Wheat prices reached a one-month high as global weather concerns mount, but a weak energy market kept a lid on row crop gains.
Fears are growing for next season’s Black Sea wheat crop, as key weather models point to hotter and drier weather next week in Russia and eastern Ukraine.
Kyle Tapley of MDA Weather Services said that winter wheat planting in the region, ahead of the 2016 harvest, will continue to be delayed, and the germination and establishment of planted seed would be stressed by dry weather.
‘No relief’
Speaking to Agrimoney.com, Nick Sax of Benson Quinn Commodities agreed that there were concerns on dryness in the Former Soviet Union, and said those worries were lifting prices.
“Weather leans positive [for prices] internationally, with one-half of Ukraine and one-quarter of Russia dry, and no sign of relief,” said Richard Feltes at Chicago broker RJ O’Brien.
And there were concerns for production in Australia as well, where the much discussed possibility of an El Nino-related drought seems closer to becoming a reality.
“Australia has trended significantly drier over the past few weeks, with the precipitation patter beginning to resemble a classic El Nino signal,” said Mr Tapley, forecasting dry weather over the next 10 days.
December Chicago wheat closed up 2.3% at $5.07 ½ a bushel.
December wheat in Paris closed up 1.8% at E174.50 a tonne.
Opec tap to stay on
Rising wheat lent support to other grains, but a sharp shift in oilmarket sentiment capped gains.
“Higher energy values supported the corn and soybean markets overnight and early this morning, but a reversal lower in the energy sector has weakened the overall support,” said Darrell Holaday at broker Country Futures.
Oil prices have fallen as fears grow that producer body Opec, which includes key gulf producers such as Saudi Arabia, Iran and Iraq, will maintain production.
These countries boast not only massive oil reserves, but a very low cost of oil production, and large onshore facilities.
Offshore oil in the firing line
Opec is widely believed to have welcomed, and exacerbated, the fall in oil prices, as a tactic to discourage the exploration and exploitation of US shale gas reserves, which could compete with Opec product in the long term.
And there have been hopes that as shale exploitation falls, Opec may start to tighten supplies.
But according to Reuters, sources within Opec have said that the organisation is now aiming to supress the development of offshore oil assets and other high-cost projects in competing countries.
This could mean that Opec producers, and particularly Saudi Arabia, hold off cutting production for months or years to come.
Brent crude prices retreated sharply, after reaching $50.25 a barrel, falling to $47.87 a barrel in afternoon deals, down 2.5% on the day.
Low oil prices are bearish for corn and soybeans, which are used as biofuel feedstocks.
November soybeans closed up 0.2% at $8.86 ¾ a bushel, with only limited support from wheat.
Stocks up
And corn gains were also capped, thanks to weakness in the ethanolmarket.
The US energy agency reported stocks of ethanol were up, which weighed further on prices.
US ethanol inventories were up by 609,000 barrels from last week, to 18.9m barrels. This increase came despite a drop in output of the biofuel by US producers, by 23,000 barrels a day, to 938,000 barrels a day.
October ethanol futures fell by 2.1% to $1.535 a gallon.
Corn for December closed up 0.7% at $3.83 ¼ a bushel, despite the reduced demand for the grain implied by the ethanol production data.
Real decline continues
In Brazil the real debacle showed no signs of stopping, as the currency discovered new all-time lows against the dollar, with fresh discussions of a move to impeach President Dilma Rousseff fuelling the sell-off.
The real reached more than 4.1 to the dollar, up 2% on the day.
The falling real saw coffee prices make new recent lows, but they rebounded in late day buying.
‘Almost in a free fall’
Jack Scoville of Price Futures noted that the weaker real may not be encouraging farmer selling just yet.
“The real is almost in a free fall, and producers there might stop selling until the currency shows some stability,” he said.
“Their production is the only hedge they have against an economic meltdown or even just a little further weakness, and old time South American farmers know how to deal with these things as they have lived through some economic extremes in the past.”
December arabica coffee futures fell to a contract low earlier, but a flurry of short covering saw prices settle up 0.6% at 11.62 cents a pound.
November robusta coffee reached three-year lows, but a dramatic late session turnaround left prices up 1.9%, at $1,540 per tonne.
Data ahead
Raw sugar futures rose, ahead of data from Brazilian cane group Unica on Thursday. The Unica numbers will reveal the effect of a spell of heavy rain on the Brazilian harvest.
October raw sugar settled up 0.6%, at 10.95 cents a pound.
Cotton continued to bump along recent lows, as concerns about global economy continue.
“Indications that the Federal Reserve is putting off raising interest rates until the world economic picture gets more stable has created the fear of further economic problems in the world among traders, and a weaker world could mean less demand for clothes and cotton,” said Mr Scoville.
December cotton in New York went sideways at 59.97 cents a pound, 0.03 cents below Tuesday’s close and at a contract low.
