Was it to do with the end of the month? Or the forecast for some rain in the drought-hit US South? Or harvest pressure, in corn, taking a greater grip?
Whatever, agricultural commodities staged a Turnaround Tuesday, with December corn, for instance, staging a rare pullback after setting a succession of contract highs.
Chicago’s November soybean contract, having staged an impressive break-out from trading range which has incarcerated it through 2011 until Friday, found freedom a little daunting, with wheat and New Yorkcotton dropping too.
‘Marching to their own tune’
The declines certainly didn’t look the fault of financial market sentiment, with Tokyo shares closing up 1.2%, and Seoul stocks adding 0.8%, amid some optimism following data showing consumer spending rising last month at its fastest pace in seven months.
Oil and copper were a touch higher too.
Besides, as Paul Deane at Australia & New Zealand Bank noted, "ag markets seem to be increasingly marching to their own tune, pricing in fundamentals with less reaction to outside market sentiment".
While Wall Street shares have lost some 10% this month, and oil 9%, corn was up 15% as of last night’s close, with soybeans 7% higher and wheat up 11%.
‘Downgrade very likely’
Nor was the US crop condition report out overnight unhelpful to bulls, revealing a three-point drop, to 54%, in the proportion of corn rated in "good" or "excellent" condition, a larger drop than analysts had factored in.
"Conditions in the key Corn Belt states of Iowa, Illinois and Minnesota all decreased," Mr Deane said, adding that a downgrade by the US Department of Agriculture to its yield estimate for Illinois, the second-ranked producing state, now looked "very likely".
In top-ranked Iowa, where the good-or-excelling rating fell four points to 59% "crop conditions are also suggesting the potential for a downgrade in yields" when the USDA unveils its next monthly Wasde report, on September 12.
For soybeans, the national crop seen in good or excellent fell two points to 57%, a revision within the realms of what the market had factored in, with the spring wheat crop rating falling one point to 61%, and the cotton figure by one point to 54%.
Wheat harvest resulkts
But not all the crop progress news was bullish, with the spring wheat harvest progressing apace too, at 50% complete, meaning 21% of the crop was reaped in a week, if still leaving the harvest well behind last year’s pace, which saw 71% in the barn by now.
Furthermore, while yields on the spring wheat harvest have been disappointing, "recent reports indicate that many areas in western North Dakota are finding higher test weights", indicating grains themselves in good nick, Brian Henry at Benson Quinn Commodities said.
Indeed, "protein continues to come in on the high side".
In Canada’s Prairies, the harvest was only three points behind normal, at 14% complete, despite the poor spring sowing period, according to the Canadian Wheat Board, which said that "warm and dry weather last week created ideal conditions".
Then there is the prospect for rain for drought-hit hard red winter wheat areas, at the beginning of the sowing season for 2012 crop, to factor in.
"The potential rain events forecasted for late week and over the weekend are not expected to break the drought, but they should allow for the area fit to plant to expand," Mr Henry said.
‘Remain stressed’
OK, not all the weather reports were in bears’ favour.
World Weather reported that "rain in the US Midwest will be slow in resuming", that "soybeans and other late crops will remain stressed" and that "some yield reductions are possible", Luke Mathews at Commonwealth Bank of Australia noted.
However, he joined the ranks those pointing to the time of year, and the idea that "harvest pressure could cap the rally unless yields fall sharply below expectations".
Crop prices typically weaken into harvest, as buyers hold off in anticipation of harvest altering, if only temporarily, the supply-demand balance.
Indeed, wheat is by lore seen setting a low on July 1 every year, a nadir which came in exactly on time in 2011.
Fund moves
The time of the month is a factor too.
Prices are often seen as weakening towards the end of a month as funds close positions and undertake a bit of washing up, before seeing a fresh influx of funds at the start of the next month.
"How much fund buying at the start of September is the key," broker US Commodities said.
Whatever, corn led the decline in Chicago on Tuesday, falling 0.8% to $7.74 ΒΌ a bushel as of 07:35 GMT (08:35 UK time) for December delivery.
Corn for September was down 0.7% at $7.52 a bushel, with November soybeans 0.3% lower at $14.43 a bushel.
In New York, December cotton edged 0.1% higher to 105.00 cents a pound, gaining some support from a rise in the January contract on the Zhengzhou exchange in China, the top producer, consumer and importer of the fibre.
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