New month, new money?
Just as month ends have a reputation for bringing weaker grain prices, as funds sell to raise cash to pay redemptions, month beginnings are seen as often bringing in fresh money, supporting prices.
But any such effect had as yet to make itself felt in early deals, when a range of markets seemed to be struggling.
Shares, for instance, opened 0.5% lower in London, while Brent crude was down 0.9%, back below $52 a barrel.
For commodities, the decline meant extending the dismal performance of July, when they reached their lowest prices in six years (or a lot more), depending on which index you follow.
One big problem for many markets remained China, with fresh negative data in terms of a Caixin/Markit purchasing managers’ index which showed China’s manufacturing sector contracting last month by more than previously thought, a decline due largely to weakness in new orders.
The index was revised lower to 47.8, below the 50.0 level which indicates neutral dynamics, and the sharpest pace of contraction since August 2012.
“Data signalled that both domestic and foreign demand had softened in the latest survey period, as highlighted by new export work also falling in July after a slight pick-up in June,” Caixin said.
Shanghai shares, having fallen 14% last month, dropped a further 1.1% on Monday.
And weakness was felt on many Chinese commodity markets too, with rubber for January settling down 1.0% at 12,570 yuan a tonne in Shanghai, while Zhengzhou sugar for January dropped 0.9% to 5,277 yuan a tonne.
Dalian palm oil dropped 1.5% to 4,700 yuan a tonne.
‘Ease dryness concerns’
Nor for grain investors was there any sign of a serious weather threat emerging, with MDA saying that the Midwest forecast remained “unchanged” from Friday’s, improved, outlook.
“Slightly below normal temperatures and showers this week will maintain favourable conditions for [Midwest] corn/soybeans this week,” MDA said.
Meanwhile in the western Prairies, where a lack of rainfall has been an issue, “expected showers in the will ease dryness concerns”.
Showers will also ease dryness worries in the North China Plains, a major corn and soybean growing area, besides too in Western Australia, Australia’s top wheat-growing state.
‘Lamenting poor demand’
One area where weather does remain a concern is in the south eastern US, where MDA noted that “drier weather in the Delta will stress soybean growth”, while the dryness is proving an issue for cotton too.
“Mostly hot and dry weather conditions are expected to persist over most US cotton producing regions over the near-term,” said Louis Rose at the Rose Report. based in Tennessee.
However, he noted that at the weekend “some precipitation is occurring across Texas and Oklahoma production areas”, Texas being the top US cotton-growing state.
And outside the US, Mr Rose also flagged that mills in China, the top cotton consuming country, “continue to lament poor demand for yarn and textile for both domestic consumption and for export.
Meanwhile in India, the biggest cotton producer, “increased monsoon rainfall continues to boost the nation’s production prospects”.
Cotton for December eased 0.5% to 63.87 cents a pound in New York as of 09:30 UK time (03:30 Chicago time).
‘Heatwave looks likely’
In Europe, dryness “will continue to stress” autumn-harvested crops such as corn “across central and southern areas”, MDA said.
And WxRisk.com said that a “European/ Ukraine heatwave looks likely” in both six-to-10-day and 11-to-15 day outlooks.
However, while an issue for corn, it is not so for winter wheat, which is drying off nicely amid the harvest.
In France, Agritel noted that “harvest is progressing quickly and could end by the end of the week”.
In Chicago, wheat futures fell by 0.9% to $4.94 ¾ a bushel for September delivery.
US corn imports?
Fellow grain corn fared even worse, falling by 1.3% to $3.66 ¼ a bushel for September delivery, and by 1.4% to $3.76 a bushel for the best-traded December lot.
There are some ideas that data later from the US Department of Agriculture could show a further, counter-seasonal improvement in the condition rating for the US corn crop, although the consensus appears to be for an unchanged figure in “good” or “excellent” terms.
On the demand side, while CHS flagged “talk that South Korea has purchased more corn for October/November/December delivery, there is also talk that some South American corn has been sold in to the south eastern US for fall delivery as well”.
Meanwhile, soybeans for August dropped 0.5% to $9.76 a bushel, while the best-traded November lot fell by 1.0% to $9.31 a bushel, earlier hitting a one-month low of $9.30 a bushel.
The oilseeds complex at least had some bullish news in a downgrade by Strategie Grains of 380,000 tonnes to 21.4m tonnes in its forecast for the EU rapeseed harvest, the world’s biggest.
Still, even though rapeseed is an oil-heavy (rather than meal-heavy) oilseed, in Kuala Lumpur, palm oil made a particularly weak start to August, falling by 1.8% to 2,082 ringgit a tonne for October.
Earlier, the contract fell to a three-month low, for a benchmark contract, of 2,079 ringgit a tonne.
The decline was attributed to the drop on the Dalian, with China a major palm oil importer.
Furthermore, there was continued disappointment over Malaysian palm export data from cargo surveyors for July, with SGS putting estimating a decline of 9.2% month on month, and Intertek putting the drop at 6.4%.
(Source – http://www.agrimoney.com/marketreport/am-markets-ag-futures-extend-poor-performance-into-august—3244.html)