Soybean and wheat futures started the week by swapping positions.
In the last session, soybean futures went where wheat feared to tread, posting an eighth successive positive close.
(Not that either of them have a patch on the Baltic Dry freight index, of course, which achieved a 21st successive gain.)
However, it was wheat which fared better early on Monday, posting modest headway, and in particular Kansas City traded hard red winter wheat futures – which offers a clue as to the source of strength in the grain compared with the oilseed.
The Plains, a major hard red winter wheat growing area, where growing dryness has been concerning investors, is set for less rain relief than had been thought, latest weather forecasts show.
This week, “dryness will increase in central [Plains] areas while precipitation in south western areas will provide some limited relief”, said MDA.
And in the six-to-10 day outlook, “the western Plains and Delta are trending drier versus Friday’s forecast,” the weather service added.
“The 11-15 day outlook is slightly drier in the western Plains” too.
‘Weather worries persist’
At Commonwealth Bank of Australia, Tobin Gorey said: “Weather worries persist for hard red winter wheat.
“Weather forecasters continue to expect that crop to receive scattered rain, but just not enough to raise soil moisture more than briefly.
It has to be said that the outlook for some weather variables has changed for the better, in production terms, with cold temperatures which were due for the Plains early this week – posing a threat to wheat newly emerged from dormancy – now reduced in their likely severity.
“The cold snap expected early in the week shouldn’t have a big impact on the winter wheat crop unless temperatures drop well below the ones currently expected,” said Benson Quinn Commodities.
“Recent forecasts have backed away from the cooler temperatures expected towards late March.”
Hard vs soft
Kansas City-traded hard red winter wheat for May stood 0.5% higher at $4.85 ½ a bushel as of 09:10 UK time (04:10 Chicago time), gaining extra kudos too from chart success.
The contract on Thursday closed above its 100-day moving average for the first time since July, and that line now looks to be acting as something of a floor against downward price movement.
Chicago soft red winter wheat (as grown largely in the Midwest) for May gained 0.3% to $4.77 a bushel.
‘Migrating into overbought territory’
An extra point in wheat’s favour too was that hedge funds, while having covered some of their short positions in both Chicago and Kansas City contracts, according to regulatory data released late on Friday, retain significant net short holdings.
For soybeans, however, they near-halved their net short to some 43,000 lot over the week to last Tuesday (when the regulatory data are taken), raising questions as to whether further support is in the offing on this score from nervous funds.
“Considering funds were net buyers the balance of the week, the fund positions in soybeans and meal are quite manageable, unless a new supportive story develops,” ie not so liable to panic short-covering, said Benson Quinn Commodities.
Indeed, the broker added that “the soybean market is migrating into overbought territory and there should be good resistance between the $8.95-9.00 a bushel level in the May contract”.
In fact, the May soybean contract eased 0.5% to $8.91 ¾ a bushel, aiming at its first negative close in nine sessions, albeit remaining above key moving averages regained during the winning streak.
The new crop November lot, growing in importance as the US spring sowing season nears, retained the psychologically important $9.00-a-bushel mark too, despite being down 0.4% to $9.03 a bushel.
Also weighing on prices is talk that higher values are encouraging selling by US producers, who have quite a few soybeans, and corn, yet to market.
Meanwhile, the rally in soyoil of late, which has in turn helped soybean values, stalled too, with Chicago’s May contract down 0.3% at 32.01 cents a pound, weighted by a somewhat equivocal performance by rival vegetable oil palm oil, which alternated between negative and positive territory.
(Palm oil was actually down 4 ringgit at 2,604 ringgit a tonne in Kuala Lumpur.)
More positively for soybean prices, on the demand side, CHS Hedging flagged data showing that “US soybean prices are a few cents cheaper than Brazilian at the Gulf, due to the Brazilian real’s recent surge”.
‘Surprised the trade’
The real was actually marginally, 0.1%, stronger against the dollar in early trading, while the greenback itself was up 0.3% against a basket of currencies, a negative for prices of dollar-denominated ags in making them less affordable as exports.
And, as an extra negative for crops such as corn used largely in making biofuels, Brent crude opened weak too, down 1.4% at $39.83 a barrel, back below $40 a barrel.
The drier forecast for the southern US is somewhat negative for corn prices too, in speaking of reduced threat to sowings in the area, where plantings are already in progress, let alone of a lower risk of the need to reseed.
However, May futures rose 0.3% to $3.66 a bushel nonetheless, offered help by US regulatory data showing a further increase in funds’ net short in Chicago futures and options, to a fresh record high.
Indeed, the data, “surprised the trade”, said Benson Quinn Commodities, forecast that “the market will attempt to square up a portion of that position ahead of March intentions” – a reference to the end-March official US plantings report which represents the next big US Department of Agriculture set piece.
‘Brazil may seek US corn’
At Futures International, Terry Reilly also flagged a positive from speculation that Brazil, where corn supplies have been slashed by an overgenerous export programme, may turn to the US for imports to replenish stocks.
“There were rumours Brazil may seek US corn,” he said.
“Interior Brazil corn prices have appreciated by a good amount from a rising real and tight supplies.”
Brazilian corn was priced on Friday at R$47.49 a sack, as measured by ESALQ/BM&FBovespa, a rise of 8.9% over the past month despite the depressant of a stronger real, which reduces the competitiveness of Brazilian exports (while making imports, of course, that much more affordable).
(Source – http://www.agrimoney.com/marketreport/am-markets-fund-data-dent-soy-rally.-but-dyness-lifts-wheat–3542.html)