas.
"Arkansas is in bad shape across the north eastern part of the state," Futures International's Terry Reilly said, forecasting that, nationally, the crop progress report will show a rise of 10 points, to 44%, in corn sowings progress.
RJ O'Brien put the figure at potentially even lower, at a little above 40%, compared with an average for the time of year the broker pegged at 51%.
'Planting will leap substantially'
Still, the broker added that with forecasts better ahead, particularly for the western Corn Belt, farmers look like making accelerated progress this week.
"Trade knows the US corn planting will leap ahead substantially on the May 15 crop progress report given open week ahead in the west," Richard Feltes at RJ O'Brien said.
"There are enough areas planting to preclude any alarm bells, although delayed areas will pre-empt major sell-offs."
In fact, MDA forecat that this week in the Midwest "expected rains in southern areas will increase wetness threats and slow corn/soybean planting".
Still, corn futures for July dropped 0.4% to $3.87 a bushel.
'Not supportive'
Wheat fared worse, dropping 0.8% to $4.38 ¾ a bushel in Chicago for July delivery, after the data on hedge fund positioning showed them having covered a large chunk of their net in Chicago futures and options in the grain.
The net short dropped by more than 37,000 lots week on week, to 124,638 contracts, while in Kansas City hard red winter wheat, speculators returned to a small net long.
"Their short in Chicago has gotten much more manageable and they may turn sellers again in the hard wheat contracts," said Benson Quinn Commodities, adding that it did "not view today's [positions] report for wheat as supportive".
In fact, Kansas City hard red winter wheat - the type grown in the southern Plains, where the late-April US storms were at their worst – edging a more modest 0.4% lower to $4.48 ¼ a bushel, keeping a little premium over pre-storm levels.
"The market cannot price as if the storms of the weekend before last never happened," CBA's Tobin Gorey said.
"Kansas July at $4.50 a bushel retains some worry, about $0.30 worth."
This despite some of the early statistics appearing somewhat positive for prices, with China reporting soybean imports of 8.02m tonnes for last month - up 13.4% year on year, and a record for April.
The buy-ins maintained a strong start to 2017 which has now seen volumes for the first four months hit a massive 27.54m tonnes, a gain of 18% year on year.
And imports of vegetable oils were higher too, up 40% year on year, and 24% month on month, to 560,000 tonnes.
Palm up
OK, so palm oil managed some gained helped by this data, which put market focus back on demand at a time of stocking by importers ahead of the Ramadan festival too.
Palm oil futures for July added 1.7% to 2,622 ringgit a tonne in Kuala Lumpur as of 09:40 UK time (03:40 Chicago time), seemingly unphased by the prospect, following Friday's announcement by Washington trade officials, of US import tariffs on Indonesian biodiesel (made from palm oil), as well as that from Argentina (which uses soyoil as the feedstock).
Palm oil closed higher in China too, by 2.1% at 5,318 yuan a tonne on the Dalian exchange for September delivery.
On the Dalian, soyoil futures ended higher too, but by a more modest 1.3% at 5,902 yuan a tonne for September, with the huge soybean imports speaking of large volumes to come from the domestic crush.
'Buy the rumour…'
In Chicago, soyoil managed a smaller gain of 0.7% to 33.13 cents a pound, remaining well below a high of 33.47 cents a pound set in the last session on the US finding that Argentina and Indonesia were guilty of dumping biodiesel on the US, and so should prepare for anti-dumping duties.
These are seen as sending demand for US soyoil higher, as the country produces more domestic biodiesel to make up for the void in domestic supplies.
However, the short duration of the strong gains in soyoil prices following the announcement may have been indicative of a "buy the rumour, sell the fact situation", Benson Quinn Commodities said, with investors having already purchased a number of soyoil contracts in expectation of the announcement.
'Fill the void'
That said, hedge funds remained net short in Chicago soyoil futures and options by 29,388 lots as of Tuesday last week, regulatory data released late on Friday showed.
And some commentators foresee a bigger reaction ahead, with Rabobank forecasting 15-20% price appreciation, based on an idea that US soyoil stocks will turn out 500m pounds lighter than where they would have been, thanks to the extra demand from biodiesel plants.
Terry Reilly at Futures International forecast that "US soyoil for biodiesel demand will increase by a minimum 400m pounds next season, to partially fill the void of sharply lower Argentina imports".
However, he added that "long term, it's hard to predict how soybean oil prices will react".
