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IKAR in Mass Media

Firm dollar, reduced frost ideas keep pressure on grains

12 сентября 2014 года

It is Tuesday, the day of the week associated in Chicago with turnarounds in grain futures prices. But not this time.

Futures in corn, soybeans and wheat fell back close to contract lows, under continued pressure from a less threatening US weather outlook, besides the stronger dollar, which made a little further ground in early deals, setting a fresh 14-month high against a basket of currency.

A stronger dollar undermines prices of dollar-denominated exports, such as many commodities, by making them less affordable to buyers in other currencies.

Frost threat

As for the prospect of a US frost, while cooler weather is on its way, the threat to crops continues to look less than it did on Friday, when freeze fears lifted prices.

Not that the risk is zero, and much higher for Canada.

"Freezing conditions over much of Canada are highly likely this week," said Brian Henry at Benson Quinn Commodities.

Another US broker said: "The latest GFS weather model raised temperatures slightly but still has the potential for temperatures to dip as low as 28 degrees Fahrenheit in Canada, Montana, and North Dakota."

However, Terry Reilly at Chicago-based Futures International highlighted how weather models had reduced the idea of a "large cold air pocket for Thursday into Friday", while slowing the "advancement of the coldest air across the northern Plains into the Midwest later this week".

Crop ratings

The reduced threat allowed investors to give more certainty to weekly US Department of Agriculture data which showed US corn and soybean crops remaining in strong health.

The corn crop was kept at a "good" or "excellent" rating of 74%, and soybeans at 72%, both the best since at least 1994.

(The soybean rating is in fact neck and neck with that in 2004.)

Development wise, crops are a little behind the pace, with 15% of corn mature for instance as of Sunday, compared with 26% normally at this time of year, highlighting the importance for yields of frost staying away rather than bringing an early end to the growing season.

In North Dakota and Minnesota, areas most at risk from frost, no corn was rated as mature, compared with typical rates of 13% and 12% respectively.

Data ahead

Another factor in investors' sights is the prospect on Thursday of the USDA's monthly Wasde crop report, which is widely expected to raise estimates for US corn and soybean yields, given the strong crop ratings.

The corn yield is expected to be pegged at 170.7 bushels per acre, up from a current figure of 167.4 bushels per acre, with the soybean forecast seen at 46.3 bushels per acre, compared with the 45.4 bushels per acre the USDA has now.

With all this in mind, it was hard for investors to summon up too much enthusiasm for buying, and Chicago corn for December fell 0.4% to $3.47 ј a bushel as of 09:30 UK time (03:30 Chicago time).

'Virtually no supply shortages'

Soybeans for November dropped 0.3% to $10.05 ј a bushel, putting investors on alert for a potential drop below $10 a bushel for the contract for the first time.

"It's hard to believe that beans should be above $10.00 with a record world carryout and a normal US carryout," one US broker said.

"There will be virtually no supply shortages in the world after the US harvest is over."

Indeed, prospects for the South American harvest, to be reaped early in 2015, are nudging higher too, with Agroconsult raising its estimate for the Brazilian crop by 1.1m tonnes to 95.1m tonnes, and pegging the Argentine one at 56.6m tonnes.

The USDA has the harvests at 91m tonnes and 54m tonnes respectively.

Declining rating

As for wheat, it dropped 0.6% to $5.30 ј a bushel in Chicago for December delivery, although Minneapolis spring wheat did better in falling a more modest 0.3% to $6.09 a bushel.

USDA crop data overnight showed the condition of the US spring wheat crop falling a further 3 points to 60% rated "good" or "excellent", not a disastrous rating, but now down 10 points in a month.

That took the edge off the price-negative factor of an acceleration in the harvest, with growers getting 20% of their spring wheat crop in the barn last week, taking the total reaped to 58%, albeit still behind the 78% average pace, reflecting the wet US summer.

As regards winter wheat, as traded in Chicago and Kansas City, and grown further south in the US, wetter conditions are regarded as helpful given the newly-started planting season, which has seen 3% of crop sown in Texas, bang in line with the average pace.

Signs of demand

On the demand side, there are signs of life, with Morocco seeking 386,600 tonnes of US soft wheat and 330,000 tonnes of US durum wheat, while Algeria is tendering for milling wheat.

Iran bought 200,000 tonnes of wheat from various origins.

However, Black Sea exporters are doing well at scooping up business, with Russia's wheat exports hitting a record 4.2m tonnes last month, according to Ikar.

Ukraine has exported 3.37m tonnes of wheat from July 1 to September 8, helping overall grain shipments soar 44% to 5.98m tonnes, according to farm ministry data.

Source: Agrimoney.com  |   |  Comments: 0   Views: 56

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