MARKET DEVELOPMENT
Morning Markets: Bears Regain Grip on Grains. But Palm Rises
Morning Markets: Bears Regain Grip on Grains. But Palm Rises
23/08/2013 (Agrimoney.com) - The pattern of alternate sessions of higher and lower grain prices would suggest that Thursday should be a down day.
And it started that way, although the extent of the decline was limited somewhat by the dry Midwest weather outlook.
"The six-to-10 day European model continues to show impressive heat for all of the central and upper Plains and western Corn Belt, and the heat now extends into a good portion of the eastern Corn Belt," WxRisk.com said.
"Relative to normal, the hottest temperatures will be over Minnesota, Iowa, Wisconsin and northern Illinois," with temperatures of 91-95 degrees Fahrenheit (32-25 Celsius) as of Monday afternoon, with temperatures topping 100 degrees Fahrenheit in the Dakotas, the weather service said.
That said, recent hours appear to have bought some rains as a temporary cold band comes south from Canada, although early on at least, "the heaviest thunderstorms can be found over Wisconsin".
Tour Results
That is not to say that the US appears on for anything but large crops, particularly in corn, as the Pro Farmer tour reminded, pegging the Illinois corn yield at 170.48 bushels per acre, above the three-year average of 148.04 bushels per acre besides last year's drought-affected 121.60 bushels per acre.
While a complete Iowa figure is not yet available, initial indications for western areas were also above the three-year average, although remembering of course that one of those three years brought a once-in-a-generation drought.
For soybeans, the picture is not quite so optimistic, although a big improvement is expected. The Illinois soybean count, at 1,115.97 pods per plot (3 feet x 3 feet) was well above last year's 944.05 pods.
Still, it was below the average of 1,149.47 pods, and tour scouts repeated cautions over delayed development, raising the importance of weather for the rest of the growing season, and in particular of the timing of the first autumn frosts.
La Nina Warning
Richard Feltes at RJ O'Brien said that, this far, there was "no sign of derailing the rally in soybeans, which have the most to lose [in yield terms] from ongoing late summer dryness".
Indeed, some funds have been adding to long positions "amid talk of a 1-2 bushels-per-acre decline in 2013 soybean yield from the US Department of Agriculture's August forecast of 42.6 bushels per acre".
Such a downgrade "would slash 75m-150m bushels off the 2013 crop, and set the stage for tight farmer holding, inverses in futures, and a heightened need for 2014 South American weather".
And that last factor may be in doubt if an observation by Gail Martell, at Martell Crop Projections, holds out, noting that recent US weather patterns "may be linked to a strengthening La Nina signal".
"Midwest drought is a common occurrence with La Nina. So is heavy rainfall in the South East US. Both anomalies have developed this summer," she said.
Prices Ease
With official Canadian data from Wednesday showing a lower-than-expected, if still record, crop of rival oilseed canola too in the top exporting country, soybeans for November fell by a modest 0.6% to $12.96 a bushel as of 09:50 UK time (03:50 Chicago time).
Corn, for which arguments are really about whether the US crop will be huge or mega-huge, was more enthusiastic in its decline, dropping 1.4% to $4.76 ½ a bushel for December delivery.
There has also been much comment over the potential for elevated corn values pricing US corn out of the export market, although more will be known later, with US weekly export sales data, expected to show 25,000-125,000 tonnes of old crop, and 700,000-850,000 tonnes of new.
For soybeans, at best 125,000 tonnes of old crop are seen sold, but 1.3m-1.7m tonnes of new crop, after the spree of purchases by China, which has now gone cold.
Wheat Exports
For wheat, export sales of 450,000-550,000 tonnes are forecast, and investors did not appear hopeful of a bullish surprise, cutting prices of Chicago's December contract by 0.7% to $6.44 ½ a bushel.
Indeed, the import market on wheat has gone quieter too, with crisis-hit Egypt now absent for two weeks, and China taking a lower profile after its spree last month.
Indeed, talk from an Australian grains conference was the China has already bought 3.7m tonnes of US wheat, besides, 2.2m tonnes of Australian.)
Meanwhile, the US spring wheat harvest, with talk of "good yields, good test weights, colour" but with "protein content typically on the slow side of normal in many areas", Benson Quinn Commodities said.
Cotton Bounces
Ag bulls had better news from soft commodities, where cotton pulled out of its tailspin, which cost it nearly 10% in two sessions, to stand up 0.7% at 84.83 cents a pound in New York for December delivery.
The plunge has been prompted by a surprise upgrade to the condition of the US crop, and improved hopes for Indian production, and supercharged by liquidation by hedge funds of a large net long position.
And arabica coffee bounced a little too, edging 0.1% higher to 117.30 cents a pound, helped by a small revival in the value of the Brazilian real.
China Boost
In Kuala Lumpur, palm oil added 0.9% to 2,355 ringgit a tonne, its highest for more than a month, helped by positive data on China's economy, where the HSBC purchasing managers' index for manufacturing rose to a four-month high of 50.1, up from 47.7 a month earlier, and the largest month-to-month gain in three years.
"Fine-tuning" of policy measures is boosting the sector, and further gains should deliver "some upside surprises to China's growth in the coming months", said Hongbin Qu, co-head of Asian Economic Research at HSBC.
