The good news for wheat bulls is that dryness-pressed winter crop is deteriorating in the US southern Plains.
The proportion of the crop in Kansas, the top growing state, rated “good” or “excellent” fell by 2 points week on week to 36%, amid “dry, windy conditions”, US Department of Agriculture data overnight showed.
In Oklahoma, the rating dropped by 2 points to 40%, and in Texas, where “precipitation across the state was scarce”, by 1 point to 34%.
However, the bad news for those hoping for higher wheat prices is that rain relief does look to be on its way.
“The trade might be more worried about [declining winter wheat condition] were it not for the potential rainfall events that keep appearing in weather projections over the next fortnight ahead,” said Tobin Gorey at Commonwealth Bank of Australia.
Benson Quinn Commodities flagged a “forecast that shows much of the southern Plains turning wetter this week and into April”.
‘Conditions are very favourable’
Furthermore, conditions in other major growing countries are benign, with Tregg Cronin at Halo Commodity Company noting that “the US is the only northern hemisphere wheat producer with a clear issue at the moment”.
Agritel noted that “conditions are very favourable in the Black Sea basin, where spring plantings are completed up to 15%”.
And in France, which has attracted its own dryness concerns, “beneficial rains are expected for today and tomorrow,” albeit followed by a return of drier conditions in northern areas.
Such talk helped fuel a further decline in wheat futures in Chicago, the world benchmark market, where the May lot shed 0.5% to $4.28 ¼ a bushel, its lowest level in nearly two months.
Hard red winter wheat, as grown in the southern Plains, fared worse, dropping 1.0% to $4.41 a bushel, cutting its premium back below $0.13 a bushel.
Nor did rival grain corn fare much better,
Chicago’s May lot shed 0.3% to $3.62 ¼ a bushel, putting in a negative performance that might be expected after its “outside day lower” session last time (ie trading beyond the range of the previous day, and ending down).
Indeed, “technical momentum has reversed course and points to more downside”, Benson Quinn Commodities said.
The fall comes despite a series of upbeat data on US exports, including a sale announcement on Monday of 120,000 tonnes of the grain to South Korea, besides export data for last week at 1.33m tonnes, a figure termed “very solid” by Joe Lardy at CHS Hedging.
“The current pace is still behind” the pace needed to meet the USDA forecast for 2016-17, “but a strong run has closed the gap seven weeks in a row”.
However, Benson Quinn Commodities noted that US export data “is losing” its power to support prices “as trade looks to record large Brazilian crop competing for export demand in coming months”.
‘Investors likely to be nervous’
And the reduced willingness to back corn has turned the so-called battle for acres – in which the grain competes largely with soybeans for a place in US sowings programmes – into something of a minor skirmish.
With new crop December corn futures easing 0.3% to $3.85 ¼ a bushel, new crop soybean futures for November could defend a ratio of 2.57 even with a 0.2% drop to $9.91 ¾ a bushel.
This in turn was little help to better-traded May soybean futures, which eased 0.2% to $9.97 ¾ a bushel.
Tobin Gorey flagged some support soybean prices from bargain hunting, saying that “investors have been huge sellers of soybeans over the past couple of months, so some buyers are likely re-entering the market at much cheaper levels”.
That said “investors are likely to be nervous about bidding prices much higher with the US planting intentions report now just around the corner”.
The battle/scuffle for acres will come to a head on Friday next week, when the USDA unveils results of a survey of US farmers’ intentions for spring crop sowings, a report which has a habit of promoting price volatility.
Cotton is involved in the melee too, and felt pressure of falls in fellow row crops.
New York cotton futures for May eased by 0.3% to 77.09 cents a pound, adding to a decline of 1.3% in the last session.
“Prices have found ample support in strong US exports of late, but investors will now have an eye on the March 31 planting report, with a 14% increase in US acreage expected for 2017,” Mr Gorey said.
Overnight, cotton futures for May dropped 0.9% to 15,095 yuan a tonne on the Zhengzhou exchange in China, their second weakest finish of 2017.
‘Pick-up in demand’
In Kuala Lumpur, palm oil bucked the trend, adding 0.5% to 2,795 ringgit a tonne, against a backdrop of worries of a return of El Nino, which would likely dent output in the key South East Asia production region, and of demand hopes too.
Tisco Securities flagged ideas of a “pick-up in demand ahead of the Muslim holy month of Ramadan in late May”.
(Source – http://www.agrimoney.com/marketreport/am-markets-wheat-falls-anew-despite-us-crop-deterioration–4022.html)