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Where the margin is 2021

Where the margin is 2021
February 11-12, 2021, Moscow

IKAR in Mass and Industry Media

Morning markets: Ag futures ease, as traders await key 2018 forecasts, 22.02.18

That seems to be the theme in grain markets, as a key date in the calendar arrives, with the start later on Thursday of the US Department of Agriculture’s two-day annual Outlook Forum.

This gives the first full forecasts for US crop supply and demand this year written in with pen rather than pencil.

(Ie, including detailed analysis of recent themes, viewed as likely more accurate than the long-term baseline forecasts first unveiled for the domestic balance sheet in November.)

Argentina downgrade

And many investors, sitting on gains from recent rallies, were not hanging around to wait to see what the forum data show.

The direction of futures in early deals was downwards, and without any assistance from foreign exchange markets, with the dollar stable against a basket of currencies.

Even soymeal fell, albeit by a modest 0.2% to $380.30 a short ton for May delivery as of 10:00 UK time (04:00 Chicago time), despite the Rosario Grains Exchange overnight cutting its forecast for the drought-hit Argentine soybean crop by 5.5m tonnes to 46.5m tonnes.

Still, this is within the range of forecasts already on the radar.

Benson Quinn Commodities noted market “ideas that Argentine production could be closer to 40m tonnes than the 47m-49m tonnes the trade has been focused on of late.

“While this isn’t out of the question, you have to be creative with yields and harvested acreage to get there.”

Chinese buyers back?

A lower close in soymeal prices would represent the first in 12 sessions, after a rally which has driven prices up by nearly 15% (at current values) to 19-month highs.

Prices of soybeans themselves - less affected by Argentine drought worries as the South American country is a less important supplier raw beans than of soymeal itself, of which it is the top exporter – shed 0.4% to $10.41 ¾ a bushel for May.

Also somewhat negative for prices are growing ideas that the USDA forum will show US sowings of the oilseed exceeding those of corn for the first time.

Besides reports from the USDA forum, also to look out for later are any signs of the return of China from new year holiday bringing fresh interest in imports of US soybeans.

In fact, “Chinese soybean buyers have started to shift their soybean procurement interest away from the US,” said Karl Setzer at MaxYield Co-operative, with this in fact a seasonal trend, given timings of US and Brazilian harvests.

“Brazilian soybeans are being offered at a $3.00-4.00 per tonne discount to the US, which is also causing a shift in buying interest.”

Too late for rains?

Corn itself for May stood unchanged at $3.74 a bushel, finding more support in a Rosario downgrade of 5m tonnes to 35m tonnes in its forecast for the Argentine crop.

Furthermore, while there are some ideas of Argentine weather improving next month, the development cycle of the corn crop could make it less likely to benefit.

“Better precipitation could help the latest of the soybeans, but these rains would be too late to significantly help a large portion of the bean or corn crop,” said Benson Quinn Commodities.

EU, US weather

Wheat extended its decline too, especially Kansas City hard red winter wheat, which fell 0.6% to $4.78 ¾ a bushel for May delivery thanks to needed rains in parts of the US southern Plans, where it is largely grown.

“North central Texas through central Oklahoma to eastern Kansas will see additional precipitation this week,” said Terry Reilly at Futures International, adding that “the central parts of Oklahoma may see 1.00-2.50 inches”.

Chicago soft red winter wheat eased a more modest 0.2% to $4.58 ¾ a bushel for May delivery, finding some support from ideas of frost threatening soft wheat crops in Europe.

“Cold conditions expected in coming days will have to be monitored as temperatures are expected to drop between -10 and -12 degrees Celsius on a large part of France,” said Agritel.

Russia upgrade

“The impact of this cold snap will also hit the eastern part of Europe,” with Ukraine temperatures potentially dropping to -15 Celsius, and in areas where crops are not protected by a snow blanket.

However, “most of winter wheat areas in Russia should not be affected,” Agritel added.

Indeed, Russia’s string of tailwinds in wheat production and exports was underlined by an upgrade by Ikar of 900,000 tonnes to 48.6m tonnes in its forecast for Russia’s grain exports this season.

That reflected a of 900,000-tonne upgrade to 37.5m tonnes in the forecast for wheat shipments.

Cotton eases

Even cotton, a star for bulls in the past two sessions, lost its way this time, shedding 0.5% to 79.98 cents a pound in New York for May delivery.

This ahead of forum data expected to show a rise in US cotton sowings this year, with higher prices buying extra land.

That said, Louis Rose at Rose Commodity Group said that “we do not expect figures put forth tomorrow to be bearish.

“That is, we expect projected demand to increase significantly versus the current marketing year and for domestic production to be projected significantly south of the 2017 crop.”

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