Grain prices sagged on Wednesday, as harvest pressure in the US and ample global supplies continued to weigh on prices.
“Overall, the world fundamentals that got us to these price levels continue to plague these markets,” said Darrell Holaday, of Country Futures.
And there was some late-in-the day pressure, as the dollar jumped to a one-and-one-half month high.
The dollar was helped by notes from the US Federal Reserve’s latest meeting.
Although there was no increase in US interest rates, as was theoretically possible, chairman Janet Yellen’s remarks were widely taken as hawkish for a December rise.
A higher interest rate would support the greenback, and weigh on dollar-denominated commodities.
Reading the tea-leaves
But Mike Zuzolo of Global Commodity Analytics noted that even if December does bring a rate hike, comments by the Federal Reserve suggested that the increase in interest rates would be slow as long as the pace of global growth remained muted.
“I could see a situation where the reading of these “tea leaves” is being overdone,” he warned.
The dollar was up 0.7% against a basket of currencies as markets closed.
Closely watched rains
In Brazil, much-needed rainfall is still expected.
“Normal rainfall in most of the major crop areas should provide adequate soil moisture,” said Mr Tapley.
“Rain totals and subsequent forecasts will be watched closely for Brazil this week as planting remains behind schedule,” said Tregg Cronin of Halo Commodities.
Wet weather in Brazil is bearish for corn and, in particular, soybean
The US Midwest is also expecting wet weather, which could slow corn and soybean harvesting, but Kyle Tapley of MDA Weather Services noted that the periods of rains were expected to be interspersed with dry days, and “significant setbacks are not anticipated”.
November soybean futures, for which the first delivery day is Friday this week, closed down 1.2% at $8.801 Ѕ a bushel.
January soybeans fell 1.0% to close at $8.82 ѕ a bushel.
Reuters carried reports from traders that China will stop buying dried distillers grains (DDGs) from the US as part of an anti-dumping probe, prompted by domestic ethanol producers.
DDGs are a by-product of the US’s state-supported corn ethanol industry.
The grains can be used in animal feed, and can potentially compete with China’s domestic corn, at a time when the government is trying to draw down its huge stocks.
China is by far the world’s largest importer of the grains.
Falling ethanol stocks
The US energy agency reported weekly ethanol stocks were down by 599,000 barrels to 18.27m barrels, while weekly output was down by 7,000 barrels to 944,000 barrels.
Prices for the corn-based biofuel rose on the news, with December ethanol up 0.5% to $1.58 a barrel.
December corn futures finished down 0.9% at $3.76 a bushel.
Massive tender still in negotiation
Wheat markets gapped lower on opening, which is treated as a negative by technical traders.
And a huge wheat tender by Ethiopia, which closed on Friday, is still being negotiated.
The 1m-tonne tender received an offer of product at $233.26 a tonne including fright, for delivery in the port of Djibouti.
Reuters reports that talks are now underway, as Ethiopia attempts to encourage other traders to match the lowest offer.
Ethiopia announced the tender, which is larger than its total wheat imports last year, after a spell of low rainfall hit production.
The dry weather has been blamed on the El Nino weather pattern.
Reuters reports that the talks are expected to run for some time, and a smaller purchase of around 240,000 tonnes at under $240 a tonne may be made if agreement cannot be reached.
More wet weather is expected in wheat regions of the US over the next 15 days.
Mr Tapley said the rain would “generally favour winter wheat establishment,” although it could cause flooding.
December Chicago wheat finished down 0.5% at $5.06 a bushel.
Sugar hinges on Brazil as well
Wet weather in Brazil helped sugar find new eight-month highs.
The rains are slowing the pace of the harvest in the main centre-south growing region.
The longer the cane takes to be cut, the lower sugar yields will be.
“Chat this morning all seems to be much of the same with talk of a wet centre-south Brazil and the forecast for the coming fortnight looking to increase the average number of days lost for harvesting,” said Thomas Kujawa of Sucden Financial.
European output to ease
There was also support from an FO Licht report, which forecast the EU to produce its lowest quantity of sugar in 1971 this year, 13.6m tonnes, down 24% from last year.
This is well behind the European Commission forecast of 15.65m tonnes.
March raw sugar futures in New York touched their highest level since February at 14.80 cents a pound, and settled up 1.6% at 14.65 cents a pound.
This was the strongest close since February, but less than the highs touched on Monday and Friday, indicating that trade is still range-bound.
But coffee futures rose, as the rains continue to miss parts of Minas Gerais, the largest coffee-growing state, where dryness has been pronounced.
“It seems that the market has found some Support against the old contract lows that are now not all that far away,” said Jack Scoville, of Price Futures.
Arabica coffee rose for the first time in five sessions on Wednesday, with the December contract finishing up 1.5%, at 119.1 cents a pound.
January robusta coffee settled up 1.2%, at $1,577 a tonne.
Cotton prices rose as well, as rains in the south-western US threatened the crop quality.
“Some damage is being reported in parts of Texas, and more damage is being reported in the South East,” said Mr Scoville.
December cotton in New York settled up 0.5%, at 62.67 cents a pound.
(Source – http://www.agrimoney.com/marketreport/pm-markets-brazil-weather-outlook-weighs-on-row-crop-prices–3357.html)