Grain futures mixed, wheat advances on speculation lower prices will induce buying

Grain futures were mixed on Monday with wheat marking minor daily gains on speculation that this years 15% fall in prices may lure in importers to buy after unfavorable weather delayed harvest in the U.S. Soybeans declined and corn rebounded after hitting a 32-month low during Asian trading.

On the Chicago Board of Trade, wheat futures for September delivery traded at $6.6050 a bushel at 8:50 GMT, up 0.05% on the day. Prices held in range between $6.8375 and $6.5900. The grain settled 0.9% lower on Friday, marking a 0.46% weekly gain after tumbling 5.87% the preceding week.

Wheat advanced as investors speculated that low prices due to ample global supply may attract importers into filling stockpiles. The International Grains Council said last week that global wheat production may rise 4.2% compared to a year earlier and total 683.1 million tons, 1 million more than the previous estimate. The USDA expects global output to surge by 6.1% to 696 million tons.

In its acreage report in the end of June, the U.S. Department of Agriculture said that the planted area for 2013 will equal 56.5 million acres, 1% higher than last year. The 2013 winter wheat planted area equals 42.7 million acres, 3% above last year and up 2% from the previous estimate.

In its crop progress report last Monday, the USDA said that as of June 30 43% of the winter wheat crop was harvested, above the preceding week’s 20%. This was however below last year’s 73% during the comparable week and also below the five-year average 52%.

As for the spring wheat crop, the USDA reported that 93% has emerged as of June 30, compared to 90% during the prior week. This was below last year’s full emergence and the five-year average of 99%.

Corn rebounds from a 32-month low

Meanwhile, corn futures for September delivery traded at $5.2800 a bushel at 9:05 GMT, up 0.30% for the day. The grain hit a 32-month low of $5.2513 per bushel during the early Asian session, followed by a rebound to days high at $5.3000 during European trading. Corn settled 1.2% lower on Friday, marking a 3.72% weekly loss after crumbling 17.26% the preceding week.

Analysts survey by Bloomberg last week turned most bearish on corn since November 2010 after The U.S. Department of Agriculture reported last Friday of June that 97.4 million acres of land was sown to corn, the highest since 1936. U.S. corn output is expected to be 30% higher than last year’s crop and total 14.005 billion. Higher output is expected in the European Union as well as the European Commission said on Thursday projected corn production stands at 70.02 million tons, 17% higher than the previous season. Ukraine and other former Soviet Union countries also expect a higher output. Global production is anticipated to be higher in the 2013-2014 season, standing at 946 million metric tons, compared to 854.5 million last year. According to Bloombergs survey, fifteen out of 25 analysts expected prices to fall this week, while six were bullish and four were neutral. The grain is the second worst performer after silver in the Standard & Poor’s GSCI gauge of 24 commodities.

In its weekly report on Monday, the U.S. Department of Agriculture said that this year’s corn crop condition is a lot better than last year’s. As of June 30, only 8% of the crop was of “Very poor” and “Poor” quality, 25% was “Fair” and 67% had “Good” and “Excellent” qualities. Last year, 22% of the crop was categorized as “Very poor” and “Poor”, 30% was “Fair” and the remaining 48% fell in the “Good” and “Excellent” categories.

Soybeans drop

Elsewhere on the market, soybeans for August delivery dropped 0.13% on the day by 9:12 GMT. The oilseed traded at $14.2950 a bushel, holding range between $14.3475 and $14.2838 a bushel respectively. Soybeans settled 0.66% lower on Friday but still marked a minor weekly gain of around 0.1% last week after tumbling 4.1% the preceding one.

Like corn, farmers are expected to reap a record amount of soybeans this year. The USDA said in its acreage report in the end of June that the U.S. soybean planted area is estimated at a record high of 77.7 million acres, up 1% compared to last year. Area for harvest, at 76.9 million acres, is up 1 percent from 2012 and will also be a record high, if realized.

As for the soybean crop condition, it is overall better than last season. As of June 30, 7% was categorized as “Very poor” and “Poor”, 26% was “Fair” and 67% was “Good” and “Excellent”. Last year, 22% of the crop fell in the “Very poor” and “Poor” categories, 33% in “Fair” and 45% was of “Good” and “Excellent” quality.

Soybeans were pressured throughout June as reduced demand forecasts from the oilseeds biggest consumer, China, weighed on prices. All of the countrys PMI readings showed worse readings than the preceding month and the country received several downward revisions of its GDP growth forecast, including one from Goldman Sachs, according to which Chinas economy will expand by 7.4% in 2013, down from 7.8%.

Abah Ofon, an agricultural analyst at Standard Chartered Plc in Singapore said for Bloomberg: “The supply estimates for grains are quite staggering. A lot of end users are sitting on the sidelines, waiting for prices to fall further or at least bottom.”

Market players are now looking ahead into todays weekly crop progress report by the USDA, scheduled at 4:00 PM Eastern time.