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Soybean markets close lower amid slow planting progress, mixed demand

Meanwhile, wheat markets move lower with reports of increased yields and the need to look for new demand. World prices remain lower than US prices.

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Wheat

Wheat markets were lower as Winter Wheat yield reports have been high and as the market starts to look for more demand. The harvest is starting to wind down in Kansas and should be well over half-done nationally. Yield reports so far this year indicate that overall production will be high. Quality is reported to be good in HRW as protein levels have generally been 11.5 to 12 percent in the Kansas reports. Now the market is looking for the export demand that USDA indicated was possible in its monthly supply and demand updates. The weekly sales reports have shown only routine demand and that is not enough to support prices. 

World prices remain below those of the US and that is hurting any demand potential. Prices in the US will continue to sink unless some new demand is found or until US prices get closer to world levels. Spring Wheat in the US is generally in good condition as it has had enough rain. The North Dakota Spring Wheat tour is this week and participants should see very good crops. Canada seems to be enjoying better weather as well. It had been very dry in the Prairies but rains have been reported in the last few weeks. The price action in Minneapolis indicates weakness and that lower prices might be coming, due to the good conditions in the US and the improved conditions in Canada.

Weekly Chicago Soft Red Winter Wheat Futures ©Jack Scoville
Weekly Chicago Hard Red Winter Wheat Futures ©Jack Scoville
Weekly Minneapolis Hard Red Spring Wheat Futures ©Jack Scoville

Corn

Corn and Oats closed lower as crop conditions appeared to improve. It has been hot but not completely dry in the Midwest and the scattered showers and storms have kept selling pressure on the market. Crops are generally reported to be in good condition with good color. The Corn crop, in general, remains very late and Corn genetics mean that the crop can’t do much to catch up. There were some days above 90F last week and the nights were hot as well, so some growing days were lost due to the heat. The good news for producers is that the weather is changing this week. The hot air ridge is moving west and back to the West Coast. 

The Midwest and much of the Great Plains will enjoy below normal temperatures although it will turn rather dry once the cold front moves through. The cool temperatures will not promote rapid growth, but there will be growth and the condition should stay generally good. Meanwhile, Corn is a market that needs some demand and the weekly export sales reports have not been strong. Overseas buyers can get cheaper Corn in Argentina. What happens to Corn prices this year will depend in large part on how the US crop develops. It is very late so even normal freeze dates could cause some big production losses. A good crop is possible, but the producer will need a late freeze to get the crop home and into the marketplace. 

Weekly Corn Futures ©Jack Scoville
 Weekly Oats Futures ©Jack Scoville

Soybeans and soybean meal

Soybeans and products closed lower on conflicting news and uneven growing conditions. The entire Midwest saw some very hot weather last week but it was not completely dry as scattered showers and storms were reported. Most of these were in the east as the remnants of the tropical system that hit the Delta moved through, but some strong storms were reported in some western areas as well. It is turning cooler and drier now with the movement of the hot air dome to the west. Some big rains were seen over the weekend as the ridge began its movement. It should be mostly dry and much cooler this week. 

Soybeans were planted very late this year and not all crops are showing good progress. The plants remain small and stressed. Demand news was mixed last week as the export sales report showed weaker demand. However, the Trump administration announced that it was holding a conference call with China in hopes of getting the negotiations back on track and moving forward. There was some talk that China was getting active in buying some US Soybeans to help support futures at the end of last week but these reports were not confirmed and basis levels were reported to be steady. 

Weekly Chicago Soybeans Futures ©Jack Scoville
Weekly Chicago Soybean Meal Futures ©Jack Scoville

Rice

Rice was higher last week and made new highs for the move as weekly chart trends turned up. The market found some support from the tropical system that moved through the Delta, but reports from the region indicate only minimal damage if any was seen. Crops in the south will start to be drained from the flood soon and that means that the harvest is just around the corner. Sources in Texas expect a good crop, but probably not top yields. That seems to be the refrain in much of the Rice Belt. 