Sim Han Qiang at broker Phillip Futures said that the stronger economic data signalled that "China, the second-largest buyer of palm oil, is likely to boost palm oil demand."
And it started that way, although the extent of the decline was limited somewhat by the dry Midwest weather outlook.
"The six-to-10 day European model continues to show impressive heat for all of the central and upper Plains and western Corn Belt, and the heat now extends into a good portion of the eastern Corn Belt," WxRisk.com said.
"Relative to normal, the hottest temperatures will be over Minnesota, Iowa, Wisconsin and northern Illinois," with temperatures of 91-95 degrees Fahrenheit (32-25 Celsius) as of Monday afternoon, with temperatures topping 100 degrees Fahrenheit in the Dakotas, the weather service said.
That said, recent hours appear to have bought some rains as a temporary cold band comes south from Canada, although early on at least, "the heaviest thunderstorms can be found over Wisconsin".
Tour Results
That is not to say that the US appears on for anything but large crops, particularly in corn, as the Pro Farmer tour reminded, pegging the Illinois corn yield at 170.48 bushels per acre, above the three-year average of 148.04 bushels per acre besides last year's drought-affected 121.60 bushels per acre.
While a complete Iowa figure is not yet available, initial indications for western areas were also above the three-year average, although remembering of course that one of those three years brought a once-in-a-generation drought.
For soybeans, the picture is not quite so optimistic, although a big improvement is expected. The Illinois soybean count, at 1,115.97 pods per plot (3 feet x 3 feet) was well above last year's 944.05 pods.
Still, it was below the average of 1,149.47 pods, and tour scouts repeated cautions over delayed development, raising the importance of weather for the rest of the growing season, and in particular of the timing of the first autumn frosts.
La Nina Warning
Richard Feltes at RJ O'Brien said that, this far, there was "no sign of derailing the rally in soybeans, which have the most to lose [in yield terms] from ongoing late summer dryness".
Indeed, some funds have been adding to long positions "amid talk of a 1-2 bushels-per-acre decline in 2013 soybean yield from the US Department of Agriculture's August forecast of 42.6 bushels per acre".
Such a downgrade "would slash 75m-150m bushels off the 2013 crop, and set the stage for tight farmer holding, inverses in futures, and a heightened need for 2014 South American weather".
And that last factor may be in doubt if an observation by Gail Martell, at Martell Crop Projections, holds out, noting that recent US weather patterns "may be linked to a strengthening La Nina signal".
"Midwest drought is a common occurrence with La Nina. So is heavy rainfall in the South East US. Both anomalies have developed this summer," she said.
Prices Ease
With official Canadian data from Wednesday showing a lower-than-expected, if still record, crop of rival oilseed canola too in the top exporting country, soybeans for November fell by a modest 0.6% to $12.96 a bushel as of 09:50 UK time (03:50 Chicago time).
Corn, for which arguments are really about whether the US crop will be huge or mega-huge, was more enthusiastic in its decline, dropping 1.4% to $4.76 ½ a bushel for December delivery.
There has also been much comment over the potential for elevated corn values pricing US corn out of the export market, although more will be known later, with US weekly export sales data, expected to show 25,000-125,000 tonnes of old crop, and 700,000-850,000 tonnes of new.
For soybeans, at best 125,000 tonnes of old crop are seen sold, but 1.3m-1.7m tonnes of new crop, after the spree of purchases by China, which has now gone cold.
Wheat Exports
For wheat, export sales of 450,000-550,000 tonnes are forecast, and investors did not appear hopeful of a bullish surprise, cutting prices of Chicago's December contract by 0.7% to $6.44 ½ a bushel.
Indeed, the import market on wheat has gone quieter too, with crisis-hit Egypt now absent for two weeks, and China taking a lower profile after its spree last month.
Indeed, talk from an Australian grains conference was the China has already bought 3.7m tonnes of US wheat, besides, 2.2m tonnes of Australian.)
Meanwhile, the US spring wheat harvest, with talk of "good yields, good test weights, colour" but with "protein content typically on the slow side of normal in many areas", Benson Quinn Commodities said.
Cotton Bounces
Ag bulls had better news from soft commodities, where cotton pulled out of its tailspin, which cost it nearly 10% in two sessions, to stand up 0.7% at 84.83 cents a pound in New York for December delivery.
The plunge has been prompted by a surprise upgrade to the condition of the US crop, and improved hopes for Indian production, and supercharged by liquidation by hedge funds of a large net long position.
And arabica coffee bounced a little too, edging 0.1% higher to 117.30 cents a pound, helped by a small revival in the value of the Brazilian real.
China Boost
In Kuala Lumpur, palm oil added 0.9% to 2,355 ringgit a tonne, its highest for more than a month, helped by positive data on China's economy, where the HSBC purchasing managers' index for manufacturing rose to a four-month high of 50.1, up from 47.7 a month earlier, and the largest month-to-month gain in three years.
"Fine-tuning" of policy measures is boosting the sector, and further gains should deliver "some upside surprises to China's growth in the coming months", said Hongbin Qu, co-head of Asian Economic Research at HSBC.
Sim Han Qiang at broker Phillip Futures said that the stronger economic data signalled that "China, the second-largest buyer of palm oil, is likely to boost palm oil demand."