Sure, the buying spree, supported by funds, which has lifted corn prices to 2016 highs, and soybean futures to their highest in eight months, is showing signs of running out of steam.
But there was enough of it around still in early deals to prevent signs of weakness evident in the last session from setting in.
That was even the case in wheat, which appeared particularly vulnerable in the last session as expectations grew for rains in the southern US Plains.
Indeed, just how Chicago wheat futures in the last session avoided a sharply lower close “when the market seemed to be falling most of the day is another question”, said Tobin Gorey at Commonwealth Bank of Australia.
“Only two very brief spikes in prices produced that outcome,” ie the late-session price revival, behaviour that some may see as evidence of bargain hunting by funds.
‘Multi-million dollar event’
The importance of the southern Plains precipitation forecast to start imminently was underlined by Terry Reilly at Futures International, who termed it a “multi-million dollar rain event”.
“Very important rains will hit US hard red winter wheat country on Friday lasting through Monday,” Mr Reilly said, adding that “1-3 inches is expected, with local totals getting up to between 3.0-4.5 inches.
“The timing couldn’t be more perfect,” given crop deterioration highlighted by US Department of Agriculture data on Monday, which revealed a three-point drop in the proportion of US winter wheat rated “good” or “excellent”.
Backing up the threat, the USDA’s weekly drought monitor showed the proportion of Kansas, the top US wheat-growing state, rated in drought rising by 16.3 points week on week to 52.0% – the highest reading since May last year.
Thanks to the rains, however, wheat crop condition “across Colorado, Kansas, Nebraska into Texas and Oklahoma should all increase by mid-May”, Mr Reilly said.
Nonetheless, Kansas City hard red winter wheat futures for May nudged 0.2% higher to $4.55 ¾ a bushel as of 09:30 UK time (03:30 Chicago time), even if Chicago-traded soft red winter wheat was 0.3% lower at $4.58 ½ a bushel.
The, unusual discount of Kansas City wheat to Chicago wheat thus narrowed to less than $0.03 a bushel, from the $0.09 ½ a bushel touched on Monday.
‘Selling weakness hasn’t worked’
Soybean futures, meanwhile, rediscovered positive territory, after their 1.0% drop of the last session May basis, which might well have been expected to cast a shadow over this one.
“The close near the lows side of the range and new lows posted after the settlement period… are negatives going into the [Friday] session,” Benson Quinn Commodities said.
“One would think selling that close would work out alright, but selling weakness hasn’t worked for a couple of weeks.”
Which indeed was the case this time, with the May contract adding 0.2% to $9.49 ¾ a bushel.
‘Producer selling picked up’
And this despite too talk of farmers selling into the rally – as well they might, with spot prices still near their best in eight months, and the new crop November lot, up 0.1% at $9.60 a bushel, near its highest in nine months.
In the last session, “producer selling picked up, a bearish indicator,” said Futures International’s Terry Reilly said.
“Spring is here. Historically producers tend to sell around this time of year.”
As an extra negative, palm oil extended its April decline, dropping 1.3% to 2,623 ringgit a tonne in Kuala Lumpur, targeting what would be its first close this year below its 50-day moving average, on the continuous chart.
The fall came despite data from cargo surveyor SGS showing a 20% rise, month on month, in Malaysian palm exports so far in April – a sharp improvement from a 0.9% drop reported for the first 10 days of the month.
However, the fall-off comes at a time of a seasonal recovery in palm oil output, which take some of the heat out of the market
While Oil World apparently raised by 500,000 tonnes, to 700,000 tonnes, its forecast for the drop in global palm oil output, thanks to dryness caused by the El Nino, such numbers have already been talked of by some other commentators.
Back in Chicago, rival vegetable soyoil for May was 0.7% lower at 33.47 cents a pound.
However, buying in soybeans themselves was encouraged by the talk of La Nina now in vogue, and enhanced by a report on Thursday from official US meteorologists increasing the chance of the weather pattern setting in during the second half of next year.
La Nina is associated, for example, with yield-sapping dryness in the US Midwest.
Meanwhile, ideas are mounting too of a downgrade to the Argentine crop, following excessive rains which have flooded out some crops, encouraged spouting in others, and hampered harvesting too.
“Weather forecasters say Argentina will continue to see rain until the middle of next week,” said CBA’s Tobin Gorey.
“Market chatter is focused on a potential reduction to Argentina’s 60m-tonne crop forecast.”
‘Planting will accelerate rapidly’
For corn, the rain is obviously seen as less of an issue, with the Rosario grains exchange nudging higher by 500,000 tonnes to 24.5m tonnes its forecast for the Argentine corn harvest, citing better-than-expected yields from the early harvest.
The Buenos Aires grains exchange too said that initial yield results had exceeded forecasts, albeit noting too that the rains had limited harvest progress to 0.8% of the crop over the past week, bringing the total reaped to 18.8% – 5.3 points behind the year-ago figure.
In France, meanwhile, it is corn sowings which are being delayed by rains, with just 4% of the crop in the ground as of April 11, up 3 points week on week, but down from a figure of 17% a year before, official data on Friday showed.
Still, plantings in the US, the world’s top corn producer, look like continuing apace, a negative for corn prices.
“Weather forecasters say US planting will now accelerate rapidly given that drier weather is likely to persist for the remainder of the month,” Mr Gorey said.
Corn for May stood down 0.3% at $3.72 ¾ a bushel.
‘Export sales almost halved’
The better planting weather was a bit of a setback to cotton futures too, which also continued to feel pressure from disappointing US export sales data for last week, released on Thursday.
“Export sales almost halved on the previous week to dispel some of the chatter over renewed cotton demand,” Mr Gorey said.
Louise Rose at the Rose Report said that US shipments will need to average 249,000 running bales for the rest of the season to ensure export meet the USDA target for 2015-16, above the 196,000 running bales achieved last week.
New York cotton for July stood down 2.0% at 59.64 cents a pound, dropping back below its 10-day moving average for the first time this month.
(Source – http://www.agrimoney.com/marketreport/am-markets-wheat-prices-hold-despite-million-dollar-rains–3579.html)