Crops look good but no one expects super yields due to the very uneven growing season including a lot of rain at planting time and then uneven conditions due to cooler temperatures and varying rains seen until recently. Demand was bad in the weekly export sales report, but Iraq did buy 60,000 tons of US Rice last week and that should be reported by USDA this week. Demand until now has generally been firm in export markets and USD indicated in its monthly supply and demand updates that domestic demand has been much stronger than expected. There is also a chance that China could buy US Rice again if the trade talks go well. Futures look prepared to build on gains this week as the market waits for the harvest to get underway. 

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Weekly Chicago Rice Futures ©Jack Scoville

Palm oil and vegetable oils

World vegetable oils markets were mostly unchanged last week. There are hopes for better demand, but so far demand reports have not been real strong. Production ideas remain high for Palm Oil with both Malaysia and Indonesia talking about big production. The export pace from Malaysia has improved, but ideas are that the production is strong enough so that the improved demand will not do that much to create a tight stocks scenario. The weather has featured some rains but also dry periods and is being called good for Palm Oil production. Soybean Oil also closed little changed on the week. The US is facing increased competition for sales now from South America, and mostly from Argentina. Argentina has traditionally been the major source for Soybean Oil in the world market as it prefers to use other oils at home for its cooking needs. 

The weather in the US has been uneven in the US after a very delayed start to the growing season. There are valid questions on how many Soybeans will be produced and the amount of Soybean Oil the US will have to sell. US Soybeans will need a very late end to the growing season this year to have all that much in the way of Soybean Oil to offer into the world market. Canola was firm last week on uneven weather conditions. Parts of the Prairies remain too dry although rains have increased lately. The provincial reports have noted the uneven conditions as the growing conditions have been rated less than 50 percent good to excellent. Production ideas are starting to slide again and are now around 18 million tons after first reports indicated that 20 million tons or more could be produced. All three markets are near recent lows, and all three markets seem to be starting to find a lack of new selling interest even if the buying interest is not really strong right now. 

Weekly Malaysian Palm Oil Futures ©Jack Scoville
Weekly Chicago Soybean Oil Futures ©Jack Scoville
Weekly Canola Futures ©Jack Scoville

Cotton

Cotton was slightly lower for the week after trading both sides of unchanged. The weather caused some of the volatility as the tropical system brought some very heavy rains to the Delta but there were no reports of any significant damage. Part of this is due to the timing of the storm as it came through before bolls had formed. The system then brought more moderate rains to the Mid South and the Southeast which probably benefited crops. Demand remains a big problem for Cotton. World demand has been less this year as China has not been buying. World prices have been lower as a result. The situation is bad enough that Indian spinners have been cutting back on operations. 

USDA noted less demand for US Cotton as well, primarily due to the trade disputes the US government has started against China and other major world importers. US production prospects have improved after a rough start to the season. The main problem area continues to be the Texas Panhandle. It has generally been very hot and dry in much of the Panhandle and dryland crops have been suffering. Overall US production prospects remain strong as most other areas are in good condition and USDA has kept condition ratings generally strong. The main problem will be finding buyers for the Cotton and that could mean that lower prices are needed.

Weekly US Cotton Futures ©Jack Scoville

Frozen concentrated orange juice and citrus

FCOJ was slightly higher last week in narrow range trading. The weather in Florida remained tranquil as the state mostly missed any effects from the tropical system that moved into the Delta. There are no tropical systems likely to hit the state this week, but a system is forming in the Bahamas that could give a glancing blow to eastern parts of the state. Futures appear poised to move back to or below 90.00 seen earlier in the year. Speculators have been buying in anticipation of the hurricane season, but there are no storms on the horizon this early in the season. 

The state has seen only an increase in showers and storms that have been beneficial for crops. Trends are sideways to down on the daily charts and weekly charts as the market looks at a big orange crop and weak demand for FCOJ. USDA kept its production estimates above 70 million boxes in the reports last Friday. Inventories in Florida are still 15 percent above a year ago. Fruit for the next crop is developing and are as big as tennis balls. Crop conditions are called good. Mostly good conditions are reported in Brazil.

