Tuesday July 22, 2014




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U.S. grain futures ease on macroeconomic issues

Strong cash markets turn soybean futures higher

U.S. grain futures eased Tuesday, pressured by a stronger dollar and lower equities amid renewed concerns about the global economy, with wheat dropping one per cent, reversing four days of gains.

Soybeans fell early in the day but later bucked the broad-based commodities selloff and ended up for the second consecutive trading session.

"The cash meal market was higher and I think that turned cash beans up too. Some of the sellers (soy futures) early in the day turned it around when cash firmed up," a cash-connected trader said.

Soybeans found support from the tight stocks of soybeans, strong cash soybean and soymeal markets and slow farmer selling as the U.S. harvest winds down, traders and analysts said.

Corn eased on further signs of tepid export sales of U.S. corn due to historic high prices and on hints that U.S. cattle feeders were scaling back operations because of continued poor profits due to high feed costs.

"Risk-off is in control at the moment, as the weaker equity markets are casting a long shadow on the markets," said Sterling Smith, futures specialist for Citigroup.

Chicago Board of Trade (CBOT) November soybean futures were up 0.44 per cent, or 6-3/4 cents, at $15.53-1/4 per bushel, December corn was down 0.69 per cent, or 5-1/4 cents, at $7.56 per bushel, and December wheat was down 1.08 per cent, or 9-1/2 cents, at $8.68-3/4 per bushel.

"I would suggest that the outside markets' firming (dollar and bonds) is a return to risk-off trade in favor once again of buying the safe-haven assets of the dollar and bonds," said Mike Zuzolo, analyst for Global Commodity Analytics.

U.S. stocks slid more than one per cent as poor earnings from major multinationals heightened fears about the weak global economy. Stocks were also pressured by Moody's downgrading credit ratings for five regions in Spain.

The Thomson Reuters Jefferies Commodity Research Bureau index was down 1.2 per cent at 299.8784.

U.S. crude ended two per cent lower, the dollar index was up 0.36 per cent, gold was down 0.97 per cent, or $16.70 per ounce, and the Dow Jones stock index was down 1.62 per cent.

"It could be that some of this weakness in the outside markets is a post-debate sell-off on fears of potentially seeing increased trade tensions with China develop... regardless of who wins the U.S. presidential election," Zuzolo said.

In their third and final debate on Monday, President Barack Obama and Republican challenger Mitt Romney vowed to get tough on China's trade policies. The U.S. presidential election will be held Nov. 6.

Potential South American pressure

Prospects for a bumper soybean harvest in South America early in 2013 also contributed pressure to the soy complex, although losses were slowed by current tight stocks of soy, firm cash soybean markets, slow farmer selling, and waning harvest of the 2012 U.S. soybean crop.

Brazilian analyst Safras e Mercado raised its estimate of the country's soybean production to a record 82.5 million tonnes from its July estimate of 82.3 million due to farmers' expanding the area planted with the oilseed.

Corn found lingering pressure from the release on Friday of a U.S. government cattle-on-feed report that showed the number of cattle placed in America's feedlots in September was well below analysts' average estimate and was the lowest September figure on record. Fewer cattle to feed in upcoming months would mean lower demand for corn, which remains priced at historically high levels.

And on Tuesday, the U.S. Department of Agriculture (USDA) said private exporters switched to non-U.S. corn for a 270,000-tonne sale to Mexico, further evidence of a marked slowdown of exports of U.S. corn.

Another reminder of stiffer global competition for corn export business surfaced on Tuesday as government data indicated Brazil's 2012 corn exports had already surpassed an annual record and the country could replace Argentina as the world's second-largest exporter of the grain this year.

Wheat lower

Wheat prices were lower as the market fell back slightly after rising for four consecutive sessions. But prices remained underpinned by concerns about crops in Australia and the U.S. and the prospect of an export ban in Ukraine.

Chicago wheat futures rallied nearly two per cent last week after setting a two-month low early that week. The rally was helped by diminishing prospects for the Australian crop and expectations that Ukraine could ban exports from Nov. 15.

"The world balance sheet for wheat is tightening with major exporters, but the United States is still missing out on export business," said Brett Cooper, a senior markets manager at FCStone Australia.

Traders said on Friday that Ukraine's agriculture ministry would ban exports of wheat from Nov. 15 after bad weather hit the harvest.

-- Sam Nelson covers Chicago's grain and soy futures markets for Reuters. Additional reporting for Reuters by Nigel Hunt in London, Naveen Thukral in Singapore and Michael Hogan in Hamburg.



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