Weather Markets in Full Play As Grain Prices Plummet06/22/2016
Grains plummeted, led by a fall of nearly 6% in corn, as funds rushed for the exit after prospects for US crops improved.
“Grains continue to trade lower today on good weather forecasts and good crop conditions,” said Jennifer Webster, at CHS Heding.
And fund appetite appears to have been waning, even before the outlook improved.
“Our markets were due for a correction before the forecasts changed,” said Tregg Cronin at Halo Commodities.
“Funds have their bellies full right now, and need another catalyst for another leg higher.”
Early pressure on corn futures came overnight, as weekly crop ratings from the USDA showed the US corn crop unchanged, at 75% good or excellent.
“After last week’s heat, trade was surprised to see corn crop conditions unchanged,” said Kim Rugel, at Benson Quinn Commodities.
“This is 1 point off of our all-time record for this date,” Iowa-based broker Don Roose noted, talking to Agrimoney.
Improving weather story
And with the corn still in good condition, the market is now seeing the likelihood of hot dry weather recede.
“The big thing is we’re getting close to pollination,” said Mr Roose, noting that current weather models are suggesting wetter, cooler weather during the crucial month of July than previously thought.
Terry Reilly, at Futures International, told Agrimoney that “the crop weather story is improving”.
“The US weather outlook this morning was little changed from what we had yesterday,” he said.
“But what that does is verify the wetter outlook than we had last week.”
And the pressure on corn futures only intensified come midday, when the weather models turned even more benign.
“It would mean less heat and more moisture for the Plains and Midwest,” said Darell Holaday, at Country Futures.
Brazilian prices fall
In Brazil, domestic corn prices are plummeting as the second crop corn harvest picks up pace.
As of Monday night, Brazilian corn is down 10% from its peak two weeks ago, to six-week low of $14.25 per 60 kg sack.
In Brazilian real terms, prices are down around 9% over the same period, to R$48.40 a sack.
“Corn prices began to fall hard last week, especially in Parana and the Midwest,” said the Brazilian think tank Cepea.
“As the second crop corn harvest in the Centre-South of the country advances, domestic grain availability is gradually increasing,” Cepea said. “For almost the first time this year, buyers face… can exert pressure.”
There was a touch of support, as customs data for May showed Chinese corn imports jumped 156% month-on-month, to 1.037m tonnes.
China is not currently a major corn importer, due to a tightly regulated domestic market that limits imports and keeps prices above world records.
But there are ideas that ongoing grain market reforms could allow heavier Chinese imports, once government reserves are shifted.
Also noteworthy was the fact that imports dried distillers grains fell, suggesting there is less of a market for corn substitutes, which was the result of a loophole in the market regulation.
But rapid fund selling, in the face of an improving US weather outlook, drove a massive selloff in corn.
July corn futures finished down 5.7%, at $3.97 1/4 a bushel.
In wheat, the USDA crop report showed the US winter wheat harvest 25% complete, two points ahead of expectations.
In Kansas, wheat conditions improved by 1 point, to 62% good or excellent.
Mr Cronin said this was “a sign yields are proving better than expectations”.
Mr Cronin said there should be “a swift harvest in the Northern Plains as well given the heat experienced and that forecast which is pushing wheat to maturity quite rapidly”.
July wheat futures in Kansas City finished down 3.3%, at $4.36 1/2 a bushel.
July Chicago wheat futures finished down 2.8%, at $4.58 1/2 a bushel.
Strong export demand limits losses
Given the weakness in corn and wheat, soybeans were hardly likely to come off unscathed, but decent export demand helped limit losses for the oilseed.
Chinese soybean import numbers for May were strong, at 7.664m tonnes, up more than 25% over the past month.
And the USDA announce fresh export sales of 132,000 tonnes of soybeans for deliver to China, and 126,000 tonnes to unknown destinations.
July soybean futures finished down 0.9%, at $11.33 1/4 a bushel.
Chinese buying falls off in sugar…
Raw sugar futures continued to fall away, as demand from the world’s top importer eased. Chinese May sugar imports were down 74% year on year, at 135,455 tonnes.
“There is a lot of talk that a down side correction is coming after the recent rally that appears to be stalling out,” said Jack Scoville, at Price Futures Group.
October raw sugar settled down 2.1%, at 19.34 cents a pound. August white sugar settled down 1.0%, at $531.2 per tonne.
…and in cotton
Chinese cotton imports in May were also sharply down, at 80,000 tonnes, down 52% year on year.
And US cotton crop condition improved by 1 point, to 54% good or excellent.
Tobin Gorey, at CBA, also noted that prospects in India are improving.
“Forecasters say monsoonal rains will finally start to spread north this week,” he said.
“If Indian planting picks up as a result that would be a bearish influence on the market.”
December cotton futures settled down 2.4%, at 64.39 cents a pound.