Chicago (US), August 28: CBOT agricultural futures rose in the past week on bullish yield estimates of Pro Farmer following its tour of the U.S. Midwest, Chicago-based research company AgResource noted.
However, as U.S. Federal Reserve Chairman Jerome Powell pledged to keep rates higher for longer to fully stamp out inflation, AgResource doubts that "risk on" is the mindset of fund managers.
Rising rates will dull the economic outlook with stagflation to emerge in 2023. AgResource does not foresee a large inflow of speculative capital into the agricultural futures market.
Corn futures ended the week sharply higher on U.S. yield concern. Pro Farmer's tour of the Midwest found the potential for yield losses in Nebraska, South Dakota and pockets of the Midwest. Pro Farmer pegged the U.S. corn yield at 168.1 bushels per acre (BPA). AgResource said it is unlikely that global corn production exceeds consumption in 2022-2023.
Once the U.S. crop size is determined by U.S. Department of Agriculture (USDA) September Crop report, price direction will be determined by demand. Equally important is that a free on board (FOB) market has been established in Ukraine, with exporters there willing to shed old crop stocks at nearly any price.
A test of 6.00-6.20 U.S. dollars December support warrants end user buying due to concern over dryness in Argentina and political uncertainty in keeping the Ukraine grain export channel open. A range of 6.00-7.05 dollars is forecast into mid-September. Upside potential of 7.00 dollars in late autumn/winter remains intact as the U.S. and world cash market tightens.
World wheat futures recovered most of the previous week's losses, with chart-patterns turning neutral. AgResource views fair value into mid-autumn at 7.70-8.25 dollars for December CBOT wheat futures and 8.40-9.00 dollars for December Kansas wheat futures.
Rallies struggle as Russia tries to clear bulging inventories via very aggressive FOB offers. Russian FOB wheat is offered 30-40 dollars/metric ton below comparable EU and U.S. origins. Importers' top priority is feeding populations at the cheapest cost available. Additionally, massive Russian wheat stock will hang over the market well into mid-2023. Yet, the combined stocks/use in all other major exporting countries will be record low by a wide margin.
AgResource sees wheat as caught in a wide trading range.
Soybean futures finished with strong gains. Early week support came from disappointing Day one Pro Farmer Crop Tour results, followed by another decline in weekly crop condition ratings. Pro Farmer pegged U.S. soybean yield at 51.7 BPA with a crop size of 4,535 million bushels. The yield was down slightly from the August USDA yield and implies a September USDA yield of around 52 BPA.
Brazilian soybean planting will get underway in mid-September. Brazil's CONAB offered a preliminary soybean area estimate of 42.4 million hectares or a 4-percent increase from last year. CONAB estimated that Brazil would produce a record large soybean crop of 150.3 million metric tons.
A record large U.S. and Brazilian soybean crop would produce bearish price trends. AgResource sees no reason heading into the U.S. harvest why November soybean futures should sustain a rally above 15.00 dollars.
Source: Xinhua