Corn futures sharply pare losses on export hopes...

03.08.2016

Corn futures tumbled to six-year lows - only to recover on the news that the Brazilian government is working to open up its livestock feed sector to genetically modified corn from the US.

Corn had a weak start to the session, after weekly US Department of Agriculture overnight reported better-than-expected US crop ratings.

The USDA saw corn condition at 76% good or excellent, despite the hot weather, where markets were expecting at 1 point drop in condition.

And the development of corn is well advanced, having got through the crucial month of July with no severe heat damage, with 91% of corn in the silking stage.

Favourable crop outlook.

Meteorologist Gail Martell said the good crop condition, and a benign weather outlook "points to a favourable corn harvest in the making.

"Summer growing conditions in corn have been mostly favourable, though not ideal.

"Rainfall has been ample, promoting strong growth and development in corn," she said, although some periods of heat have "proved detrimental".

But the warm June temperatures, along with ample rainfall, "has spurred corn development," Ms Martell said.

The prospect of ample US supply pushed December corn futures to session lows of just $3.29 a bushel, the lowest level for second-month futures since late 2009, but prices pared losses later in the session.

Brazilian demand

Rich Nelson, at the US broker Allendale, ascribed the change in mood to "a new story out there".

This was an announcement by the Brazilian government that it was working to allow the import of more varieties of genetically modified US corn, for use in the country's livestock industry.

Shipping corn to Brazil, the world's second ranked corn exporter, during the middle of its' second crop, or safrinha, harvest might seem like sending coals to Newcastle.

But a crisis in corn supplies is developing in Brazil's southern livestock regions, sending prices soaring.

A long period during which the currency was very weak, making Brazilian corn highly competitive in international markets, lead to heavy exports.

Brazilian stocks were depleted, and much of the current crop was forward sold.

Now, with estimates of the safrinha crop ever declining, the corn supply is getting very tight.

Running out of corn

Last week the analyst Dr Michael Cordonnier reported that "livestock producers are very concerned that the corn situation in Brazil is so tight that the country could essentially run out of corn again before the 2017 safrinha corn harvest gets underway next June".

"Even though the corn situation is expected to get very tight in Brazil, the country is still exporting corn, but all the corn now being exported is to fulfil old contracts from months ago," Dr Cordonneir said.

"Once these contracts are fulfilled, no new export contracts are expected for the foreseeable future because domestic corn prices in Brazil are expected to be much higher than the international price."

Domestic demand

"They do have a need for corn domestically," Mr Nelson told Agrimoney,."The country's exporters oversold."

He noted ideas that export sales could be made within the next few week.

But he pointed out that it was "interesting that they're making such a move on a government basis now," rather than ahead of the safrinha crop, when supplies were tighter.

December corn futures bounced back from the session lows, to finish the day unchanged, at $3.34 a bushel.

Export prospects limit losses

Soybean futures couldn't make any such recovery, although they did trim losses on good export potential.

Soybeans were rated 72% good or excellent in the USDA report.

This is actually a 1 point increase from last week, where a 1 point decline was expected.

Still, at least there was a touch of export demand, as the USDA announced a 252,000 tonnes ale of soybeans to China, for delivery next marketing year.

And the dollar declined through the session, supporting dollar-denominated prices, and increasing export prospects, falling 0.7% against a basket of currencies, to a five-week low.

November soybean futures finished the day down 0.9%, at $9.53 a bushel, falling below the 200-day moving average for the first time since April of this year, but 10 cents above the session low.

Wheat extends losses to 10-year low

But Chicago wheat markets plumbed a fresh 10-year low, under pressure from the weight of world supplies.

Adding to the bearish tone was the news out overnight that Japan and Korea had both taken steps to restrict US imports, due to concerns over unapproved genetically modified wheat verities.

And Gasc, the stat grain buyer for Egypt, appears to have curtailed its buying in Tuesday's tender, taking just one 60,000 tonne cargo, of Russian wheat.

This is the smallest purchase of the marketing year.

Gasc bought 60,000 tonnes of Russian wheat from Midgulf at $168.90 a tonne, after many sellers lifted their prices from last week.

September Chicago wheat futures finished down 1.1%, at $4.01 ј a bushel, its lowest level since September 2006.

Bullish outlook outweighs hefty speculative net-long

Sugar futures bounced back, as the bullish outlook driven by long term supply deficit forecasts helped markets overlook the still hefty hedge-fund net long.

"The longer-term picture may be persuading funds to hold onto longs anticipating a further and higher leg up later in the season," said Nick Penney, a senior trader with Sucden Financial Sugar.

October raw sugar settled up 1.3%, at 19.05 cents a pound.

Orange juice hits limit down, again

It was another wild day in the frozen concentrated orange juice market, as futures hit limit down.

On Friday ICE announced it was returning to its 10 cents a pound daily trading limit for the commodity, after relaxing it earlier due to sharp volatility.

September FCOJ futures fell 10 cents, down 5.5% on the day, to finish at 170.85 cents a pound.

Prices are under pressure from ideas that the recent rally, which took futures to 4-year highs of 195.45 cents a pound week, was overdone.

"Overall demand has weakened due to the higher prices," said Jack Scoville, at Price Futures Group.


agrimoney

Readers choice: TOP-5 articles of the month by UkrAgroConsult