The big news for financial markets overall may be the collapse on Sunday of talks between Greece and its bailout creditors, raising the likelihood of default.
Shares made a weak, although not dismal, start to trading on Monday, with stocks in London down 0.5%, although shares within the eurozone did fare a little worse, with the main Paris index down 0.9% and Frankfurt’s Dax 1.3% lower.
Asian shares showed even smaller losses generally, a notable exception being Shanghai stocks, which dropped 2.0%, in a decline fuelled by a move by the securities regulator to curtail margin trading, and with concerns that a flurry of flotations may drain liquidity.
Still, importantly for ags, the Greek worries as of yet had not had any effect in boosting the greenback, and heaping pressure on prices ofdollar-denominated assets such as many commodities through making them less competitive to buyers in other currencies.
The dollar was in fact down a miniscule 0.01% as of 09:40 UK time (03:40 Chicago time).
‘Increases potential quality problems’
Nonetheless, investors found other reasons to sell grains, and in particular wheat – not that weather in the US southern Plains appears to be showing signs of improving for now, in terms of bringing dryness to speed up harvesting and cut the threat of moisture-spread disease and quality losses.
This week, “moderate-to-heavy showers in south eastern areas will increase wetness and flooding concerns,” weather service MDA said.
This after a weekend which brought 3 inches of rain to some parts of the southern Plains hard red winter wheat area, although amounts were generally 0.25-1.25 inches, MDA said.
At broker Futures International, Terry Reilly said that “rain over the weekend increases potential quality problems”, adding that “US hard red winter wheat country will continue to see rainfall through Tuesday of next week”.
That said, next week the southern Plains may not prove as wet as previously expected, with MDA saying that the “outlook is drier in southern wheat areas versus Friday’s outlook”.
Tobin Gorey at Commonwealth Bank of Australia said: “Crops need to realise that drier pattern otherwise further declines in wheat quality are likely.”
And in Australia itself, confidence is growing in rains for both eastern and western grain belts, prompting a further slide in Sydney wheat futures, by Aus$4.00 per tonne to Aus$302.00 per tonne.
“Parts of Australia’s southern grain regions saw some useful rain over the weekend,” Mr Gorey said, adding that “weather forecasters are expecting useful rainfall to pass through most of Australia’s southern and eastern grain areas this week.
In Western Australia, “weather forecasters are now expecting useful, but by no means heavy, rainfall” too.
Canada also has received some much-needed rains, although much more is seen as needed.
Meanwhile, on the demand side, Russia underlined its price advantage, shown in an Egyptian tender on Friday, by offering the lowest price wheat to an Iraqi tender, at $231 a tonne, including freight.
One US cargo was offered at $285.42 a tonne.
And if bears felt more emboldened, the structure of fund positions allowed them more elbow room for selling without concerns of the bet being “crowded”.
Hedge funds slashed their net short in Chicago wheat by more than 40,000 lots, to a four-month low of 30,768 contracts, in the week to last Tuesday, regulatory data late on Friday showed.
Chicago soft red winter wheat for July fell by 1.1% to $4.98 a bushel, although Kansas City hard red winter wheat fared worse, with the drier forecast for next week, dipping 1.3% to $5.19 ј a bushel.
That was hardly helpful for fellow grain corn either, which is suffering extra pressure from China, which looks like it is trying to resolve the problem of domestic prices which are extremely elevated by international standards, standing at the equivalent of about $9.80 a bushel.
“China is planning on cutting their state corn price in order to encourage greater domestic use and curb imports of cheaper foreign corn,” CHS Hedging said.
“Their current buying scheme was aimed at increasing farm incomes, but also drove domestic prices 30% higher than import prices, while poor quality issues persisted.”
And state inventories were sent soaring too.
Futures International’s Terry Reilly said: “Only 2.5m tonnes of China corn has been sold out of reserves this season.
“They are thought to be sitting on about 120m tonnes of corn,” although frankly there is little confidence in such estimates.
Talk is that China is looking at other ways to resolve the glut, with distillers’ grains (DDGs) a target again, of which there is rumour that China has cancelled two cargos of imports from the US.
“There is talk that they are considering cancelling or postponing six more,” CHS said.
Such cancellations would mean more DDGs backing up in the US and competing with other feed ingredients, and indeed US prices fell by more than $15 a short ton last week.
Still, one support for corn is that concerns are growing for US weather, over which relatively little risk premium has been factored in to prices so far after ideal weather for most of the spring sowing season.
“The US Midwest will remain active with frequent rain over the next week,” Mr Reilly said, noting that “flooding across the western Corn Belt is expected”.
Corn for July fell by 0.6% to $3.51 a bushel.
With DDGs again an issue, soymeal, a key rival as a high protein feed ingredient, found headway tricky, easing 0.8% to $315.00 a short ton.
But soybeans themselves were a little less keen to decline, dropping 0.5% to $9.35 Ѕ a bushel, offered at least a little support by ideas that wet US weather is slowing, and potentially preventing, the last sowings of the oilseed.
Rains fell across northern Kansas and Nebraska are “preventing planting progress in an area that is already far behind,” CHS said.
Further north, “areas of excessive moisture are being identified along the Illinois-Iowa and Iowa-Missouri borders.”
At Country Futures, Terry Reilly said that “producers saw planting delays across Missouri over the weekend”.
He forecast that USDA crop progress data later will show soybean sowings 86% complete, down from 90% a year ago and an average of about 90% too.
More immediately, the market will later, during market hours, see the release of monthly data on the US soybean crush for last month, which is expected to come in 147.3m bushels, a record for May.
Kim Rugel at Benson Quinn Commodities said that if the figure does meet expectations, “it implies the USDA is still underestimating US crush demand” for 2014-15, even after a 10m-bushel upgrade to 1.81bn bushels last week in the forecast.
(Source – http://www.agrimoney.com/marketreport/wheat-leads-grains-lower-amid-some-weather-improvements–3177.html)