Spring wheat futures extend their premium to soft red winter

05.10.2016

This year's wheat harvest is certainly very big, but protein levels in many areas have been disappointing, including in Russia and the US Plains.

So while Chicago wheat prices languish near 10-year lows, prices in Minneapolis, where high protein spring wheat prices, are showing more support.

The spread between front-month Minneapolis futures, and December Chicago wheat futures, rose over 129 cents a pound on Tuesday, supported by fresh concerns over the Canadian spring wheat crop.

Quality concerns

Kim Rugel, at Benson Quinn Commodities, noted "world quality concerns," supporting Minneapolis prices.

Tregg Cronin, at Halo Commodities, said the strength of the Minneapolis contract was "impressive, but not unwarranted".

"US production of spring wheat was unexpectedly cut from 571m bushels down to 534m bushels, and serious concerns over the Canadian crop are now rising.

December Chicago wheat futures finished up 0.3%, at $3.95 Ѕ a bushel.

December Minneapolis spring wheat futures up 1.2%, at $5.21 ѕ a bushel.

Yield forecast weighs on soybeans

Corn futures extended their rally, while soybeans fell back after a big upgrade to yield hopes.

After markets closed on Monday, commodity brokerage INTL FCStone lifted its forecast for US soybean yields to a record 52.5 bushels an acre, up from 50.1 bushels an acre forecast last month.

FCStone boosted its forecast for this year's US soybean crop to 4.357bn bushels, up from 4.163bn bushels last month.

FCStone trimmed its forecast of the US 2016 corn yield to 175.2 bushels per acre, down from the 175.6 bushels forecast last month.

US corn production was seen at 15.163bn bushels, down from 15.195bn last month.

The next session will see the release of corn and soybean yield forecasts from Informa, which are also closely watched.

Slow harvest

The USDA's weekly crop report also leaned supportive for corn, and bearish for soybeans.

Despite some good harvest weather in the US Midwest, the crop is still behind the average pace, at 24% complete compared to 27% on average.

Corn conditions were reported at 73% good or excellent, down 1 point from last week, although still 5 points ahead of last year.

The soybean harvest, meanwhile, is 26% complete, compared with 27% on average.

And soybean conditions are up 1 point to 74% good or excellent.

Argentine tax u-turn

Still, there was some supportive news for soybeans, as the Argentine government confirmed that, as widely expected, they will not lower their export tax on beans by 5%, as previously discussed.

This is seen as likely to increase corn production, at the expense of soybeans, while wheat sowings are complete, and unlikely to be changed.

November soybean futures finished down 1.1%, at $9.63 Ѕ a bushel, after failing to break through the 50-day moving average.

Psychological support

Technical factors encouraged corn buying.

"Corn inching above resistance at $3.4425 yesterday and closing above that level helped bulls at least psychologically," said Mr Cronin.

And the USDA announced the sale of 100,000 tonnes of corn for delivery to unknown destinations during the 2016-2017 marketing year.

December corn futures finished up 0.6%, at $3.48 Ѕ a bushel.

Hurricane fears

Cotton futures rallied, after the International Cotton Advisory Committee lowered its forecast for inventories at the end of 2016-17.

The ICAC saw ending stocks at 18.10m tonnes, down from the 18.14m tonnes forecast in September.

And there are also concerns that Hurricane Mathew may hit the US crop.

"Hurricane Matthew's expected track has turned a bit westward, which will put it running along the eastern coast of Florida and up through the Carolinas and Virginia," said analyst Louis Rose.

"The westward track will likely result in rain being dumped on cotton producing regions of northern Florida, southern and eastern Georgia and all across producing regions within the Carolinas and Virginia."

But Mr Rose said that the hurricane is expected to weaken by the time it reaches Northern Florida, which he said "should mitigate damage to cotton, and other crops".

December cotton futures finished up 1.7%, at 69.68 cents a pound.

Sugar bounces back

Sugar futures found buyers, after three sessions of losses.

"There is little doubt that set backs are being bought into and the market continues in a bullish frame of mind despite the large speculative net long position at a new record," said Nick Penney, at Sucden Financial.

March raw sugar settled up 2.6%, at 23.26 cents a pound.


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