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Soy nears 3-year top, corn hits 1-year high, wheat soars...
Grain prices soared in the first session of the week, as bears lost control even of the Black Sea.
One of the intriguing tensions within the wheat market has been between values in the former Soviet Union and those in the West.
As the offers to a tender by Egypt's Gasc authority last Wednesday showed, the surge in US, and to a lesser extent, French values has not been matched by those from the likes of especially Russia, where merchants have been wary of the prospect of a large harvest on the horizon.
Would this conflict resolve in a shift downwards in Western prices, or a move up in Black Sea values?
Egyptian tender results
Certainly, bears won the early exchanges, with the Gasc tender details being seen as a key reason for a significant retreat in Chicago futures in the last two sessions of last week.
But Chicago soft red winter wheat futures recovered a good bit of that lost ground on Monday, ending up 2.9% at $5.50 a bushel, as cracks appeared in Black Sea resolve, with Russian export prices for 12.5% protein pegged by Ikar at $194 a tonne, up $5 a tonne week on week.
SovEcon estimated Black Sea wheat prices for supply in July-August up $6 week on week at $190-193 a tonne.
This tallied with the results of a further Gasc tender, at the weekend, which showed the grain authority for the world's top wheat-importing country paying an average of $204.23 a tonne for crop, excluding freight.
That was up nearly $4 a tonne over three days.
"Russian export prices hit a 19-month high, with Black Sea wheat up 3.2% last week," was how CHS Hedging saw the dynamic.
And the gains only added to the buoyancy in grain markets on Monday, in which North American weather, as ever of late, was the main focus of attention.
Minneapolis hard red spring wheat for September closed up 4.4% at $8.00 ½ a bushel in late deals, if remaining nearly $0.70 below four-year intraday highs hit last week.
"The spring wheat growing areas of the northern Plains are expected to remain in an extended drought, and conditions deteriorate more heading further west in the Dakotas and into Montana," said CHS Hedging.
'Yield potential will decline'
US Department of Agriculture data later are expected to show a further drop in the condition of the US spring wheat crop, of 2 points week on week to 35% rated "good" or "excellent".
And in Canada, "rains should remain rather light in southern Alberta, southern Saskatchewan, and southern Manitoba and very warm temperatures should continue as well," said weather service MDA.
"This will maintain significant moisture shortages as and stress on spring wheat and canola.
"Yield potential will continue to decline as well."
At RJ O'Brien, Richard Feltes said that "two-thirds of US hard red spring wheat and one-third of Canadian hard red spring wheat is deteriorating under heat/dry stress".
Still, back in the US, the key issue for grain investors was of hot and dry weather in the Corn Belt, which matters particularly from now on with July bringing the heat-sensitive pollination process for corn, and August the vulnerable pod-setting phase for soybeans.
"Warm and dry forecasts, specifically for areas west of the Mississippi River, continue to prompt significant buying in all of the grain and oilseed markets," said Darrell Holaday at Country Futures.
Terry Reilly at Futures International said that "many weather models are in agreement that a high pressure ridge will be over the western Corn Belt and Great Plains during the middle-to-latter part of next week.
"We see this as more threatening than that of late last week."
CHS Hedging flagged "hot and dry extended weather forecast that will likely hold through the pollination period".
The broker added that the "hotter, drier forecast is driving soybeans higher" too.
'Deteriorating yield potential'
News on the demand side was not too bad either, in terms of US exports for last week coming in at 1.01m tonnes for corn, down nearly 140,000 tonnes week on week but still a respectable figure, while for soybeans, shipments jumped by nearly 200,000 tonnes to 465,157 tonnes.
(Wheat exports, at 533,872 tonnes, were up some 15,000 tonnes week on week.)
That does not answer the worries over the pace of demand for corn and, in particular, soybeans for 2017-18.
However, RJ O'Brien's Richard Feltes noted that "trade is more worried about deteriorating corn and soybean yield potential than faltering new crop demand.
'Hard to break row crops'
Mr Feltes: "It will be hard to break row crops until Minneapolis spring wheat corrects or trade is confident that remaining row crop managed fund shorts are covered."
And Chicago corn futures for December, the best-traded contract, closed up 2.3% at $4.14 a bushel in late deals, a one-year ending high for the lot.
Soybean futures for September closed up 2.4% at $10.30 a bushel, the lot's highest finish in four months, while the best-traded November contract ended up 2.3% at $10.39 ¼ a bushel – the highest close for the contract in nearly three years.
Still, if bears lost their grip on grains, they rediscovered their grip on cotton, which for December closed down 1.9% at 67.29 cents a pound, with conditions far more favourable in the cotton belt in the south and east of the US.
"The growing weather in the US Delta and South East is generally good and crop conditions are reported to be mostly good by producers and observers," said Jack Scoville at Price Futures.
"Warmer temperatures have arrived to support development and there has been more than enough rain."
At Commonwealth Bank of Australia, Tobin Gorey flagged that even with a strong close to last weke, "not all weak momentum indicators have been stubbed out.
"Allied with a fundamental context that will see supply conditions ease in the next six month, we still think prices have a weaker bias."
And raw sugar returned to the back foot, slumping by 4.2% to 13.56 cents a pound for October delivery, amid observations that prices had rebounded far above the level of ethanol parity – ie the level at which Brazilian mills have equal financial incentive to turn cane into sugar or ethanol.
Trading above parity means sugar remains the more favoured product, from a simple margin perspective.
"The fundamental outlook is still bearish as we are back above ethanol parity estimated at 12.70 cents a pound for spot, and forward positions showing a price advantage for sugar over ethanol of 140 points for July/August and 50-70 points New York equivalent for September-December," said Sucden Financial.
CBA's Tobin Gorey said: "Both anhydrous and hydrous ethanol prices are now sub-13 cents a pound in sugar equivalent terms.
"The sugar market is not trading at levels that will see a lot less sugar production."
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