Grain investors talk about “million dollar rains”, when precipitation reaches crops in dire need of moisture.
And the rainfall due later in the western Corn Belt, and in particular Iowa, may qualify.
Iowa – the top US corn-producing state, which vies with Illinois for first place in soybeans too – has been the focus of dryness concerns, with the US Department of Agriculture last week rating 22.2% of the state in drought, up 6.0 points week on week, and the highest figure in three years.
However, parts of the state received rain relief (excessive for some farms) over the weekend, and more precipitation is expected this evening.
‘Moderate to significant rain’
“The dry areas of the western Corn Belt will see a rain event over the next few days this week that should be widely monitored,” said Terry Reilly at Futures International, cautioning that “after that event, net drying will occur across large pockets of the Midwest”.
David Tolleris at WxRisk.com said: “Most of the short range models show moderate to significant rain over anywhere from 50-75% of Iowa on Wednesday and Wednesday night with the rain/ storms spreading into central and southern Illinois and northern Missouri Wednesday night into Thursday morning.
“It appears that the best rains will fall over western, south western and southern portions of Iowa as well as northern Missouri and central and west central Illinois Wednesday and Thursday,” with amounts of typically 0.75-3.5 inches.
“But there will be locally higher amounts especially over northern Missouri, near the Iowa border, and into portions of central Illinois.”
However, there is still time for weather models to change, or simply to prove inaccurate – with large implications for crop prices.
For soybean futures, for instance, Benson Quinn Commodities said that if rains arrive “as advertised, price support is back at the low side of the June 30 chart gap at $9.58 a bushel” for the November contract.
“If rains are less than expected, resistance is back up the recent high of $10.45 a bushel.”
The November contract stood at $9.94 ¼ a bushel, a gain of 0.2% on the day, as of 08:50 UK time (02:50 Chicago time).
Corn futures for December, meanwhile, stood flat at $3.82 ¼ a bushel, also facing later the prospect of weekly data on US ethanol production and inventories.
“Ethanol grind continues to be a bright spot,” said Benson Quinn Commodities, adding that “with firm oil and easy corn, spreads appear favourable”.
Indeed, Brent crude, having soared back above $50 a barrel in the last session, dug in above this psychologically important level, adding 1.0% to $50.71 a barrel.
The recovery in oil prices follows a pledge by Saudi Arabia to deepen its export cuts in August, and, with Russia, to do more to enforce output cuts agreed with other major producing countries.
Winter wheat futures, meanwhile, added 0.4% to $4.75 ¾ a bushel in Chicago for September delivery.
The gains reflected some profit-taking on the spring wheat-winter wheat spread which have been encouraged by dryness in the northern US Plains (spring wheat growing country).
Indeed, Minneapolis spring wheat for September eased by 0.4% to $7.24 ¼ a bushel, amid some signs from a much-watched tour of mainly North Dakota, the top spring wheat-growing state, showing crops damaged but not devastated by drought.
The first day of the tour came in with a yield estimate of 37.9 bushels per acre – well below the 43.1 bushels per acre seen last year on the day, and the five-year average of 45.7 bushels per acre, but ahead of many of the figures investors have been talking about.
“Tuesday’s tweets showed a decent wheat crop,” said Benson Quinn Commodities, although adding that “this was expected.
“Wednesday’s crop isn’t going to be as good,” given where the tour is travelling through, while “Thursday’s route should also see good wheat fields”.
Back in the oilseeds complex, Kuala Lumpur palm oil set back on profit-taking after a 2.7% surge to a two-month closing high in the last session, when it was helped by soyoil, which gained on data showing a dip in US soybean crop condition, besides by buoyancy in crude oil markets.
(Much palm oil is used to make biodiesel.)
However, there remains concern over the potential for a pick-up in Malaysian production from El Nino-affected levels, with seasonality anyway dictating an output rise, while export growth has slowed.
According to ITS, Malaysian palm exports grew by 3.2% month on month in July, as of Tuesday, compared with a 17.8% rate of expansion as of July 15.
Palm oil futures for October eased 0.8% to 2,605 ringgit a tonne, but remained above their 100-day moving average on a continuous chart.
The contract in the last session ended above the 100-day moving average for the first time in five months.
(Source – http://www.agrimoney.com/marketreport/am-markets-grain-markets-cautious-as-critical-rains-loom–4192.html)