US wheat too expensive for Egypt

20.02.2017

Grain futures extended their losses on the previous day, with US wheat still too expensive to compete in export markets, and corn and soybeans under pressure from good South American crop prospects.

"These markets have found it difficult to find any bounce back buying," noted Darrell Holaday, at Country Futures.

Row crop markets continue to suffer from bearish fundamentals, particularly as farmers are starting to show signs of willingness to sell at current prices.

Richard Feltes, at RJ O'Brien, reported "bears citing pick up in farmer corn sales, over-extendedd managed fund longs in corn and soy complex, negative chart action and upcoming USDA release of US supply and demand a week from today".

And prospects in South America look good.

Dry Brazil, wet Argentina

Kyle Tapley, at MDA Weather Services, noted that "below normal rainfall is expected across northern and central Brazil over the course of the next week, which should favour soybean harvesting and safrinha corn planting".

"Rainfall is expected to increase across southern Brazil late in the 6-10 day period and may become more widespread in the 11-15 day period, but excessive rainfall that would lead to major delays in fieldwork is not expected through the end of the month," he said.

"In Argentina, the heaviest rains are still expected to favour central Argentina, primarily over the next week," Mr Taplay said.

"The rains will favour crop growth in many areas, but will maintain some wetness concerns in Entre Rios and portions of Santa Fe."

"Any flooding should be limited to Entre Rios."

Bird flu fears

Two other issues have been on the bubbling away in row crop markets this week, fuelling bearish sentiment.

One is the virulent bird flu epidemic in China, which is likely to greatly reduce poultry production there.

 "There is some consensus developing that the bird flu will impact total world consumption of soymeal (or equivalent) by 1 to 2m tonnes," said Mr Holaday.

Mexico shops around

And there are also concerns about a political push in Mexico to replace US agricultural imports with South American.

On Thursday the Mexican agriculture secretary in Mexico announced a trip to Brazil and Argentina in order to look for deals on agricultural imports, specifically in wheat, corn, and beef.

But many commentators are sceptical as to whether this plan, which is being driven by political opposition to the US president rather than economic factors, has legs.

"One big challenge to this idea is that freight rates South America to Mexico are well above freight rates from the US," noted Mr Holaday.

March soybean futures settled down 0.9%, at $10.34 ѕ a bushel.

March corn futures settled down 1.3%, at $3.68 Ѕ a bushel.

US wheat too expensive for Egypt

Wheat futures also fell, with evidence that US supplies are too expensive to compete in export markets.

Egypt, the world's top importer, bought 360,000 tonnes of Russian, Ukrainian and Romanian wheat.

Prices paid ranged between $195.0 and $197.0 a tonne, excluding freight.

There was some US product offered, but it was well out of the running, at $208 a tonne, even bofore considering the higher freight compared to Black Sea supplies.

And Morocco bought 263,636 tonnes of European Union soft wheat, under a preferential tariff agreement.

May Chicago wheat futures settled down 1.2%, at $4.42 Ѕ a bushel, after hitting multi-month highs in the previous session.

End of bounce

Cocoa prices ended their two-day rally, as the reality of the big West African crop continues to weigh on markets.

"Ideas of bigger production in West Africa continue, and prices are very weak," said Jack Scoville, at Price Futures Group.

"The problems in West Africa due to recent defaults from local industry have hurt prices even more, and now some cocoa is being left to rot on trees or in storage."

May New York cocoa futures settled down 2.1%, at $2,000 a tonne.

Technical selling

And cotton futures also slumped, under pressure from technical selling after prices broke out of an uptrend on Thursday.

The March contract, which expires next week, opened below the 20-day moving average, but found support at the 50-day average.

March cotton futures finished down 2.1%, at 73.48 cents a pound.

May cotton futures settled down 1.6%, at 75.52 cents a pound.


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