If there is a “race for dirt” going on, it does not look like one any of the major crops want to win.
Every spring, crops, fight through relative pricing, for space in northern hemisphere farmers’ seasonal sowing programmes.
But, with corn and soybeans closing lower for a sixth successive session on Tuesday, while Chicago wheat futures notched up their weakest finish since June 2010, there is a bit of an “after you” feel about this year’s battle for acres.
After all, “for farmers who grow some of the biggest US crops, choosing what to plant this year has become a bet on which one will lose less money,” the Bcom index said.
“Growers probably would lose $70 on every acre of corn or soybeans they sow – the most since 1999.”
‘Too much wheat’
The comments followed a month in which Bcom’s grains sub-index posted negative returns of 4.7%, making it the worst performer bar energy in the commodities complex for February, and hurt by ideas of ample world supplies.
(Softs put in a positive return of 2.0% and livestock a positive 0.9%.)
For wheat, for instance, Tobin Gorey at Commonwealth Bank of Australia said that “too much wheat still sits at origin for the market to yet stabilise.
“That’s been the case for some time but the recognition has been slow because the inventory only seems to have come to market more recently.
Soybean futures, meanwhile, “are looking like they will probably soon establish new season lows”.
‘Totals were supportive’
… but not in early deals, at least, when the market took succour from comments by Cofco, the Chinese state grain trader, that the country, the top soybean importer, will buy 83m tonnes of the oilseed in 2015-16.
That is, besides being up from 78.4m tonnes last season, and well above the 80.5m-tonne figure being forecast by the US Department of Agriculture.
Furthermore, some USDA data overnight on the domestic soybean crush in January were viewed largely, although unanimously, as positive for prices.
“Totals were supportive with the soybean crush being reported at 4.81m tonnes versus an anticipated 4.79m tonnes,” said Benson Quinn Commodities.
‘Chart got ugly’
Still, soybean futures for May added a modest 0.2% to $8.59 ½ a bushel as of 09:30 UK time (03:30 Chicago time), remaining under pressure from the spurt of South American supplies hitting the market as harvest there progresses.
Indeed, Terry Reilly at Futures International attributed the negative close to the last session to the idea that “South America harvesting pressure eventually prevailed”.
And, after all, Brazil unveiled soybean exports of 2.04m tonnes for last month, up from 394,431 tonnes in January and 868,658 tonnes in February 2015, and a figure termed “impressive” by Mr Reilly.
Meanwhile, among the soy processing products, he cautioned that for May soyoil futures “the chart got ugly” in the last session, with the contract “taking out its 50 and 200-day moving averages”.
Soyoil for May indeed lost a further 1.0% to 30.23 cents a pound, although remained above its 100-day moving average, at 30.17 cents a pound.
‘Desperate for bullish news’
Wheat bulls had some call to arms through the release overnight by Egypt, the top importer of the grain, of a fresh tender, giving at least some evidence of demand at prices amongst their lowest in six years.
That said, Chicago soft red winter wheat managed only a small gain, of 0.2% to $4.46 ¾ a bushel, maintaining its newly-restored discount to Kansas City-traded hard red winter wheat, which added 0.2% to $4.50 ½ a bushel.
The $4.50-a-bushel mark for Kansas City wheat indeed has been mentioned as something of a psychological floor for futures, which has helped spare the contract from the worst of the latest drop in wheat futures.
That said, at this level, the contract is at amongst its lowest levels since April 2007, on a nearest-but-one contract basis.
“The wheat market continues to flounder as weather remains good across most of the US wheat areas,” CHS Hedging said.
“The promise of rain next week in hard red winter wheat regions, rain/snow combination in some of the soft red winter wheat areas on Tuesday, and no real problems weather-wise in the world, continue to pile on to the poor fundamentals in a market that is desperate for bullish news.”
‘Help to restore some competitiveness’
Meanwhile, corn futures for May gained 0.4% to $3.57 a bushel, offered some help, as a crop largely used in making biofuels, by the recent recovery in crude oil prices –although Brent crude itself was down 0.4% at $36.65 a barrel.
“The rebound in oil prices yesterday will help to restore some competitiveness to corn based ethanol,” CBA’s Tobin Gorey said.
From a technical perspective, the contract was also offered some help by having failed, yet at least, to set fresh contract lows, suggesting some resistance to prices getting close to $3.50 a bushel.
Weekly data later on US ethanol production will be viewed with interest by corn investors,
In New York, cotton for May managed headway too, adding 0.8% to 56.56 cents a pound, with charts beginning to offer some hope that the collapse to 54.53 cents a pound on Monday, the lowest for a nearest-but-one contract since 2009, represented the kind of capitulation by bulls that heralds a reversal.
Overnight, the International Cotton Advisory Committee trimmed their forecast for average prices, as measured by the Cotlook A index of physical values, but only by 1 cent, to 70 cents a pound for 2015-16.
Still, news on China, and when, how much and at what price it will begin a fresh round of releases of cotton from state stocks, remains the elephant in the room for investors.
“Market bears are anxiously waiting for some official news on China’s intentions to sell down some of its cotton reserves in 2016,” CBA’s Tobin Gorey said.
“Without that piece of the puzzle, the reality of how much cotton will be on the market, both this season and next, remains uncertain.”
(Source – http://www.agrimoney.com/marketreport/am-markets-grain-prices-shoulder-arms-in-battle-for-acres–3526.html)