Corn futures in Chicago rallied to a 10-month high ahead of the long US weekend, helped by strong US exports and a rapid take-up at Chinese government auctions.
Friday saw the first auction of Chinese government corn stocks, which are part of an ongoing plan to rationalise the country’s corn market.
The release of state stocks threatens to flood the domestic market, but China is not a major corn importer due to heavy government control of the sector, and the move will help reduce the heavy inventories, which make up some 40% of total world stocks.
The first state auction sold 889,094 tonnes of corn, of which 864,960 tonnes was Chinese corn from the 2012 harvest, and 24,134 tonnes was corn previously imported from the United States.
This represents an impressive take-up, given that China is only intending to sell 2m tonnes in total.
“The quality was better than previously anticipated,” said Ryan Kelbrants, at CHS Hedging, told Agrimony.
Mr Kelbrants said the take-up was “good from the perspective of the producer”. He also pointed to “good export sales” for US stocks.
The USDA announced the sale of 130,000 tonnes of corn, initially said to be for delivery to China. The destination was later changed to “unknown”.
Still, Mr Kelbrants said the market was “seeing a bit of pressure capping today’s rally due to a strong dollar”.
The greenback was up 0.6% against a basket of world currencies, at a two month high, in afternoon deals.
July corn finished up 1.2%, at a ten-month high of $4.12 ¾ a bushel.
The USDA also announced sales of 110,000 tonnes of US soybeans to China, and 100,000 tonnes of soymeal to unknown destinations.
Soybeans enjoyed a late-session rally ahead of the long weekend.
“Today’s price action had the feel of housekeeping ahead of the weekend until the soybean market posted a strong rally late in the session,” said Benson Quinn, at CHS Hedging.
July soybeans finished up 0.7%, at $10. 86 ½ a bushel.
French prospects downgraded
Wheat futures saw a choppy day’s trade, despite some supportive fundamentals.
The proportion of French soft wheat rated “good” or “excellent” stood at 83% as of Monday, down three points week on week, according to the French farm office FranceAgriMer.
French wheat has been falling in quality, down from 92% good or excellent in the middle of April, and is well behind last year, when 91% of the crop was so rated at this point in the season.
Concerns are growing that that the mild winter, although otherwise supportive, leaves the crop vulnerable to pests such as yellow-dwarf virus.
Still, the French wheat condition is still very good, and prospects across Europe are strong, after a report released by the International Grain Council late on Thursday lifted prospects for EU production, including durum, by 1.5m tonnes to 153.6m tonnes.
July Paris wheat futures finished up 0.2%, at E167.50 a tonne.
Rains on Plains
And there is some support in the US, as fears of excessive rain continues.
“The very wet weather pattern across the Plains and western Midwest will continue through early next week,” said Kyle Tapley, at MDA Weather Services.
“In the Plains, the wet weather will allow wetness concerns to expend, maintain high disease risk, and may also reduce the quality the hard red winter wheat crop,” Mr Tapley said.
“The 6-10 day forecast has trended drier across the central Plains and north-western Midwest,” he said, but noted that there is disagreement between weather models, with the American GFS model showing wetter conditions.
July Chicago wheat futures finished up 0.1%, at $4.81 ½ a bushel.
July Kansas wheat futures finished down 0.5%, at $4.76 ¼ a bushel.
Cocoa futures rallied as front month futures gained against later contracts.
The opening up of the July/September spread, which is now at a $31 a tonne premium, is usually considered a signal of squeezed short-term supply, but market sources suggested that the spread was being pressured by long investors trying to spur some movement.
“Fundamentally nothing has changed from last week to today,” a US trader told Agrimony. “There’s no shortage of cocoa.”
“There are certain traders that are long the market and they are looking for an opportunity to get the market to the upside,” he said.
July New York cocoa settled up 3.1%, at $3,005 per tonne.
Raw sugar futures on ICE extended their recent rally to a 22-month high, after finishing above technical resistance levels on the previous session.
Markets are gaining as wet weather in Brazil spurs fears of harvest production in the world’s top exporter, at a time when drought in other key areas is expected to leave the world in deficit.
“Whilst there was further speculative buying, the general feeling has been that some have been caught short and unprepared by the change in weather forecasts in Centre South Brazil for the coming month and added to shipment bottlenecks, this has prompted a re-evaluation of near term risk,” said Nick Penney, at Sucden Financial.
July raw sugar settled up 0.6%, at 17.52 cents a pound.
(Source – http://www.agrimoney.com/marketreport/pm-markets-corn-futures-hit-10-month-high–3622.html)