So the idea of month end bringing grain price losses went according to tradition.
Will the sister concept, of month beginnings bringing a fresh influx of money and price gains, work too?
In fact, it has to be said that the idea of funds using the last trading day of the month to sell up withdraw cash did not look borne out by data on open interest, ie the number of live contracts, which showed gains for all three of Chicago’s major futures contracts.
Record open interest
OK, in soybeans, the rise was modest, at 49 lots – although compared with the drop in open interest of 140,000 contracts over the previous five sessions, to 665,573 lots, linked to Friday’s close of November options, it did represent quite a change of tack.
But in Chicago wheat futures, open interest gained a sizeable 18,739 lots, to pass 546,000 contracts, according to preliminary exchange data.
And in corn, the jump was 25,748 lots, to 1.59m contracts, the highest in more than six years.
With wheat futures prices for December falling to a fresh contract low in the last session, and the December corn contract heading that way, it looked like funds were opening up fresh short positions.
‘Just has no friends’
“Bigger production and bigger carryout has funds selling corn again while the wheat market just has no friends on record world stocks,” Benson Quinn Commodities said.
And, certainly, wheat futures extended their losses in the early trading hours of November, falling 0.3% to $4.17 ¼ a bushel for December delivery as of 08:30 UK time (03:30 Chicago time).
Tobin Gorey at Commonwealth Bank of Australia said that “the US dollar’sstrength is not doing dollar wheat prices any favours,” in cutting the competitiveness of exports denominated in the currency.
In fact, the dollar was flat in early trading, against a basket of currencies, but remains up some 4% from a September low.
‘New month/new money’
But corn did manage slim headway, edging up 0.1% to $3.46 a bushel, scratching that itch to outperform wheat at this time of year, as Agrimoney discussed last night.
Terry Reilly at Futures International flagged that “corn prices are at the lower end of trading ranges and could see an appreciation for the balance of this week on new month/new money, and pre-seasonal harvest rally expectations”.
The latter refers to the idea that corn prices rise as harvest gets past its peak, and the pressure wanes on values from fresh supplies.
Indeed, that may well be why corn tends to outperform wheat at this time of year, although a slow US corn harvest could muffle or delay that signal this time.
‘The producer is a reluctant seller’
Meanwhile, Michael Cordonnier, the respected analyst, has flagged the potential for some curtailment to the rising ideas for the US corn yield, saying that recent high winds, a threat to such a tall standing crop, have undermined prospects.
He still sees the yield around 170-172 bushels per acre, compared with a current US Department of Agriculture estimate of 171.8 bushels per acre.
Benson Quinn Commodities flagged the support to prices from a recalcitrance by US producers over selling at weak values (although of course if storage space becomes an issue, they may ultimately have no choice but to market some crop soon).
“Interior basis shows select firming, it would appear gaining ownership of physical corn bushels is a challenge, with the producer a reluctant seller,” the broker said.
Store, not sell
Soybeans were also in positive territory, adding 0.1% to $9.86 a bushel for January delivery, maintaining a bit of comfort over 40-day and 200-day moving averages at some $9.82 a bushel.
These too are becoming that much harder for end-users to find, with the US harvest in its closing stages, and a price incentive from the market to hold on to crop.
“Soybean futures spreads are starting to attract producer storing,” Futures International’s Terry Reilly said.
“Expect some crushers to continue to raise interior basis over the next couple of weeks to entice new-crop sales.”
‘Still not enough’
And Benson Quinn Commodities flagged the potential for the USDA, in its monthly Wasde crop report next Thursday, to trim its estimate for the US soybean yield this year.
“Impression is that USDA will lower soybean yield as later-harvested beans were said to disappoint,” the broker said.
CBA’s Tobin Gorey noted that in Brazil, “Mato Gross soybean regions remain on the dry side. Rainfall has been modest and temperatures high.
While weather forecasters “expect light rain in the region… The rainfall is still not enough to take the region off the watch list”.
‘Strong cold front hit’
In New York, cotton for December added 0.5% to 68.74 cents a pound, more than reversing its decline of the last session.
“The market seems to be indecisive about how to respond to weekend freezes in west Texas cotton regions for now,” said Mr Gorey.
USDA data on Monday showed that 10% of Texas bolls had yet to open, ie were particularly vulnerable to damage, when, in the words of officials, “a strong cold front hit… resulting in freezing temperatures in the Plains and a few other areas.
The freeze “affected cotton fields in the Plains, with some producers reporting damage to late-maturing fields.
“However, cotton harvest continued in full swing in the Plains, the Blacklands and the Trans-Pecos.”
‘Shouldn’t be as bullish as it is’
Still, Ecom took a more downbeat tack saying that “maybe the market shouldn’t be as bullish as it currently is.
“Even off the back of numerous weather events and possible crop disasters classings have been coming in very well in the US.”
And with expiry process approaching for the December contract (which actually expires on December 6), and funds holding a sizeable net long in the fibre, “surely we should start to see specs moving their positions to March [futures], or liquidating”, the trading house said.
(Source – https://www.agrimoney.com/news/am-markets-new-month-bounce-eludes-grain-futures-for-now-41765)