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PM markets: wheat futures tumble as US prospects improve

Agrimoney.com, 01.06.16


Grain futures took a tumble, as the end of the month spurred profit-taking in corn and soybean markets, while wheat futures fell on improving prospects for the country's wheat crop.

"Today's trade is about month-end positions," said Kim Rugel, at Benson Quinn Commodities.

As the US hard red wheat harvest gets underway in Oklahoma, yields are reported to be strong.

"The wheat complex is lower today dragging corn along for the ride on good harvest yields in hard red wheat areas," said Jennifer Webster, at CHS Hedging.

Weather worries ease

And weather prospects are improving for US wheat as well, after some wet weather raised fears over yields and quality.

"The weather models indicate a pattern that will allow harvest to progress later this week and into early next week," said Darrell Holladay, and Country Futures.

"The potential for the US winter wheat crop just simply gets larger," he warned.

Strong wheat exports

There was a touch of support as the US Department of Agriculture announced larger than expected export inspections, at around at 494,000 tonnes for the week.

But the US prospects weighed on prices, as July Chicago wheat futures fell by 3.2%, to finish at $4.64 Ѕ a bushel.

In Kansas, where hard red wheat of the variety grown on the US plains is traded, July futures finished down 2.3%, at $4.48 a bushel.

Rain worries in France

Losses in European markets were less marked, as the wet weather in Europe is raising concerns about crop condition there.

"Continuous rains in a large part of France are raising fears about quality of the next harvest," warned Agritel.

"Excess of precipitations is not only hitting France but as well the rest of Europe from the Atlantic to south west of Russia."

"Sanitary pressure remains strong on all winter cereals and future climatic conditions will be crucial."

Still, Russian prospects are still looking strong, as the agricultural consultancy Ikar raised its forecast for the wheat harvest by 1.0m tonnes to 63.5m tonnes.

September Paris wheat futures fell 1.4%, to finish at E164.50 a tonne.

Chinese grain sales

An ongoing attempt by China to reform its grain sector is leading the government to auction off some of its massive inventories, which is bad news for import demand.

After Friday's corn auction, the first in a series that will offer up around 2m tonnes of government corn reserves, China gave details of upcoming soybean sales, which are set to be slightly bigger than anticipated.

4.4m tonnes of soybeans will be offered, in weekly auctions of 300,000 tonnes each.

The first soybean auction was intended to be held on Tuesday, but has been delayed to Wednesday due to administrative issues.

Disappointing exports

And weekly US export inspections for corn were disappointing, at 786,407 tonnes.

This was well down from last week, and behind forecasts of 1.0-1.3m tonnes.

Imea, the state farm institute for Mato Grosso, the top Brazilian corn state, forecast production there at 21.2m tonnes, an 8% trim from its April forecast.

But with weak export sales, and spill over pressure from wheat, July corn finished down 1.9%, at $4.04 ѕ a bushel.

US weekly soybean export inspections were in line with expectations, at some 182,000 tonnes.

The USDA announced a fresh export sale of 73,000 tonnes of soybeans for 2015-16 delivery, and 140,000 tonnes for the 2016-17 marketing year.

July soybeans finished down 0.7%, at $10.78 Ѕ a bushel.

Sugar eases back from two-year highs

Raw sugar futures fell back on a touch of end-of-month profit taking, after hitting a 23-month peak.

The sugar contract has been rallying thanks to fund buying, and harvest-disrupting rains in top grower Brazil, at a time when other exporters are seeing reduced yields due to dry weather.

Pressure came on sugar futures as the Brazilian real fell 1.2% against the dollar, to 3.6115 to the dollar in afternoon deals.

A weaker real is bearish for prices as it encourages producer selling.

July raw sugar settled down 0.2%, at 17.49 cents a pound, after hitting a 23-month high of 17.70 cents a pound.

Short supplies or technical trading?

Cocoa futures extended their rally, as the spread between the front month and second month contract widened.

The increasing premium of front month cocoa futures has raised ideas that the market is tightening.

The premium of New York July cocoa futures to September futures is now at $40, a contract high.

And the International Cocoa Organisation raised ideas of the 2015-16 global cocoa deficit by a whopping 67,000 tonnes, to 180,000 tonnes.

But as on Friday, traders reported there was little sign of a tighter physical market.

"The market has no real reason for a sustained move higher," said Jack Scoville, at Price Futures Group.

"Demand remains a problem as the recent European and North American grind data was considered disappointing."

July New York cocoa settled up 1.8%, at $3,059 per tonne.

http://www.agrimoney.com/marketreport/pm-markets-wheat-futures-tumble-as-us-prospects-improve--3624.html



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