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AM markets: grains ease, cotton steady amid storm appraisals, 30.08.17

A further fall in the dollar might give hope to optimists over agricultural commodity prices – at least, values of those contracts traded in the greenback.

A weaker dollar boosts the affordability as exports of assets denominated in the currency.

But while the dollar continued to fall on Tuesday, "getting taken out behind the shed" as put of Benson Quinn Commodities, and hitting its lowest levels since January 2015 against a basket of currencies, ags saw little benefit.

Hurricane damage?

Cotton did, as of 09:30 UK time (03:30 Chicago time) manage a 0.1% gain to 69.90 cents a pound in New York for December delivery, but of course there are other factors in play in this market, with rains from hurricane/tropical storm Harvey ripping through the cotton belt.

Indeed, the contract gained strongly in the last session, reversing Friday's losses, but still lacks the strength to break above the psychologically important 70 cents-a-pound mark.

One setback is that the US Department of Agriculture's weekly crop condition rating, released overnight (but accurate as of the week to Sunday), for the domestic cotton crop came in at 65% "good" or "excellent" - up 2 points week on week.

This included a 3 point gain to 58% for the reading in Texas, the top US cotton producing state, and one which has suffered particularly badly from Harvey damage.

Still, "several producers in the Coastal Bend completed cotton harvested prior to the arrival of hurricane Harvey," USDA officials said.

"Cotton modules in the Coastal Bend received little to no damage from the hurricane."

Corn, soy worries

The storm poses a threat to some other crops too.

"There is some concern that Hurricane Harvey could cause quality concerns for corn and soybeans with harvest underway in the [Mississippi] Delta," said Benson Quinn Commodities.

Terry Reilly at Futures International also noted that "there is some moderate concern that heavy rains from Hurricane Harvey, as it moves east into Louisiana and Mississippi, may raise quality concerns with the soybean harvest under way in the Delta".

However, on the negative side for prices was the hiccup that the hurricane poses for US Gulf export loadings, speaking of a back-up of supplies at port and extra (although short-term) pressure on prices.

'Sharply lower bids'

More concerning for bulls looks the pressure coming from the forthcoming US harvests, a time anyway of price pressure, and the increasing hopes for what they will produce.

(In fact, Texan farmers, for instance, have already harvested 54% of their corn and 5% of the their soybeans, but the real market impact comes when combines start rolling in the Corn Belt.)

"Corn basis bids are mostly flat to sharply lower in the Midwest, seeing pressure by increased old crop sales ahead of harvest," said CHS Hedging, adding that "barge corn bids in the Gulf are also in a downturn, further pressuring basis for river terminals".

The results of last week's Farm Journal (ie Pro Farmer) Midwest crop tour, after all, came in with results which were hardly disastrous, putting the corn yield at 167.1 bushels per acre, not from the USDA's 169.5 bushels-per-acre figure.

The tour's soybean yield, at 48.5 bushels per acre, was only 0.9 bushels per acre below the USDA total.

"The Pro Farmer tour last week confirmed good harvest potential for soybean and corn even if estimated yields were slightly below the last USDA figures," said Agritel.

Crop ratings

Furthermore, the USDA's weekly crop ratings overnight appeared to show little cause for alarm, with 62% of the corn crop rated "good" or "excellent", unchanged week on week.

(That said, the figure did disguise falls in many major growing states, including Illinois, Indiana and Iowa, offset by recoveries in the likes of South Dakota, where drought is easing.)

For soybeans, the reading rose by 1 point to 60%, with a decline notably in Illinois, of 3 points to 57%, facing off against increased readings for the likes of Nebraska, Ohio and North Dakota as well as South Dakota.


Lower prices are prompting some hope for demand, with US export data for last week, released on Monday, coming in at 805,756 tonnes, up from 720,213 tonnes the week before.

For soybeans, the figure came in at 716,171 tonnes, up from 668,245 tonnes the week before.

Still, Benson Quinn Commodities flagged that "slow export sales to date" for 2017-18 and ample have still left investors "unimpressed".

Chicago corn futures for December eased by 0.1% to $3.50 ¾ a bushel, earlier setting a fresh contract low of $3.50 a bushel.

Soybeans futures for November, at $9.40 ½ a bushel, stood down 0.1%.

'Get bigger as harvest progresses'

Chicago wheat futures for December matched their contract low (set in the last session) of $4.26 ½ a bushel before reviving somewhat to $4.27 ¾ a bushel, a dip of 0.1% on the day.

For wheat, Russia is bull's big enemy, with Benson Quinn Commodities flagging that "the Russian wheat crop just continues to get bigger as harvest progresses, yield get bigger and latest estimates start edging from 81m tonnes to 90m tonnes".

Agritel flagged a "context that remains heavy" in wheat markets, "with the record crop in Russia".

Futures International's Terry Reilly noted that the "massive Russia wheat production is pressuring cash prices", with Ikar reporting export values down 1.6% last week to $180 a tonne.

'Below production costs'

More will in fact be known on Russian prices later, with the results of the latest tender by Egypt's Gasc grain authority.

"Gasc is in, which will allow the trade to see just how cheap the Black Sea origination is willing to offer wheat," said Benson Quinn Commodities.

In Paris, where wheat has fared even worse than in Chicago of late, pressed by a weak euro as well as the huge Russian harvest, December futures were actually indicated opening unchanged at E158.25 a tonne (after closing the last session at a fresh contract low).

"One trader noted EU wheat is below production costs," Mr Reilly said.

'Market is nervous'

In fact, Paris-based Agritel said that at "current price levels, under-production costs are problematic for grain producers.

"This is in addition to the difficulties encountered by the French agricultural sector, following the catastrophic harvest of cereals last year."

Agritel also noted that the "rapeseed market is nervous right before the European decision, expected on September 7, on the WTO's conviction that Europe should lower its anti-dumping duties" on imports of Argentine biodiesel.

Rapeseed for February was shown down 0.3% at E370.00 a tonne, dipping below its 40-day moving average.

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