AGRIMONEY
If wheat investors think they are having a hard time, well, their peers in the sugar market are doing worse.
Sure, Chicago wheat for September finished down 2.1% at $8.39 ¾ a bushel, a one-month closing low, and taking its decline over the past three sessions above 8%.
But raw sugar for October, New York’s benchmark lot, surrendered early gains to close 0.6% down at 20.32 cents a pound – a seven-week low and the 11th successive trading day of decline in which losses have topped 10%.
‘Picture continues to be bearish’
The sweetener’s lower finish, which defieddownbeat comments from Macquarie over India’s production outlook, reflected continued hopes for a recovery in the Brazilian cane crush.
Lynette Tan at Phillip Futures said: “August weather will continue to remain dry, making it favourable for cane crushing,” in Brazil’s important Centre South district, where heavy rains got the harvest off to a poor start.
“Weather in Centre South Brazil is forecast to be good for crushing till at least the end of this month,” Nick Penney at Sucden Financial said, noting ideas that long-awaited production surplus may finally be on tap.
“The much-touted statistical surplus seems finally to have entered the market’s consciousness, and the near-term picture continues to be bearish.”
‘Measuring stick for competitiveness’
For wheat, the main downer was another US defeat in an Egyptian tender, with Russia, again, and Ukraine getting the business, totalling 120,000 tonnes.
“The wheat trade will be using the results of the tender as a measuring stick for US competitiveness,” Benson Quinn Commodities said.
With US wheat some $30 a tonne out of the running, even before the extra charges of shipping to Egypt from the Gulf of Mexico are factored in, that stick became something to beat futures with.
However, it was not the only downer to values, as Richard Feltes at RJ O’Brien noted.
‘News is negative’
“International wheat news is negative today with Egypt once again sourcing former Soviet Union wheat while eastern Australia and Argentina winter wheat areas all benefit from stepped up rainfall,” he said.
“Additionally, rainfall is improving for the US hard red winter wheat belt over next week,” important when sowings are coming due.
Furthermore, there is a seasonal factor to consider, with the accelerated US cornharvest posing a block to wheat farmers wanting to take grain to elevators.
“Most elevators,” in the Midwest at least, “won’t take wheat from September to November or so because they want to clear the way for taking in the corn harvest,” Jerry Gidel, feed grains analysts at Rice Dairy, said.
And technically, wheat’s weak performance only worsened its credentials, taking it further below its 10 and 20-day moving averages.
‘Changing focus’
The decline weighed on corn futures too, which ended down 0.3% at $7.89 a bushel for December delivery, even though official data overnight showed a further slight decline in the condition of the US crop, in terms of the proportion rated “poor” or “very poor” edging 1 point higher.
“Corn futures seem to be changing focus from the hot, dry weather and production loss to demand destruction and technical chart patterns,” Paul Georgy at Allendale said.
Benson Quinn Commodities said: “While the fundamental structure of the markets is, for the most part supportive, the trade remains wary of additional fund liquidation due to the recent lack of upward momentum.”
Funds were reported net sellers of a further 1,000 lots on Tuesday.
‘Poor yield reports’
In fact, yield reports from early harvest keep coming in low, adding further evidence to ideas of a disappointing crop.
“It is important to note that poor corn yield reports today represent a mere fraction of tidal wave of yield reports that will be flowing in on corn early September,” RJ O’Brien’s Richard Feltes said.
“Nonetheless, the corn market seems confident that poor yield reports will continue, while soybean traders are more guarded on how new crop soy yields will track relative to expectations.
“Be ready for some big moves in beans as the first wave of Midwest soy yields are reported in three-to-four weeks.”
Yield revival?
Indeed, ideas of higher soybean yields were seen as the primary reason behind a 0.1% drop to $15.98 a bushel in Chicago November futures, despite an upbeat number for domestic production.
The National Oilseed Processors Association said that the US crushed 137.2m bushels of soybeans last month, 4.7m tonnes above industry forecasts, and more than 14m bushels above the crush in July 2011.
“That was certainly impressive,” Mr Gidel said.
“But people are more concerned that increased soybean yields,” now many parts of the US have received decent rains, “will mean we get an extra 125m, 175m more bushels”.
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