The last episode of In the Grain Markets left corn futures within 2 cents of regaining the psychologically important $4.00-a-bushel mark in Chicago, for the first time since July.
Will they cross the milestone this session?
Not in early deals, at least. While the benchmark December contract did post further headway, as of 09:05 UK time (03:05 Chicago time) the lot had reached only $3.98 ¾ a bushel, a gain of 0.1%.
One factor which supported dollar-denominated commodities as a whole in the last session, the dollar, turned less favourable by staging a small rebound against a basket of currencies.
(A firmer greenback cuts the competitiveness of dollar-denominated exports.)
‘Lower yield estimates’
Furthermore, investors were awaiting further information from the rumour mill over yield results from the US corn harvest, with the latest, and somewhat disappointing, flow of reports seen as a big factor behind the rise in futures in the last session to a two-month high.
Terry Reilly at Chicago broker Futures International flagged “chatter on lower yield estimates across the eastern Corn Belt”.
At ADM Investor Services, Steve Freed said that a simple average of ad hoc reports from farmers “suggests the corn yield could be near 171 bushels per acre” in the key eastern Corn Belt state of Illinois, a little below the 173 bushels per acre the US Department of Agriculture is currently factoring in.
Such talk is giving credence to ideas that the USDA will on Friday, when it releases its monthly Wasde crop report, cut its estimate for this year’s US corn yield.
A survey by Bloomberg suggests market expectations of a cut of 0.8 bushels per acre to 166.7 bushels per acre in the yield figure.
The harvest overall, meanwhile, is seen being downgraded by 103m bushels to 13.482bn bushels, with a cut in the harvested acreage figure kicking in too.
Other support for futures is coming from ideas of weaker exports from Ukraine, where the government is reportedly permitting merchants to ship 16m tonnes of the grain in 2015-16, down from the 18.5m tonnes estimated for 2014-15 by the USDA.
The direction of corn futures later on may also depend on weekly US ethanol production data, which Mr Reilly expected to come in “unchanged to moderately lower from the 943,000 barrels per day reported last week”.
Still, the rise in Brent crude prices to back above $50 a barrel in the last session, with further headway on Wednesday, won’t have done any harm to ethanol producers’ margins ahead.
‘Taken their toll’
Corn also gained less support this session from fellow grain wheat, the rally in which stalled after a bravura performance in the last session, particularly by hard red winter wheat, as traded in Kansas City.
OK, the weather worries supporting wheat prices remained alive, with Tobin Gorey at Commonwealth Bank of Australia, for instance, noting that in Australia, while cooler weather is on the way for eastern regions which have been roasted “the past few days of very hot weather will have taken their toll.
“And there is little rainfall in prospect that will restore moisture across areas where that is still relevant.”
In the former Soviet Union, where dryness means newly-seeded crops for the 2016 harvest “are probably poorly established for now, there remains time for rain to fall, but the window is closing faster around the Black Sea as colder temperatures loom”.
‘Cash prices may have bottomed’
And in the US, Terry Reilly noted that “minimal rainfall will occur over the next two weeks” in the southern Plains hard red winter wheat country, where the lack of moisture is also raising concerns over establishment of sowings.
ADM Investor Services Steve Freed said that seven “some wheat bears actually suggested on Tuesday that world wheat cash prices may have bottomed”.
Still, there is hardly talk of a bonanza in shipment volumes, with Mr Freed also noting that “world trade continues at a slow pace which could limit the upside in prices”.
Chicago soft red winter wheat for December stood up 0.1% at $5.26 ½ a bushel, while Kansas City-traded hard red winter wheat for December was flat at $5.15 ¾ a bushel.
‘Yields are better than expected’
The theme of little early direction extended to soybeans too, which gained 0.1% to $8.89 ¼ a bushel for November delivery.
The talk from the US harvest is of yields a little higher than the 47.1 bushels per acre than the USDA is factoring in, with the Bloomberg survey revealing an expectation of a figure in Friday’s Wasde report of 47.2 bushels per acre.
“Farmers continue to report yields are better than expected, especially in Illinois, Iowa, Minnesota and Nebraska,” Mr Freed said, flagging ad hoc results from Illinois showing a result of 61 bushels per acre, compared with the USDA estimate of 54 bushels per acre for the state.
Still, investors also expect the Wasde to cut the estimate for harvested acres for soybeans by some 600,000 to a little under 83m.
“While not wildly bullish, this could support prices,” Mr Freed said.
Furthermore, there are mounting concerns of the threat to sowings in Brazil, ahead of the harvest early in 2016, as dry weather makes farmers think twice about planting.
“Central Brazil is dry and there is speculation some of the soybean plantings will be delayed,” Futures International’s Terry Reilly said.
Support to the soy complex was in the last session seen coming in particular from soymeal, the processing product used as a feed ingredient, which added 0.2% to $304.10 a short ton in early deals on Wednesday, for December delivery.
Mr Reilly flagged a “rise in South American meal values for shipment to Rotterdam”.
While soyoil was higher too, up 0.2% at 28.77 cents a pound for December delivery, amid talk of India being a strong buyer, the strength failed to spread to rival vegetable oil palm oil, which tumbled 2.2% to 2,319 ringgit a tonne in Kuala Lumpur.
Palm oil’s decline was attributed to a recovery in the ringgit, making Malaysian exports less competitive, and to profit-taking after it strong rebound from a six-year low hit in late August.
(Source – http://www.agrimoney.com/marketreport/am-markets-modest-grain-gains-return-corn-close-to-$4–3327.html)