There weather worries to think about, to start the week – one potential, another nascent and a third very much live.
(And this before getting to La Nina, the threat of which has become much larger, US meteorologists said last week.)
The first, whisper it, but another hurricane threat is brewing in the Caribbean.
Indeed, Hurricane Maria is already posing a threat for some islands, “with isolated maximum amounts of 20 inches across the central and southern Leeward Islands, including Puerto Rico and the US and British Virgin Islands, through Wednesday night”, said the US National Hurricane Center.
Bringing in the likes of Barbuda and Barbados too, the centre said that “rainfall on all of these islands could cause life-threatening flash floods and mudslides”.
As for wind speeds, they have “increased to near 90mph with higher gusts” and “rapid strengthening is forecast during the next 48 hours” to make Maria a “major” hurricane.
Mills vs producers
Not that it is by any means certain that Maria will go on to reach the US, although Commodity Weather Group cautioned that the hurricane “needs to be watched for a potential South East threat late in the six-to-10 day outlook”, suggesting a further worry for cottongrowers.
New York cotton futures for December edged 0.1% higher to 69.12 cents a pound as of 09:55 UK time (03:55 Chicago time), with Ecom, without mention of hurricane worries, seeing cause for some price support.
The trading house, flagging the “on call” data for cotton in the physical market that needs to be priced against futures, noted that as of September 9 “mills need to fix 32,000 futures contracts compared to the producers only needing to still fix 18,000 of contracts.
“This means there are 14,000 more futures contracts to fix on the buying side.
“Therefore we believe as the futures drop more mills will come in to fix their on call contracts.”
‘Can create issues’
As for the nascent threat, that is the less-than-ideal South American weather for corn and soybean sowings (and already seeded wheat), with too little rain in central Brazil, and too much in Argentina.
“Weather forecasters have mixed opinions about whether the current dryness in Brazil will linger long enough in to become a problem,” said Tobin Gorey at Commonwealth Bank of Australia.
“If farmers are delayed in planting first crop soybeans then this can create issues right through the season into second crops.
“The issue will remain for another week or so at least as little rain is expected in dry soybean regions.”
Planting date implications
To put it into perspective, the (legally enforced) soybean sowing window in Mato Grosso, the top Brazilian growing state, only opened on Friday.
And some forecasts put rain in the outlook for next week for central Brazil.
Still, even late sowings would have an impact, in terms of meaning a delayed harvest and so, at Mr Gorey noted, setting back seedings of the second crop, which in turn raises worries about them reaching sensitive developmental phases as central Brazil’s dry season kicks in.
Furthermore, a late harvest would mean a longer period for the US to have seasonal dominance in soy export markets, with the forthcoming US harvest attracting a jump in orders from Chinese buyers.
Indeed, as Terry Reilly at Futures International flagged, the official CNGOIC bureau has pegged Chinese “November soybean imports at over 9m tonnes, from 7.5m tonnes in October”.
Chinese soybean crush markets were running late last week at $0.74 per bushel, up from $0.38 late last year, although down from the $0.92 a bushel a week before, on Futures International estimates.
Benson Quinn Commodities said that with latest US weekly export sales the “largest since December”, and six consecutive days of the USDA reporting orders through its daily alerts system, the signals have “US market pontificators proselytising about a demand-based recovery” in prices.
‘Lowest level in four years’
There remains comment too about US soybean demand, and Friday’s Nopa crush data for August which came in at 142.4m bushels – 7m bushels above the average trade estimate and record large for August.
Futures International’s Terry Reilly, while terming the raw crush data “bullish”, added that what was “more impressive” was an easing in soyoil stocks of 141m pounds to 1.42bn pounds, despite the elevated crush and indeed a high oil extraction rate.
“End-of-August soyoil stocks were reported at their lowest level in four years,” he noted.
Still, even if implied soyoil use last month was larger than expected, the inventory figure ended up 20m pounds above investor expectations.
‘Plenty of good yields’
Futures in the vegetable oil eased by a further 0.1% to 34.77 cents a pound in Chicago for December delivery, adding to its retreat of the last session on the Nopa data.
In Kuala Lumpur, futures in rival palm oil edged 0.6% lower to 2,819 ringgit a tonne.
Chicago soybeans themselves, however, added 0.4% to $9.73 a bushel for November, focused more on Brazilian dryness and Chinese demand.
‘Seasonal price low ahead’
Chicago corn, meanwhile, was for December unchanged at $3.54 ¾ a bushel, awaiting US harvest results.
“Plenty of good yields are showing up from the early reports out of southern Illinois, but in general the trend this year will be one of variability,” Water Street Solutions said.
In fact, Benson Quinn Commodities said that “seasonally, beans and corn futures hit harvest lows around October 2.
“I see no reason why this year will be different.”
That said, the likes of Roach Ag have seen reasons, including exhaustion in late August of a producer selling spree, to believe that the seasonal low has already been set, in fact echoing 2015 and 2016.
Aussie prices rise
Returning to the weather worries, and the very-much-live concern is that over frost and dryness damage to the Australian wheat crop, although CBA’s Tobin Gorey said that “weekend temperatures in south eastern crops do not seem to have been broadly low enough to cause more widespread crop damage”.
Still, the signal from futures markets was of a crop still shrinking, with the January east coast contract settling up 1.9% at Aus$273.00 a tonne.
Agritel noted that “the delicate situation in Australia is offering an element of support to international markets”, in terms of wheat prices, too.
Black Sea pressure
In fact, Chicago futures, the world benchmarks, eased 0.5% to $4.47 a bushel, with the bumper supplies in Russia continuing to weigh on values.
“Exporters will have to monitor the price evolutions in the Black sea area while this origin is staying very competitive,” Agritel said.
The Australian drought “becomes a supportive piece” for US prices “if business materialises” for US supplies of hard red winter wheat, Benson Quinn Commodities said.
For now, Kansas City hard red winter wheat for December was down too, although less so, by 0.2% to $4.45 ¼ a bushel, allowing some shrinkage of its atypical discount to its Chicago peer.
(Source – http://www.agrimoney.com/marketreport/am-markets-three-weather-worries-for-ag-markets–4263.html)