Soybean futures rose to a four-week high, buoyed by concerns in the Midwest, as well as better-than-expected US export sales data.
Tropical Storm Bill, which made landfall in Texas two days ago, has yet to dissipate, meaning more rainfall to come for many major US crop-growing regions.
And the soybean market is proving particularly sensitive to the moisture, with US sowings not yet completed (as they are just about for corn), meaning farmers still need good access to fields, and with the oilseed not so tolerant of moisture either.
Soybeans “don’t like getting their feet wet”, the market saying goes.
MDA weather services said that “abundant rains in the south-western area through the weekend as a result of the remnants of Tropical Storm Bill will maintain very slow late planting of soybeans”.
Storm ‘losing steam’
Not that, it has to be said, traders are unable see through the clouds to brighter skies for farmers ahead.
“We have felt that radar returns indicate that the tropical storm Bill is losing steam as it moves north east,” said Darrell Holaday at Country Futures.
“That is confirmed by lower rainfall projections now in Illinois and Arkansas as a result the tropical storm in the next several days,” he added.
“The longer term forecast is also generally favourable”.
Drier weather to come
CHS Hedging also noted drier weather in the US ahead.
“The 6-10 forecast calls for below normal precipitation and above normal temperatures for the areas that are behind on soybean plantings,” adding “the next two weeks will be critical”.
And while the rains are also having broader continue to disrupt barge transport across the Midwest – with high river levels and barge transport disruptions causing the Chicago Mercantile Exchange to declare force majeure for all corn and soy shipping stations on the Illinois River on Wednesday – not all the cash market talk is so supportive for prices.
At broker RJ O’Brien, Richard Feltes flagged an “increase in farm sales” into the strengthened soybean market, “triggering nine soy crushers to lower basis late on Wednesday”.
Export bullish
Still, export statistics offered some confidence to wavering soybean bulls, with data from the US government showing US export sales of new crop soybeans beating expectations, suggesting higher global demand.
OK, old crop sales at the lower end of the expected range, at 132,000 tonnes. But they are not so crucial, with orders already seen as signalling a decent performance for 2014-15.
The problem has been the downturn in orders for 2015-16, which starts in September.
However, while market participants expected new crop exports sales at 150-300,000 tonnes, they came in at 532,000 tonnes, providing bulls with some comfort for once – although Mr Feltes reminded that the pace of sales was “still well behind last year”.
Soybeans for July closed up 0.7% at $9.77¾, above their 100 day moving average.
Saskatchewan rains, but more needed
North of the US, there was mixed news from the Canada, as the Saskatchewan provincial government updated on crop condition after some recent rains.
“Much of the province received scattered rainfall that helped replenish topsoil moisture conditions in some regions,” Saskatchewan officials said.
“However, significant rain is needed soon in many areas to help crops, hay and pasture develop.”
Canola fared relatively well, with the proportion of crop rated “good” or “excellent” at 47%, up 3 points from two weeks ago, if well behind its year-ago condition.
November canola finished down 0.6% at C$493.40 a tonne.
Spring wheat rating down
The rating was less upbeat for Saskatchewan’s important spring wheat crop, with the proportion rated good or excellent down 8 points at 57%.
Nonetheless, spring wheat for July ended down 1.5% at $5.42½ a bushel in Minneapolis, with higher protein wheat futures undermined by the prospect of drier weather for the southern US Plains, hard red winter wheat country.
Drier weather means a pick-up in harvest, extra supplies and pressure on prices.
Kansas wheat for July was down 1.6% at $4.97½ a bushel.
Global benchmark Chicago wheat closed the day down a relatively small 0.7% at $4.88 a bushel for July, offered some support by continuing uncertainties over the impact of Russia’s forthcoming export tax.
Downgrade to EU
The exact way in which the floating tax will be applied has not been confirmed, leading to cautious trade.
There was also a rare downgrade to the European Union wheat harvest, the world’s biggest.
Strategie Grains cut its forecast for the harvest, including durum, by some 1.3m tonnes, citing dryness in many major producing countries.
Despite this, September Paris wheat edged down 0.3% to E178 a tonne.
Disappointing corn sales
Corn lagged, despite facing similar weather concerns to soy, as US sales data suggested disappointing demand.
The US announced new-crop export sales of just 200,000 tonnes, compared with expectations of 500,000-900,000 tonnes.
Mr Feltes pointed out that the “disappointing” sales had widened the lag between this year’s pace of sales and last year’s to 2.5m tonnes.
July corn ended down by 0.4% at $3.58 a bushel.
Fresh lows
Among soft commodities, sugar lost ground too. There looks like no bottom to the sugar market just yet as, having rallied in the last session, it stumbled to a fresh six-year low.
Thomas Kujawa, co-head of softs at Sucden Financial, said “the sugar bulls have very little ammunition to repel the marauding bears” with, given global supply of the sweetner is still thick.
“Overall our best guestimate is that the rallying cry will not be heard and we will slip further lower as the soon to be front month spread crumbles,” he added.
July sugar futures ended down 1.0% at 11.24 cents a pound.
Currency lends support
A falling dollar was supportive across other softs, with the US dollar index down 0.3% against a basket of currencies.
September robusta coffee, London’s most widely-traded robusta contract, was up 2.2% to $1,788 a tonne, pulling arabica coffee up with it.
Front-end robusta has been supported by farmer-hoarding in Vietnam, the world’s largest coffee producer, with July contract trading at $1,875 a tonne, up 3.8% on the day.
September arabica closed up 1.3% to 144.30 cents a pound.
Fresh highs
Cocoa resumed its climb, hitting a new 9-month high, as concerns continue that wet weather in Ghana will cause disease to spread.
Jack Scoville of Price Futures said “the reports of big rains in Ivory Coast along with the production losses already in Ghana are providing the reasons to rally”.
“The problems now in Ivory Coast come on the heels of the lower production estimates seen in the last couple of weeks from Ghana,” said Mr Scoville, noting that “the supply of Cocoa from West Africa is fading”.
July New York cocoa closed up 2.1%
Cotton sales up
Cotton edged up after the US government exports sales data showed sales up last week, at 60,800 running bales, including both pima and upland supplies.
Actual exports reached 223,400 running bales, well down week on week but, said Louis Rose at the Rose Report “well ahead of the pace required to meet” the USDA’s US export forecast for 2014-15.
“Overall, today’s data seems supportive and continues to cast serious doubt on the USDA’s 10.7m-bale US export projection,” Mr Rose said.
December cotton ended up 0.5% at 62.24 cents a pound
