Ag markets were somewhat quiet in early deals, but whether it stays that way…
One item on the radar later for wheat markets is the latest tender by Gasc, grain authority for Egypt, the world’s top importer of the grain, with the event coming at an interesting time, on two counts.
Russian price rise
The first is some erosion in the competitiveness of Russian wheat, which has dominated Gasc orders so far in 2017-18, but has seen some upward price pressure thanks in part to recovery in the rouble.
(That said, the rouble was back to 58.1 per $1 on Tuesday, from a level of 56.8 achieved a couple of weeks ago.)
Black Sea prices for Russian wheat with 12.5% protein, for September delivery, rose $2 last week to $185 a tonne, according to Ikar.
SovEcon also put the price at $185 a tonne, but reckoned that was a $1-a-tonne rise week on week.
EU vs Russian
“Offers in Russia are on the rise,” said Benson Quinn Commodities, if questioning the extent to which “the bid is willing to follow”.
The dynamic means that the price premium held by European Union wheat “has narrowed slightly.
“But it has some work to do take demand away from the Black Sea.”
Still, the prices of the cargos offered “will have to be monitored closely”, said Agritel, with such details an indication of where different origins stand on the world market.
(Agritel also flagged Ukraine’s difficulty of winning Gasc business, since the authority in the spring raised its protein threshold to 12.5%.
“This change could favour Russian wheat since the quality in Ukraine is lower compared to the 2016 harvest,” the analysis group said.)
The second count on which Gasc will prove intriguing is any impact on offers of Egypt’s rejection of one cargos of wheat apiece from France and Romania over containing poppy seeds.
In fact, it looks the cargos may be allowed in, after removal of the seeds.
“The two wheat cargoes rejected by Egypt’s agriculture quarantine service may have to be transported to another port to undergo the sieving procedure needed to remove poppy seeds from the wheat,” CHS Hedging noted.
Will this mean an extra premium on offers to Egypt?
Or will, indeed, merchants just stay away, and avoid the risk of huge demurrage etc charges should a cargo sent to Egypt fail fall foul of the country’s notorious customs process?
“It will be interesting to see how many offers come to the table,” said Terry Reilly at Futures International.
Sowings a little slow
In early deals, as of 09:30 UK time (03:30 Chicago time) Chicago wheat futures gained 0.6% to $4.46 a bushel for December delivery, continuing to find support at their 10-day moving average, of a little over $4.42 a bushel, which has provided a bit of a floor now in three successive sessions.
US Department of Agriculture data overnight on US winter wheat sowings were hardly unhelpful in showing planting progress 13% complete – 2 points below the average pace, and 1 point behind investor expectations.
Sowings in Montana and Nebraska, at 16% and 23% complete respectively, are running 10 points and 11 points respectively behind the average pace.
South Dakota, with 30% completion, is 6 points ahead.
Chicago corn futures found a little bit of bounce too, adding 0.2% to $3.52 ¼ a bushel for December delivery.
The USDA data overnight was somewhat helpful here too, in terms of harvest progress which, at 7% complete, was 4 points behind the average pace, a reflection of a late-maturing crop (thanks to cooler conditions last month).
Progress was 3 points behind trade expectations too.
Still, there is no clear picture yet of how yields are turning out, with Benson Quinn Commodities saying that “early yield reports have been very mixed with little indication of trend versus the USDA forecast”.
A more definite price direction, and on the negative side, is coming from the demand side.
“Demand though has been disappointing with cash basis market weak despite little if any new selling from producers,” said Benson Quinn Commodities, flagging weakness in the US export performance.
Actual shipments have reached 1.35m tonnes for the first two weeks of the new season – compared with 2.93m tonnes a year ago.
It is worth restating comments on Monday from Tregg Cronin at Halo Commodity Company, who said that “late last week, CIF corn [export prices] traded down to $0.14 a bushel above December futures, which is the lowest spot trade since 2009”.
“This is due to the large amount of old crop corn still trying to move as well as the lack of a nearby export programme relative to recent years.
“Traders knew the competition from South American corn supplies would be fierce, but export commitments as of last Thursday are the second lowest for this time of year in the last 11 years.”
‘Focus for the market’
Soybean futures, which performed best in the last session, lagged in this one, albeit easing only by 0.25 cents to $9.67 ½ a bushel for November delivery.
The first US soybean harvest progress figure of the year, at 4%, came in 1 point behind the average pace, and investors’ expectations, although that is hardly a huge impetus for price movement.
Ditto the figre on soybean condition, which eased 1 point to 59% rated “good” or “excellent”, rather than holding at 60% as the market had forecast.
Tobin Gorey at Commonwealth Bank of Australia flagged that “Brazil’s dry soybean regions remain a focus for the market.
“But there has been little evolution in the weather outlook. And without evolution there is little impetus for prices to move.”
In New York, cotton futures for December edged 0.1% higher to 69.57 cents a pound for December, continuing to factor in a small amount of premium to account for the threat that Hurricane Maria ends up making landfall in the US.
(At the moment, Maria’s path looks to be going well east of Florida.)
The US cotton harvest, at 11% complete, was well ahead of the average pace of 6 points by now, largely thanks to speedy work in Texas.
The condition of the US crop eased by 2 points week on week, although to a still-elevated 61%.
(Source – http://www.agrimoney.com/marketreport/am-markets-grain-prices-revive.-but-what-of-egypt-tender–4265.html)