The good news for wheat bulls was that oil prices were holding their ground at two-year highs.
Brent crude for November stood unchanged at $59.02 a barrel, having touched $59.59 a barrel earlier, a fresh highest-since-July-2015, with the gains attributed to strong demand and ideas that independence elections among Iraqi Kurds may lead to supply disruptions.
Higher oil prices tend to support the Russian rouble, which is in turn a support to global wheat prices, though raising the price of the country’s huge exports of the grain, prospects of which have been boosted by a record harvest.
The rouble nudged 0.1% higher against the dollar, to 57.4 per $1.
‘Look for choppy trade’
There were other props to wheat futures too, with Australia’s continued dryness worries helping further gains in Sydney prices, which for the January east coast contract added a further 1.0% to Aus$296.00 a tonne.
“The market is still catching up with declining crop forecasts in eastern Australia,” said Tobin Gorey at Commonwealth Bank of Australia.
And then there is the prospect on Friday of US Department of Agriculture data on production of summer-harvested grains, and on inventories of major crops as of the start of this month.
“Look for choppy trade as market starts squaring positions ahead of Friday’s stocks report, month-end and quarter-end,” said Benson Quinn Commodities.
In fact, the data are, according to a Bloomberg survey, expected to show an 15m-bushel downgrade to 1.72bn bushels in the estimate for the US all-wheat crop, reflecting an 18m-bushel cut to 384m bushels in the figure for drought-hit spring wheat.
‘How is wheat likely to rally?’
Then there was USDA data out overnight showing US winter wheat sowings, at 24% complete, behind the average pace of 28%, amid some worries over dryness in the Plains hard red winter wheat area – although rains are on their way.
“How is wheat likely to rally when the hard red winter wheat belt is receiving much needed rainfall currently?” asked Mike Zuzolo at Global Commodity Analytics.
“This is where the crude oil technicals, and potential for fund investors covering their large [wheat] net‐short position, comes in – along with the prospect that the rainfall for the hard red winter wheat area of central Kansas is unlikely to develop into a pattern.”
All in, Chicago wheat make a firm, if unspectacular, start, adding 0.2% to $4.55 a bushel for December as of 08:20 UK time (02:20 Chicago time).
‘Forecast rainfall is modest’
This time Chicago soybeans were a touch higher too, adding 0.1% to $9.72 a bushel for November delivery, with the USDA data showing the US soybean harvest, at 10%, running a touch behind the average pace (of 12% by now) and the trade forecast of an 11% figure.
Furthermore, worries remain about dryness in central Brazil, where sowings are in their early stages, although rain prospects have eased the jitters markedly.
Still, “the forecast rainfall is modest so the market will continue to worry about delayed planting for a while yet,” said CBA’s Tobin Gorey.
The stocks data on Friday are expected to come in at 339m bushels for soybeans, a little below the 345m bushels the USDA is currently factoring in (for what is the end of 2016-17).
‘Demand is rather dismal’
For corn, for which the stocks number will also be a marketing-year-end figure, the estimate is expected at 2.346bn bushels, 4m bushels behind the USDA’s current forecast.
The corn harvest is also estimated as running slow, at 11% complete, behind the trade forecast of a 14% figure and the 17% average pace.
As an extra positive for prices, “while harvest is active the producer has been uninterested in marketing corn, which may also be offering underlying support from end user that is hoping to add to needs off of seasonal harvest lows,” Benson Quinn Commodities said.
“Demand though is rather dismal with weekly export inspections running at about 50% behind last year’s pace for the same period.”
Corn futures for December eased, by 0.1% to $3.53 ½ a bushel.
New York cotton for December stood in negative territory too, failing to extend the upward momentum of the last session, and indeed finding the 50-day moving average at 69.54 cents a pound tricky to stay above.
The market’s lack of stability the last few sessions has got investors asking a few questions.
“Has the market found support from mills, or are specs just playing the ranges and getting longer hoping to make a move in the December contract?” asked Ecom, after the 1.5% move upwards in the last session.
The trading house added that “as far as we see it, if the US crop can get off the field without any major hiccups then the specs are in trouble. In this case we would expect to see 66 cents a pound.
“However, if we see storms during picking and the October USDA Wasde report reflects heavy damage data [from hurricanes Harvey and Irma] then the specs may just make their money back.”
(Source – http://www.agrimoney.com/marketreport/am-markets-oil-lubricates-wheat-price-gains.-cotton-drops–4276.html)