Soya oil drags beans down slippery US slope
SOYA oil has continued its precipitous fall this week, dragging soyabeans down in its wake. It looks like the year-long bull run is over.
The Chicago July soya oil futures contract closed on Friday, 22 May, at 27.33, down 92 points on the week. The soya oil market has been depressed by falls in Malaysian palm oil prices and recent reports indicating oversupply. On Monday, the national estimate of monthly stocks was revised upwards by 84 million lbs to 1.405 billion lbs, and this has turned sentiment bearish.
Beans closed on Friday at their lowest point in five weeks, with the July contract down 6¢at $6.3525/bushel. In addition to poor oil prices, which will discourage bean crushing, traders are reacting to the ideal planting conditions for soyabeans in the midwest.
US farmers have completed 38% of their planting already, compared with a five-year average of only 23%. Early crop growth also looks extremely healthy, with 9% of the crop already emerged.
The bumper bean crop expected for this year will come on top of high carry-over stocks from last year. Many analysts report that only severe weather conditions could cause this oversupplied market to rally from here.
Maize market waits as rain holds off for planting
THE maize market is extremely sensitive to the outlook for precipitation as farmers complete their spring planting.
So far, there has been little to disturb the supply picture, with farmers already 78% completed in their planting, compared with a five-year average of 63%. The six- to ten-day weather forecast shows perfect planting conditions in the midwest, so farmers are likely to finish planting well ahead of schedule.
While most traders are bearish on corn because of the severe structural oversupply in the market, some analysts are predicting a drought in July or August, the La Niña sequel to El Niño. This would hurt the crop around harvest time and lead to a rally in prices.
On the demand side, the latest export figures show an encouraging pick-up in maize shipments. Export sales during the week ended 14 May rose 33.4 million bushels to 1235.1 million bushels. The USA is gaining business at the expense of Argentina, as the South Americans are unwilling to discount sales while having difficulty meeting current commitments.
The Chicago July futures contract closed at $2.4725/bushel, up 1¢ on the week, while the December contract was unchanged at $2.5925.
US wheat prices in free-fall
THERE seems to be no end in sight for the drop in USA wheat prices, with the July contract hitting a new low during Friday trading, before recovering slightly to close at $2.98/ bushel, down 4¢ on the week. Wheat is the most depressed of the US grain markets, due to severe oversupply.
Thanks to this years unusual weather conditions, the winter wheat crop is progressing well, with 60% already headed, compared with a five-year average of 48%. The harvest is beginning in some areas of Texas.
Meanwhile, the ideal planting conditions have enabled farmers to get 90% of the spring crop into the ground, well ahead of the average figure of 62%. Not only is planting well ahead of schedule, but the growing conditions have also been ideal. An impressive 69% of the spring crop is already emerged, compared with a five-year average at this time of 32%.
All this may cheer up the farmer as he surveys his green fields, but it will hurt when it comes time to sell the crop. As long as the corn (maize) market remains on the defensive and weather conditions are favourable for the crop, wheat will remain in a bear market.