Soy and wheat prices eased on Tuesday, ahead of the US Department of Agriculture’s December World Agriculture Supply and Demand Estimates.
“With no changes to production on this report the main feature will be ending stocks,” noted CHS Hedging.
Falling incomes mean US farmers will struggle to hold back stocks of agricultural commodities, the US Department of Agriculture told reporters at a conference in London.
“Now (US) producers are holding more stocks waiting for a better price but we’ve seen that farm incomes are coming down so the ability to hold that crop without selling it is somewhat limited,” USDA chief economist Robert Johansson said.
Ample world supplies
“Tomorrow’s USDA report should have little impact on wheat with both the US and world ending stocks sufficient,” said CHS Hedging.
Worries about the world wheat crop have been easing, after rains hit vulnerable areas of winter wheat.
“Just recently, the past two weeks, drenching rain has developed in Russian wheat,” said forecaster Gail Martell.
“However, the Ukraine missed out on the heavy rain, perpetuating severe fall drought,” she added.
Weak export demand
And French customs data showed wheat exports slowing to 581,621 tonnes in October, down nearly 100,000 tonnes from September.
French wheat exports are now lagging year by 1%, at 2.7m tonnes so far in 2015-16, despite this year’s record wheat harvest.
Meanwhile, the Australian commodities bureau Abares cut its forecast for wheat exports by 580,000 tonnes to 16.95m tonnes in 2015-16, on a July-to-June basis.
The bureau restated the setback to crops from “generally unfavourable” spring conditions, such as below-average rains and above-average temperatures.
Abares noted “strong competition from exporters in the Black Sea region and the European Union, where supplies of wheat for export are expected to be plentiful”.
March Chicago wheat futures fell 0.3% to close at $4.81 ½ a bushel.
Brazilian fears ease
Soybean prices fell as traders unwound long-soybean spreads ahead of Wednesday’s data.
Weather worries are easing in Brazil, where Richard Feltes of RJ O’Brien noted that “only 15-20% of Brazil soy crop is unfavourably dry”.
Darrell Holaday, of Country Futures, reported that crop scouts in the key growing state of Mato Grosso “indicate that crop is in good to very good condition despite drier than average conditions up to this point”.
January soybeans fell 0.6% to 0.57%, to close at $8.76 ¾ a bushel.
Chinese production up
Mr Feltes said that for corn markets there was “nothing in tomorrow’s report likely to change narrative of ample supplies, soft US exports and undersold farmer ready to sell board rallies”.
And there were signs of weaker world feed grain demand on Tuesday.
Data from the Chinese statistics bureau pegged the 2015 corn crop at 224.6m tonnes, up 4.0% from last year, boding poorly for the Chinese drive to draw down stocks.
The total Chinese grain output in 2015 was pegged at 621m tonnes, up 2.4% of last year.
Cut to Australian exports
The Australian commodities bureau Abares cut Australian coarse grain export hopes by 1.03m tonnes to 7.18m tonnes, reflecting lower sorghum exports to China.
Sorghum is used as an alternative feedgrain to corn in China.
“Importers in China hold large stocks of grain sorghum and are expected to reduce imports over the remainder of 2015–16, compared with 2014–15.”
Lower sorghum demand puts pressure on other feed grain prices, including corn.
And supplies from Argentina may be about to flourish.
“Argentine corn is 60% planted with ideas that more acres may get seeded with the elimination of the export tax for corn and only a small reduction for the soybean tax,” said CHS Hedging.
“The Argentine producer won’t sell until the new president takes office on December 10th and the tax is eliminated.”
Still, after Mondays sharp sell-off, corn enjoyed an uptick on short covering.
December corn futures rose 0.5%, to close at $3.70 a bushel.
Sugar falls away
Sugar prices spiked immediately after data from Brazilian cane group Unica was released, thanks to some mildly bullish headline numbers.
Sugar production in the key Centre-South region of Brazil fell faster than expectations, as mills favoured ethanol.
But the brief spike in prices was followed by a sharp sell-off.
“The key driver behind the selloff was looking deeper into the numbers, and seeing the contraction in the sale of ethanol,” Tracey Allen, senior analyst at Rabobank, told Agrimoney.com.
Sales of hydrous ethanol from Centre South mills in November were 1.57m cubic metres, down 15.6% from October levels.
Prices fell despite Abares cutting its forecast for 2015-16 sugar stocks to 72m tones, compared to a previous forecast of 78m tonnes.
March raw sugar in New York settled down 2.0%, at 15.0 cents a pound.
New York cocoa futures had their biggest fall in a year on Tuesday, collapsing from a five-year high.
A drop of $100 dollars within a matter of seconds triggered a pause on trading.
Reuters reports speculation that the sell-off may have been triggered by a commodity fund liquidating its positions.
March New York cocoa settled down 3.0%, at $3,316 a tonne,
Coffee pares losses
Arabica coffee futures also saw a sharp sell-off when the markets opened, but the contract pared losses later in the session.
Brazil’s Conselho Nacional do Café (CNC) producers’ group pegged at 47m-49m bags next year’s total Brazilian coffee output next.
The number is well ahead of the official figure of 42.2m bags recorded for this year.
March arabica coffee settled down 0.7%, at 125.2 cents a pound.
January robusta coffee settled down 0.3%, at $1,531 a tonne.
The International Cotton Advisory Committee forecast Chinese purchases of the fibre to fall 33% in the year from August 2015, to 1.2m tonnes.
March cotton settled down 0.2% at 64.44 cents a pound.