Morning markets: Wasde bolsters crops as oil and shares slip

by Agrimoney.com

The September 11 commemorations stole the headlines this weekend, but they weren't the only sobering news in town.

In Europe, fears for Greece's debts got a boost from growing talk among German politicians that default may be in order.

Furthermore, in France, banks such as Credit Agricole and BNP Paribas, which are viewed as particularly exposed to Greek debt, are reportedly bracing themselves for a potential credit rating downgrade by Moody's.

With analysts hardly raving about US economic prospects either, Tokyo's Nikkei share index tumbled 2.3% to a two-year low. Wall Street stocks are expected to open lower later on too.

New York crude fell 2.1%, copper eased, the dollar gained 0.5% against a basket of currencies, hitting its highest since March – markets had a distinctly "risk-off" tone.

Data later

…which might have extended to crop markets were it not for two factors.

The first is the prospect later of the US Department of Agriculture's monthly Wasde report on world crop supply and demand which is expected to cut estimates for the domestic soybean and, in particular, corn crops, following a summer long on heat and short on rainfall.

Investors have been increasingly cautious ahead of data expected to move markets.

"Is the high in" for corn and soybean futures, Mike Mawdsley at Market 1 asked.

"No one knows for sure, but the USDA report will mostly likely give traders some fodder, bullish or bearish."

'Strong cold front'

The second is the prospect of further adverse US weather, an early frost, which showed no signs of letting up.

"Clearly the main issue this week is going to be the strong cold front which is going to bring a real blast of autumn into a good portion" of central and eastern America from around Thursday, weather service WxRisk.com said.

The high pressure formation "will be the largest and strongest since May".

"The frost risk for North Dakota, South Dakota northern Iowa Minnesota and Wisconsin is pretty high."

Chinese imports

There were some Chinese import data for August, released on Saturday, for traders to factor in too.

For soybeans, of which the country is the top importer, imports fell 15.7% month on month to 4.51m tonnes, although the data was less poor on vegetable oil, with a drop of 1.4% to 690,000 tonnes.

Overall Chinese soybean imports this year have reached about 34m tonnes, down about 1.5m tonnes on the same period in 2010.

And there is also mounting talk over the degree at which South American growers will switch sowings to corn, thanks to high prices of the grain.

"Surging corn prices have raised concerns farmers in the US and South America may cut soybean plantings in favour of corn," Lynette Tan at Phillip Futures said.

'Demand remains stagnant'

Still, with the Wasde ahead, Chicago corn moved all of 0.25 cents, downward, to $7.36 ¼ a bushel for December delivery, as of 07:50 GMT (08:50 UK time).

Soybeans added 0.3% to $14.30 ½ a bushel for November.

That left wheat the best performer of the Chicago majors, adding 0.7% to $7.34 ½ a bushel for December delivery, looking for its first positive close in four trading sessions.

"The bulk of the weakness [in wheat] has stemmed from upward momentum in the dollar, but overall demand for spring wheat and soft wheat remains rather stagnant," Brian Henry at Benson Quinn Commodities said, also flagging the competition from Russian exports.

"There is talk of Black Sea wheat and corn pencilling a profit into the [US] south east."

Luke Mathews at Commonwealth Bank of Australia held out hope for wheat futures,

"A strong [Wasde] report may see prices rebound, particularly given that drought conditions continue across the US Great Plains, negatively impacting hard red winter wheat planting," he said.

Thai rains

Elsewhere, dry weather in the drought-hit US South over the weekend, and estimates from Pakistan that some 2m bales may have been lost to heavy rains, allowed a rebound in cotton, which added 0.8% to 112.78 cents a pound in New York, for December delivery.

In Asia, palm oil picked up, adding 0.7% to 3,072 ringgit a tonne in Kuala Lumpur for November delivery, on the back of firmness in oilseed peer soybeans.

But rubber lost further ground, shedding 1.7% to 362.50 yen a kilogramme, well below the February high of 535.70 yen a kilogramme.

Still, the tyre ingredient's "downside is limited due to tight supply amid heavy rain in Thailand, wintering in parts of Indonesia and stock replenishing in China", Ker Chung Yang at Phillip Futures said.

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