Morning markets: Turnaround Tuesday starts to last all week for wheat

Turnaround Tuesday is starting to last all week in the wheat market.

Chicago traders say that a strong trend in the first session of the week is reversed in the second one.

But in the wheat market, that u-turn has started barging into successive sessions.

Last week, a 3.6% surge in Chicago soft red winter wheat futures, the world’s benchmark contract, for July delivery was followed by four negative sessions, which pared back gains for the week to 0.2%.

This week, a 2.1% tumble in Chicago’s July contract has been followed by a 2.6% rebound so far, including a 0.5% gain to $4.91 ¾ a bushel on Thursday as of 09:30 UK time (03:30 Chicago time).

Hard reversals

The reversals have in fact reflected turns in the weather forecast for the US southern Plains, the major area for growing hard red winter wheat, Kansas City futures in which have, of course, reflected the same trend.

The Kansas City hard red winter wheat contract for July lost 2.0% last week, despite having in the first session soared 3.1%.

This week, a tumble of 3.5% on Monday has been followed by successive gains, to leave the contract at $5.13 a bushel in early deals on Thursday.

That was up 1.0% for the day (although still left the contract down 0.4% for this week so far).

‘More sober view’

This week, the price recovery has reflected the reinjection of risk premium after a wet southern Plains forecast revealed on Monday has continued to fade.

Meanwhile, US Department of Agriculture crop condition data on Monday showed further deterioration in southern Plains winter wheat questioning how much good the rain would do anyway.

“The rebound continues on US wheat,” said Agritel.

“Indeed, rainfalls awaited on Saturday in the Great Plains are declining both in terms of accumulation and area.”

At Commonwealth Bank of Australia, Tobin Gorey said, “the market seems to be taking a more sober view of impending rains events in US hard red winter wheat regions.

“The benefit in the worst areas is real but it is limited.”

Spring sowings

Still, demand will come back squarely into the picture later, with weekly data on US export sales, expected for wheat for 2017-18 at 100,000-350,000 tonnes – a large spread, it has to be said, which offers wheat data the chance to come in within the range of expectations.

That has not always been the case of late, with export sales last time for 2017-18 at 120,706 tonnes, below the range of expectations that time, and for the week before at an even more meagre 108,989 tonnes, also falling short of market hopes.

The data also include, of course, spring wheat, which proved less willing to gain in early deals in Minneapolis, standing flat at $6.24 ¾ a bushel with its key weather issue – damp and cold in the northern US into Canada – looking like seeing some resolution after a wet Wednesday.

Warmer conditions are expected “later this week, and slowly improving field conditions begin”, said Terry Reilly at Futures International.

Benson Quinn Commodities, based in Minneapolis, noted “warm temperatures on the horizon.

“North western North Dakota could be in the field by end of next week,” with North Dakota the top US spring wheat growing state.

‘Spillover weakness’

Chicago soybean futures struggled for any gains at all, standing 0.1% lower at $10.52 ½ a bushel for July.

CHS Hedging flagged “spillover weakness in the soymeal market and concerns that soybeans may be the next target in the tariff spat between the US and China”, besides pressure from “profit taking and ideas of a potential increase in US soybean acres”.

Soymeal futures in early deals eased by 0.5% to $379.20 a short ton for July falling below their 40-day moving average, despite worries over industrial action at Argentine crushing plants adding to drought to threaten supplies of the feed ingredient from the top exporting country.

However, soyoil futures found support, adding 0.2% to 31.75 cents a pound for July, after failing in three successive sessions to break below 31.41 cents a pound, suggesting a price floor had been set.

Palm prices

That helped futures in rival palm oil nudge 1 ringgit higher to 3,410 ringgit a tonne in Kuala Lumpur, extending its recovery from Monday’s 20-month closing low, despite some demand worries, at a time when output is seasonally rising.

“Demand for the tropical oil in April is expected to be weak,” said Oriental Pacific Securities, noting a slowdown in the pace of export growth.

“Shipments from Malaysia during the first half of the month rose between 5% and 6% from the corresponding period in March, compared with a rise of 25% to 32% from April 1-10, data from inspection company AmSpec Agri Malaysia and cargo surveyor Societe Generale de Surveillance showed.”

Flat corn

Strength in oil markets, where Brent crude set a three-year high of $74.44 a barrel, also helped palm oil, which is used largely in making biodiesel.

And it offered support to futures in corn too, a grain used largely for making bioethanol.

Still, in Chicago, corn futures for July were flat at $3.91 ¾ a bushel, also weighed by ideas of better US planting weather ahead, after delays to early seedings from  wet and cold.

US weekly corn export sales data later are expected at 700,000-1.20m tonnes, compared with 839,914 tonnes last time.

For soybeans, the forecast is for a figure of 900,000-1.40m tonnes, compared with an even stronger 1.51m tonnes last time.