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Weekly FCOJ Futures ©Jack Scoville

Coffee

Futures closed a little higher in New York and a little lower in London. The market is still talking about the freeze that Brazil experienced a couple of weeks ago but no one is talking about a lot of damage for the crop this year. Brazil continues to keep a strong export pace and shipped about 2.8 million bags in June. It seems that the exporters are using old Coffee along with some new Coffee to keep the pace as strong as it is. The Brazil harvest is moving along at a slow pace and producers are trying to store the crop due to the current low prices. Reports indicate that the yields are not really strong and that the quality of the crop is poor due to extreme weather seen early in the growing season. Reports from the recent freeze suggest little additional damage to crops, but some leaves were burned and some trees will be in shock for a while. Production potential for the crop next year could be affected. 

Vietnam is also reporting lower yields for the current crop as the weather was not good for flowering earlier in the year. There have been some hot and dry spells that have hurt yield and quality for these crops as well, but showers are reported in the Central Highlands now and ideas are that conditions and production potential have improved. Central America has Coffee on offer, but bid prices from buyers have been very low. The weak prices are pushing the banks into a holding mode and they are not offering much in the way of production loans to producers. That means less production for Central America as the trees are not being fed or cared for properly. Buyers are now more actively pursuing other origins, especially for certified or higher-end coffees. Roasters were scaling down buyers on the extended down move and now have more than ample supplies in-house or on the way. Brazil had a good production year for the current crop, but the next crop should be less than normal. 

Weekly New York Arabica Coffee Futures ©Jack Scoville  
Weekly London Robusta Coffee Futures ©Jack Scoville

Sugar

Futures closed lower and New York made new lows for the move as it broke some important support on the daily and weekly charts. London was lower, but held after the initial move down and then climbed back into the recent trading range. World supplies appear ample for the demand. Reports from India indicate that the country still has a large surplus of White Sugar that probably must be exported. India has always been willing to dump agricultural goods such as Rice and Sugar at below cost prices, so the market began to anticipate improved sales from mills and exporters there. 

There are concerns that the Indian monsoon will not be strong this year and that Sugarcane production could be hurt. It is hot and dry there so far, but there are signs that the monsoon has started to develop as rains have now been at or above normal for a couple of weeks in Sugar areas. Processing of Sugarcane in Brazil is faster now after a very slow start as the is now harvest in full swing. Mills are refining mostly for ethanol right now. The fundamentals still suggest big supplies, and the weather in Brazil and India has improved to support some of the big production ideas. Demand seems to be average and routine. Very good conditions are reported in Thailand. Demand for Sugar has been average, and demand for ethanol is reported to be stable.

Weekly New York World Raw Sugar Futures ©Jack Scoville
Weekly London White Sugar Futures ©Jack Scoville  

Cocoa

Futures closed mixed, with New York lower and London a little higher. Demand news was mixed. The European Cocoa grind was lower for the quarter and the grind itself was at a two year low. The Asian grind was sharply higher. The uneven weather in West Africa is still a feature. The weather in Ivory Coast has been drier than normal for the last couple of weeks and there is some talk that production of the next main crop could be hurt. Some showers are returning to West Africa now to help relieve stress on trees. 

Ideas are that the next crop will be good. The harvest will start in the Fall. Growing and harvesting conditions in Asia are also reported to be good. The harvest is ongoing amid showers, but good progress in the harvest is expected at this time. More and more Asian Cocoa has been staying at home and processed in Indonesia for export in the region. Demand in Asia has been growing and Indonesia has been eager to be the primary source of Cocoa. 

Weekly New York Cocoa Futures ©Jack Scoville  
Weekly London Cocoa Futures ©Jack Scoville

(Featured image by DepositPhotos)

DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation for writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.

Jack Scoville is a futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar. In addition to writing daily market commentaries in both English and Spanish, he offers brokerage services to an international clientele of agricultural producers, processors, exporters, and other professional traders. He is regularly quoted by major wire services including Dow Jones, AP, and Reuters. His comments are sourced by newspapers around the world and on various radio and television programs.

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