Actualités

Tuesday, rather than offering any kind of turnaround, as noted in Chicago lore, continued exactly where the last session left off.

Corn nudged higher, continuing to gain support from Friday’s US Department of Agriculture data showing domestic stocks of the grain far lower than expected as of September 1, the end of 2011-12, and implying more resilient use than had been expected in the face of high prices.

But soybeans and wheat extended losses, given no support by a mediocre start on external markets, where traders attempted to account for Monday’s mixed manufacturing data – strong for the US but weak for China –besides factoring in a cut in Australian interest rates.

And this against trade thinned by holidays in China, Hong Kong and India.

‘Greater confidence in yield reports’

Soybeanscontinued to be pressured by the record pace of US harvest, confirmed in USDA data overnight which showed 41% of the crop cut as of Sunday, up 19 points in a week.

Furthermore, there is continued talk of yields beating poor expectations, and the prospect of an upgrade of potentially 3 bushels an acre to the USDA estimate in the next Wasde crop report, on October 11.

“We now have enough row crops harvest completed to place greater confidence in row crop yield reports to date—essentially widely variable for corn, with upside surprise unlikely, and much better-than-expected for soybeans,” Richard Feltes at RJ O’Brien said.

Seasonal low imminent?

Sure, there is continued evidence of strong demand too, with export data on Monday showing the US shipped 41.7m bushels in the latest week, largely to China, and taking total shipments for the first three weeks of 2012-13 to 76.9m bushels – well ahead of the 45.8m bushels a year before.

And, historically, the first week of October is often one when soybean declines fostered by harvest pressure bottom out.

“This is normally the week to probe the long side of soybeans or reown sales,” Mike Mawdsley at Market 1 said.

“Traders are wary of higher production, however,” he added, and Chicago’s November soybean lot indeed dropped 0.5 cents to $15.59 ¾ a bushel as of 09:30 UK time (03:30 Chicago time), if having recovered from a three-month low set earlier, for a spot contract, of $15.51 a bushel.

‘Wheat expensive compared to corn’

Wheat fared worse, shedding 0.7% to $8.78 a bushel for December delivery, extending a decline attributed in part to profit-taking on a 5% jump in prices on Friday.

Then, US stocks of wheat, as well as corn, were shown smaller than expected, fostering the price jump.

But prices have fallen since, in part on spreads with corn, with funds believed to be taking out “long corn-short wheat bets”, noting the relative prices of the two grains.

“The consensus is that wheat is expensive compared to corn, which I couldn’t disagree with when the Chicago December wheat contract was trading at a $1.40-1.50-a-bushel premium to December corn,” Brian Henry at broker Benson Quinn Commodities said.

“I would not be surprised to see this relationship tighten more from the current levels, but I would be surprised to see this spread trade inside $1.00 a bushel in the near future.”

‘Ongoing yield concerns’

Furthermore, values in Russia’s interior have eased some $10 a tonne in the last week, while Ikar, the Moscow-based consultancy, edged up its estimate for the domestic wheat harvest by 1m tonnes to 40m tonnes – both stoking concerns that the country might have a last card to play on the export market.

And there has been welcome rain in parts of Australia too, although how much a crop saver the precipitation has been is open to debate.

“Crop production potentials from central New South Wales to southern Queensland benefitted from the weekend’s rain,” Luke Mathews at Commonwealth Bank of Australia said.

“However, the meaningful rain missed the Riverina and Victoria-South Australia Mallee, resulting in ongoing yield concerns.”

He added: “No decent rain is forecast for the Australian grain belt for the remainder of this week.”

Meanwhile, parts of Argentina have received too much rain, stoking concerns for wheat, besides potentially delaying soybean sowings.

‘More compelling story’

Corn benefited from the spreading from wheat, which also has a seasonal basis, with RJ O’Brien’s Richard Feltes quoting Moore Research findings that the “wheat/corn seasonal tends to peak out in October before crashing lower Halloween onward”.

“While US and global stocks of both commodities are tight, we think corn has the more compelling story near term,” he added, noting the imperative in corn to ration further domestic demand, which accounts for the great majority of use, even if exports are showing a rapid decline.

Indeed, Brazil on Monday said that its corn exports set a record 3.15m tonnes last month, as it scooped up demand from importers deterred from US supplies by high prices.

Interestingly, Brazilian (cane-based) ethanol shipments hit 452.7m litres, their strongest since July 2009, tying in with Goldman Sachs observations on declining US shipments of (corn-based) ethanol, and potentially a sign of rationing pressure in that segment too.

December corn added 0.2% to $7.58 a bushel.

Slump continues

Outside Chicago, Kuala Lumpur palm oil continued its astonishing decline, dropping to 2,365 ringgit a tonne, its lowest since July 2010, before recovering some ground to 2,371 ringgit a tonne, a drop of 3.8% on the day.

The vegetable oil has now lost 23% of its value in the last month, sapped by concerns over soft demand for Malaysian palm exports at a time when the country’s production is ramping up to its seasonal high.

In New York, raw sugar investors were cautious over adding more gains after the sweetener’s recent run, and awaiting more signals to indicate that short-covering is continuing.

The March contract added 0.1% to 21.15 cents a pound.

“It appears the market remains supported by last week’s news that India may import raw sugar because of price differentials,” CBA’s Luke Mathews added.