Soybeans again outperformed grains, although that wasn’t saying much.
But can it last?
Imminent US data will likely determine whether the soybean market, which diverged from corn and wheat peers in the last session by showing gains, can maintain its newly-rediscovered outperformance.
The Farm Service Agency will unveiled statistics giving an insight into how much crops farmers really sowed by releasing data showing on what areas have been registered, and what indeed was written off as prevent plant.
There are ideas that US farmers were unable to plant a stack of soybean area thanks to a wet spring, implying a downgrade to the US Department of Agriculture plantings estimate, and so a cut to production prospects too.
Some investors believe the FSA will “affirm the suspected overstatement of US soy area”, said Richard Feltes at RJ O’Brien, with some estimates of a loss above 1m acres.
Fed meeting ahead
Still, if that was enough to keep soybeans in positive territory early on Tuesday, the headway was not huge.
Also to factor in was the broader uncertainty over the prospect on Thursday of a Federal Reserve meeting which could raise US interest rates for the first time in a decade.
A rise in rates would imply a strong dollar which, in reducing the affordability of dollar-denominated exports such as many commodities, would be a depressant to many ag markets.
(That said, Asian share markets posted healthy gains, amid waning expectations that the Fed will act, with Shanghai stocks soaring 4.9%, Seoul ones 2.2% and Tokyo shares gaining 0.8%.)
‘Favourable early yield results’
And as another negative, the ideas of disappointing yields from early US harvest are being tested as combines progress.
“Major harvest activity remains at least a week off, but areas of the western Corn Belt are busy with favourable early yield results,” said CHS Hedging.
“There continues to be evidence that late season rains have once again helped yields.”
Richard Feltes at RJ O’Brien noted that “we are seeing more ‘better-than-expected’ updates” to the US autumn harvest, including corn.
‘Suffered little stress’
It must be noted that, it is the eastern Corn Belt where investors have most concerns.
Still, the USDA reminded in a report overnight that the east-west split is not so binary, highlighting that its unexpected upgrade on Friday to its estimate for the US soybean yield was down in part to an upgrade to the Illinois crop (eastern Corn Belt), offsetting downgrades in the likes of Minnesota (western).
“Midwestern soybean crops suffered little stress in August as it was generally cooler than average and rainfall was seasonally normal,” the USDA added.
“A heat spell in late August may have actually benefited crop development for areas such as Missouri where development had been lagging following delayed planting.”
More supportive to prices was an outlook for rains in Brazil which will delay sowings of what are expected to be a record soybean area, the plantings period for which opened on Tuesday in Mato Grosso, the top growing state.
“In spite of the lower soybean prices internationally, Brazilian farmers are actually seeing an increase in the domestic soybean prices thanks to the stunning weakening of the Brazilian currency compared to the US dollar,” said Michael Cordonnier at Soybean and Corn Advisor.
“Brazilian farmers are generally feeling more optimistic toward the upcoming growing season and they are expected to increase their soybean acreage by 3-5%.”
OK, looking further ahead, while wetness will improve soil moisture for what is planted, there is the chance that, in an El Nino year, the rains will not stop, meaning that seedings will not get undertaken.
And soybeans also found support this time from soyoil, which recovered somewhat from a poor showing in the last session, encouraged by talk of cancellations by China of orders from Argentina.
At Chicago-based broker Futures International, Terry Reilly noted talk “that China cancelled four cargos of Argentina soyoil as they could not get import permits from the Chinese government.
“And one cargo of Brazilian soybean oil was rejected due to quality problems.”
Soyoil for December gained 0.2% to 26.71 cents a pound as of 09:20 UK time (03:20 Chicago time), offsetting a 0.2% drop to $316.70 a short ton in Chicago soymeal for December.
Mr Reilly also noted that while soymeal supplies “remain thin across selected parts of the country”, the likes of Chicago and Gilman “showed signs of a breaking basis as producers began harvest season”, meaning extra soybeans to crush, and so boosting meal supply hopes.
‘Yields are improving’
Soybeans for November stood flat at $8.89 a bushel.
Still, that was better than corn futures could manage, in falling 0.3% to $3.89 ½ a bushel for December delivery.
The grain is not expected to see quite such acreage losses implied by the FSA report, while appears in particular to be seeing an uptick in yield reports.
“Evidence is surfacing that yields are improving and aren’t as bad as some traders are thinking,” CHS Hedging said.
‘Useful planting rain’
Wheat futures dropped too, by 0.5% to $4.92 ¼ a bushel for the December contract.
At ADM Investor Services, Steve Freed flagged “continued talk that wheat prices continue to slide in European Union and the Black Sea”, implying heightened competition on export markets.
And as for the 2016 US crop, conditions are decent, if not ideal for winter wheat plantings.
“US winter wheat seeding has begun with good soil moisture conditions in many regions,” CHS Hedging said.
At Commonwealth Bank of Australia, Tobin Gorey said that “US hard red winter wheat regions are likely to get some useful planting rain next week.
“Good pre-winter establishment, though, will require more rain.”
(Source – http://www.agrimoney.com/marketreport/am-markets-soybean-futures-hold-firm-ahead-of-us-area-data–3297.html)