OK, US farmers didn’t manage quite the corn plantings progress that investors had imagined.
US Department of Agriculture data overnight showed sowings reaching 19% as of Sunday, up 10 points week on week, but behind the average of 25% by now, and a little below most market forecasts too.
“Farmers are running a little behind on planting in the eastern states of the US Corn Belt because of soggy conditions,” Tobin Gorey at Commonwealth Bank of Australia noted.
Growers in states such as Indiana and Kentucky were particularly far behind the usual pace.
‘Great strides will be made’
However, investors ignored nonetheless this invitation to inject a bit of risk premium back into corn prices, amid expectations of improved weather allowing mega sowings progress this week.
“Forecasts for the next week or two appear to be very favourable for corn planting and the US farmer is expected to have made great progress next week at this time,” CHS Hedging said.
“Great strides will be made this week” with corn seedings, Brian Henry at Benson Quinn Commodities, if noting that “forecasts aren’t exactly void of moisture”, which could potentially slow fieldwork.
Indeed, Terry Reilly at Chicago-based Futures International said that forecasts show that “a period of wetter weather begins Sunday and continues through May 10” in the western and central Midwest.
And this week, “regular rounds of light showers will occur in Ohio and surrounding areas and planting will be slow to advance”.
‘We are not worried’
Still, Mr Reilly added that this outlook was not wet enough to cause concern, saying that “we are not worried” over the slower-than-expected progress last week, citing “drier conditions this week in the Corn Belt overall.
“Additionally, the corn will be sown in moist soil,” improving yield prospects.
Indeed, investors found little excuse to reverse their negative pitch on corn futures, especially with reports too that further cases of bird flu have been found in flocks in Iowa, reviving concerns of a sector slowdown and worsened prospects for feed demand.
“Bird flu continues to negatively impact corn demand on a localised basis as infected birds are euthanized,” CHS Hedging said.
Chicago corn for July stood unchanged at $3.64 ѕ a bushel as of 09:40 UK time (03:40 Chicago time), earlier hitting a fresh six-month low of $3.63 ј a bushel.
‘Soybean selling opportunity’
Again, soybeans outperformed their fellow row crop, despite some concerns that the ratio of November soybean futures: December corn futures – a much-watched metric for indicating the relative appeal of the crops in farmers’ spring sowings plans – has reached levels unduly favouring the oilseed.
“Global balance sheets do not need, nor do they support, the rally of beans over corn with the November soybeans: December corn ratio firming to 2.48:1, its highest since October 2014,” Benson Quinn Commodities said.
“This rally in the ratio is a soybean selling opportunity.”
Still, the strong hopes for US corn sowings are only supporting an elevated ratio.
“Trade sources noted further unwinding of long corn/short soybean trades on Monday on the outlook for a timely start to US corn planting,” said Richard Feltes at broker RJ O’Brien.
‘Higher export demand’
Furthermore, while soymeal demand stands to be hugely affected if the US bird flu outbreak spreads, investors at least have the reassurance of decent export demand.
Futures International’s Terry Reilly noted “higher export demand” after data on Monday showed stronger-than-expected US export inspections of 311,622 tonnes, and a separate announcement of the sale of 158,000 tonnes of the oilseed to an unknown import buyer.
And CHS Hedging flagged “talk that China was a buyer of a few cargos of US beans for October loading ahead of a change in VAT.
“A VAT reduction would improve their crush margins, which is supportive demand.”
With US sowings of the oilseed starting a little slower than expected too, at 2% complete as of Sunday, soybean futures for July gained 0.4% to $9.77 ј a bushel.
And this time, wheat rose too, after the USDA crop progress data showed US seedlings not improving, as investors had expected after rains for the drought-hit southern Plains.
The proportion of US winter wheat rated “good” or “excellent” was unchanged at 42%, with no improvement in the ratings in the important hard red winter wheat states of Oklahoma and Kansas, where crops have received some much-needed rains.
Still, the data showed spring wheat plantings were ahead of expectations, at 55% complete, and well above the 29% typically seeded as of Sunday, with the advanced progress of sowings a reflection of dry conditions at a time of year when many farms in the northern US and Canada are often submerged by snow melt.
Not that the dryness is all good news, speaking of some setback to crop development.
“Regarding top soil, the northern Plains remain dry as temperatures migrate towards average to above average,” Benson Quinn Commodities’ Brian Henry said.
“Given the dry conditions, planting will remain the focus, but legitimate rainfall in the next 10 days would be a big benefit to much of this region.”
Still, that is one of the few potential concerns for wheat supplies.
“European crop numbers have been upgraded. And, last night, there are now signs that Russia’s crop may be larger too,” CBA’s Tobin Gorey said.
Wheat gained, but its headway was limited to 0.7% for July delivery, taking the contract to $4.76 Ѕ a bushel, regaining only part of the losses of the last session.
‘Drier conditions are expected’
Cotton retreated further too, by 0.4% to 65.94 cents a pound in New York for July, as investors took more profits following the temporary achievement in the last session of a seven month high of 67.50 cents a pound.
The drop also reflected hopes of a pick-up in sowings progress, after USDA data showing a further slow week for US plantings, as rains limited sowings to 10% complete, up only 2 points week on week, and behind the typical 16%.
“Farmers are being delayed in planting cotton in the US Delta and South East and will need to catch up at some point,” Mr Gorey said.
“Weather forecasters expect rainfall in the US Delta and South East to continue today but then drier conditions are expected to return and allow planting.
“That forecast needs to be realised as later rain events are likely to interfere with planting again next week.”