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US soybeans, palm oil face increased sales competition from South America

Meanwhile, rice was higher last week and made new highs for the move.

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Wheat

Wheat markets were lower again last week, with Chicago SRW prices the weakest on speculative selling. HRW and Spring Wheat futures were lower but held support areas. The Winter Wheat harvest is moving to completion now under mostly good conditions. The yield and quality reports for HRW have been very good. We have not heard much about the SRW crop but the price action suggests good yields there too. Spring Wheat has held better on uneven conditions in Canada. Rains in the Prairies have been mostly in northern sections and southern sections have been dry. It has been a very dry year overall and there are ideas that yield potential is being affected. 

US Spring Wheat conditions have been mostly good as the primary growing areas in Montana and North Dakota have had good rains. The weather overseas has not been that good. Europe had some record-setting heat last week that caused the government to tell producers to stop harvesting due to fires that were breaking out in production areas. Yield reports have been good given the stressful weather. Other parts of western Europe have had dry weather and hot conditions as well. Russia has also had some very hot and dry weather in Spring Wheat areas that have caused stress to crops. 

Winter Wheat areas near the Black Sea appear to be in relatively good condition, and the region was a strong seller to Egypt last week. World prices have been generally firming and have been providing some support to US prices. The market is watching conditions in Brazil, where much of the Winter Wheat crop froze during the recent bout of sub-freezing temperatures. Ideas are that Brazil will become a bigger importer this year and will buy primarily from Argentina but also could buy some significant amounts from the US. 

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 continued to improve. It has been cooler but mostly dry in the Midwest. Cooler and drier weather is expected this week after a bought of warmer temperatures and some showers over the weekend. Crops are generally reported to be in good condition with good color, but many areas are now too dry after the very wet Spring and early Summer and the crops need a good drink. The Corn crop, in general, remains very late and Corn genetics mean that the crop can’t do much to catch up. 

The Midwest and much of the Great Plains will enjoy below normal temperatures although it will remain rather dry. 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. Demand for ethanol has also started to go down on weaker processing margins. 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. 

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

Soybeans and soybean meal

Soybeans and soybean meal closed lower on ideas of strong competition for sales from South America and improved growing conditions. The market is waiting for news this week from Shanghai as the US and China will start to try to resolve trade and economic differences once again. The entire Midwest saw some cooler and drier weather last week that should have helped reduce stress on the plants. It was warmer with some showers over the weekend but should be mostly dry and cooler again 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. 

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. But, the two sides are talking again and China has removed tariffs on up to 3.0 million tons of Soybeans imports from the US by private industry there is a show of goodwill towards the talks. The problem is that the issues to be resolved are big and very complicated and will require a lot of time and work before success can be claimed by both sides.

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. Weekly chart trends remain up. 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. Arkansas could be the worst state this year as many producers could not get everything planted ahead of enrolling in the Prevented Planting program. Demand was strong in the weekly export sales report with big buying reported from Haiti and good buying seen from Mexico. 

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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. The two sides are talking in Shanghai this week. Futures look prepared to build on gains this week as the market waits for the harvest to get underway. Weekly charts indicate that prices are getting near some swing targets, and a pick up of farmer selling is anticipated on any further price strength. 

Weekly Chicago Rice Futures ©Jack Scoville

Palm oil and vegetable oils

World vegetable oils markets were a little higher last week, but the weekly charts for all three markets show that prices are still in a trading range. Palm Oil was in a short term and short-covering rally last week on ideas that demand could improve and as the US Dollar moved higher. 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. SGS had been showing better exports in July, but the export pace slipped behind June in the new data released last week. The weather has featured some rains but also dry periods and is being called good for Palm Oil production. Soybean Oil also has been firm but in a trading range. 

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 higher for the week and weekly charts show that futures could be forming a low at this time. The weather has been considered good for Cotton production in the US. It has been warm but there have been showers to support good development. Crop development remains on about an average pace and bolls should start to form soon. 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 but conditions have improved and crop ratings have gone higher. 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 lower last week in narrow range trading. The weather in Florida remained tranquil as the state has seen frequent showers and storms that have greatly reduced irrigation needs. There are no tropical systems likely to hit the state this week. 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 production reports. Inventories in Florida are still 15 percent above a year ago. Fruit for the next crop is developing and are as big as baseballs. Crop conditions are called good. Mostly good conditions are reported in Brazil.

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Weekly FCOJ Futures ©Jack Scoville

Coffee

Futures closed lower in both markets on reports that the Coffee crop in Brazil mostly escaped damage from the freeze and as the export pace from Brazil remained above 2.8 million bags per month. It seems that the exporters are using old Coffee along with some new Coffee to keep the pace as strong as it is. The new harvest is starting to become available so the country should be able to keep up a strong export pace for at least the next few months. The Brazil harvest is moving along 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. Roasters were scaling down buyers on the extended down move and now have more than ample supplies in-house or on the way. 

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

Sugar

Futures closed higher, but trends remain down in New York on the weekly charts. London was higher inside the recent trading range. Support came from ABIOVE who reported a slower crush of Sugarcane and still strong processing of the cane into Ethanol. The recent freeze may have hurt some of the cane. World supplies still appear ample for the demand potential. Reports from India indicate that the country still has a large surplus of White Sugar that probably must be exported. India is reporting below-normal monsoon rains, but rains have been better lately. 

There are concerns that the Indian monsoon will not be strong this year and that Sugarcane production could be hurt. Processing of Sugarcane in Brazil is slower and the pace of the crush is behind last year. Mills are refining mostly for ethanol right now as has been the case all season. The fundamentals still suggest big supplies, and the weather in Brazil is good enough and India has improved to support some of the big production ideas. Very good conditions are reported in Thailand. 

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

Cocoa

Futures closed lower, with New York in downtrends but with London looking like higher prices are possible on the weekly charts. Some of the selling in New York was currency-related as the US Dollar has held very strong. 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

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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