November 18, 2011
US grain futures drop on sluggish exports
As demand for US agriculture exports fell, the grain futures in the US also fell Thursday (Nov 17), with corn dropping to a five-week low and wheat reaching a four-month bottom.
Corn tumbled 4% on the CBOT and wheat fell 3%, headed for their sixth losses in seven sessions, while soy weakened for the second straight day.
With ample grain supplies as the US harvest wraps up, export demand has been sluggish. The USDA reported lower net weekly export sales of corn and wheat than expected.
Corn's still relatively high price has prompted some animal feeders to substitute feed wheat, while Japan bought about 800,000 tonnes of corn from Ukraine instead of its usually preferred US supplies.
Wheat's weakness has also dragged corn down, due to their price relationship through the feed market.
"The (corn) export sales this morning were dismal and they aren't going to get better as long as this wheat situation stays like it is," said Dale Durchholz, senior market analyst for Agrivisor Services in Bloomington, Illinois.
The USDA reported corn export sales of 208,900 tonnes, down from last week and well below the range of trade estimates from 350,000 to 600,000 tonnes.
"I don't think the market liked the export sales pace in corn here today at all," said Dan Cekander, analyst for Newedge USA. "A sign of the times, with cheap Black Sea corn eroding US corn export demand."
French analyst Strategie Grains raised by one million tonnes its estimate of the EU's corn crop this year to 64.4 million tonnes, now seen up 16% from 2010.
CBOT December corn lost US$0.25-3/4 to US$6.17 a bushel at 11:37 a.m. CST (1737 GMT), with selling accelerating after corn triggered sell stops, traders said.
"The other thing is, we are liquidating the December open interest here ahead of first notice day," Cekander said. "Last year, every time you liquidated one of the contracts, we had a significant break in the market, and I think this is following a similar pattern."
CBOT December wheat shed US$0.18-3/4 to US$5.98 a bushel.
Net weekly wheat exports of 317,100 tonnes fell short of expectations for between 350,000 and 450,000 tonnes.
Soy topped expectations for export sales, which kept its losses more modest.
China stepped up soy purchases this week to fill state reserves, buying more than 500,000 tonnes to take advantage of lower global prices and traders in Beijing said more deals were likely.
January soy tumbled US$0.21-1/4 or 1.8% to US$11.66-1/2 a bushel, following corn.
Fears about the growing euro zone debt crisis kept investors on edge, as Spain and France faced sharply higher borrowing costs.
Those developments pressured riskier assets like commodities and equities, and kept the US dollar firm.
Grains have stayed in a tight trading range for more than a month, with macro-economic concerns leading some investors to the sidelines and with little fundamental news to trade.
Drier weather in the US Midwest through Saturday will help boost the final harvest of the 2011 corn and soy crops, an agricultural meteorologist said on Thursday.