'Historically a flat month'
But futures in soybeans themselves eased despite the Chinese import data, the boost from which was tempered by a separate report, from the China National Grain and Oils Information Centre, forecasting a 9.2% rise to 14.3m tonnes in domestic output of the oilseed this year.
The forecast reflects an estimate of a 10.5% rise to 7.15m hectares in sowings, as farmers shift away from corn in the face of reduced subsidy incentives for the grain, of which seedings will drop by 3.7% to 36.8m hectares.
Besides, historically, May is "is historically a flat month for soybean price action prior to the typically supportive June price action", Water Street Solutions said.
"The $9.90-a-bushel area will likely be solid resistance for now ahead of some summer weather issue."
Soybean futures for July eased by 0.3% to $9.70 a bushel.
'Fundamental leader to the downside'
There were some jitters ahead of the US Department of Agriculture's Wasde report on world crop supply and demand, due on Wednesday, which be a particularly big edition of the bellwether monthly briefing, in showing the first forecasts for 2017-18.
For soybeans, the US stocks figure for the close of the season is expected at 555m bushels, well above the 438m bushels that the Wasde is expected to show for inventories at the end of 2016-17.
"A 27% increase in 2017-18 stocks projected in the estimates causes me to continue to strongly recommend looking at the soy complex as the fundamental leader to the downside as we head into the post-planting time period," said Mike Zuzolo at Global Commodity Analytics.
"This big… number should hit the trade, especially when viewing these numbers through the lens of how many stocks of soybeans the Brazilian farmer is holding."
'Simply doesn't equate'
The US corn stocks number for 2017-18 is seen coming in at 2.12bn bushels, down a touch from the 2.326bn bushels expected at the close of this season.
That said, this figure "simply doesn't equate in my view", Mr Zuzolo said.
"I recognise that the US corn export demand in the new-crop year is unlikely to be as great as this current marketing year, but there are also likely going to be less foreign supplies outside South America.
"The market must be assuming a top-end yield" for the US corn crop this year.
Sowings progress
Some insight into the chances of getting a big yield may be gained later on Monday, with the release by the USDA of weekly US crop progress data, much watched at this time of year for the advancement of sowings.
The extent of progress by mid-May, for corn, is seen as something of an indicator of yield prospects.
And seeding has been difficult, given the wet and cold US weather, better publicised for damaging winter wheat production prospects.
In fact, Tobin Gorey at Commonwealth Bank of Australia noted that "the eastern US Midwest has seen modest weekend rainfall to date.
"Weather forecasters expected somewhat drier weather over the weekend so the drying out process will have been delayed at least a little more."
'In bad shape'
In Arkansas alone, as much as 1.8m acres of cropland have been "affected" by inundations, according to the University of Arkansas.
"Arkansas is in bad shape across the north eastern part of the state," Futures International's Terry Reilly said, forecasting that, nationally, the crop progress report will show a rise of 10 points, to 44%, in corn sowings progress.
RJ O'Brien put the figure at potentially even lower, at a little above 40%, compared with an average for the time of year the broker pegged at 51%.
'Planting will leap substantially'
Still, the broker added that with forecasts better ahead, particularly for the western Corn Belt, farmers look like making accelerated progress this week.
"Trade knows the US corn planting will leap ahead substantially on the May 15 crop progress report given open week ahead in the west," Richard Feltes at RJ O'Brien said.
"There are enough areas planting to preclude any alarm bells, although delayed areas will pre-empt major sell-offs."
In fact, MDA forecat that this week in the Midwest "expected rains in southern areas will increase wetness threats and slow corn/soybean planting".
Still, corn futures for July dropped 0.4% to $3.87 a bushel.
'Not supportive'
Wheat fared worse, dropping 0.8% to $4.38 ¾ a bushel in Chicago for July delivery, after the data on hedge fund positioning showed them having covered a large chunk of their net in Chicago futures and options in the grain.
The net short dropped by more than 37,000 lots week on week, to 124,638 contracts, while in Kansas City hard red winter wheat, speculators returned to a small net long.
"Their short in Chicago has gotten much more manageable and they may turn sellers again in the hard wheat contracts," said Benson Quinn Commodities, adding that it did "not view today's [positions] report for wheat as supportive".
In fact, Kansas City hard red winter wheat - the type grown in the southern Plains, where the late-April US storms were at their worst – edging a more modest 0.4% lower to $4.48 ¼ a bushel, keeping a little premium over pre-storm levels.
"The market cannot price as if the storms of the weekend before last never happened," CBA's Tobin Gorey said.
"Kansas July at $4.50 a bushel retains some worry, about $0.30 worth."