Ag markets stunned by London bombings

Activity on international agricultural commodity markets improved, with the USDA reporting earlier sales of U.S corn and soybean oil and Japan and South Korea buying wheat and corn, though market sentiment was knocked by today's terrorist attacks in London.

There were four explosions in the city center, with three in London's subway system and one which destroyed a double decker bus. There are mixed reports about the number of people killed and injured. A radical Islamic terrorist group took responsibility for the attack, which was similar to the March 2004 subway bombings in Madrid. Security analysts reckon at least 24 people would have been involved in the London attack.

Analysts at the Chicago Board of Trade (CBOT) said the London bombings could affect the confidence of markets longs. Combined with improving moisture outlooks on account of major storm systems moving toward the United States through the Gulf region, they said it would not be surprising to longs sell off positions in agricultural futures markets.

Exporters in the United States report selling 116,000 metric tons (MT) of corn to unknown destinations, with shipment split between the 2004-05 and 2005-06 marketing years; and the sale of 26,124 tons of soybean oil to Mexico, with 21,770 MT for shipment during the 2005-06 marketing year and 4,354 MT for shipment during the 2006-07 marketing year.

In releasing the information, the USDA said exporters in that country are required to report any export sales activity of 100,000 MT or more of one commodity, except 20,000 metric tons for soybean oil, made in one day to one destination, by 3:00 p.m. Eastern time on the next business day following the sale. Export sales of less than these quantities must be reported to USDA on a weekly basis.

Japan's Ministry of Agriculture, Forestry and Fisheries confirmed the purchase of 125,000 MT of milling wheat for shipment between August 26 and September 25, including: 40,000 MT of U.S. Dark Northern Spring; 20,000 MT of Australian Standard White; 20,000 MT of Australian Prime Hard; 20,000 MT of Canadian No. 1 Western Red Spring; 8,000 MT of Canadian No. 1 Canadian Red Spring; and 17,000 MT of Canadian Durum Wheat wheat.

Toepfer sold South Korea's Corn Processing Industry Association 107,500 MT of non-genetically modified corn for arrival by September 30. The buyer paid U.S. $136.67 MT C+F Incheon for 52,500 MT of Chinese corn; and paid $144.67 MT C+F for 55,000 MT of U.S. or South American origin corn.

The Taiwan Flour Millers Association rejected all offers on a tender for 46,200 MT of U.S. origin milling wheat for last half August shipment, saying asking prices were too high.

Oilseeds

Indonesia 's PT Astra Agro Lestari sold 2,500 MT of crude palm at auction. PT Inti Benua Perkasatama paid IDR3,790/kg delivered Riau for 500 MT. PT Teluk Bayur Bulk Terminal paid FOB Bumiharjo for 2,000 MT.

Rice

Rice markets maintained their weaker tone in Asia overnight. Asking prices in Thailand continue to be pressured by weakness in the country's currency, while Vietnam is suffering from harvest selling pressure. With prices slipping, buyers see no reason to enter markets, contributing to anxiety on the part of sellers.

Exporters in Thailand are asking U.S. $283 MT FOB Bangkok for 100% B grade; and $278 for 5% broken rice. Exporters in Vietnam are asking U.S. $230 to $234 MT for 5% broken FOB Ho Chi Minh City; and $220 MT for 25% broken.

Softs

Pakistan 's domestic cotton market remains relatively quiet, with limited trading reported on commercial markets. Ginners are believed to be holding around 50,000 bales of unsold cotton, but are finding it hard to sell in competition with the Trading Corporation of Pakistan (TCP) auctions. Interestingly, cotton usage by the country's spinners is believed to have reached record levels this season.

Industry Perspective

Analysts at the Chicago board of Trade (CBOT) note that wheat is being strongly influenced by other grain markets. "(And) just when the technical action was showing promise of an upside breakout, concerns about demand due to London terrorism combined with improving US crop conditions and increased competition for exports to push September futures back under the 100-day moving average.

"Fund traders' knee-jerk reaction to (this morning's subway bombings in London) could trigger heavy long liquidation selling today. Funds were noted sellers of nearly 2000 contracts yesterday."

Looking at the fundamental situation in the United States, the CBOT analysts said, "Good weather for harvest and talk that Ohio yields were coming in higher than expected with no sign of a vomitoxin problem have added to the bearish tone."

Discussing corn markets, the CBOT analysts said, "Crop conditions in Illinois look to continue to deteriorate over the next week, but ideas that a hurricane-induced significant rain event is now possible for next week helped drive the market sharply lower overnight. With crops entering the pollination phase, a 1-inch rain in Illinois next week could make the difference between a decent yielding crop and a disaster.

"As the heat builds next week, drought stress will increase, ear leaves will roll up tightly early in the day and pollination could be poor. On the other hand, a rain event could support decent pollination, and crop conditions could still recover into late this month. A University of Illinois extension agronomist yesterday indicated that the Illinois crop could lose 2-3 bushels of yield potential per day as long as the dryness persists."

In trade news, the CBOT said South Korea is tendering for 110,000 MT of optional origin corn. South Korea bought 67,000 MT of China corn overnight and the country is also tendering for up to 55,000 MT of corn from US, South America or China. Japan bought 100,000 MT of corn from South Africa, the first in 1 1/2 years.

In the case of soybeans, the CBOT analysts said, "After another 5-6 days of dryness and increasing heat into central Corn Belt, hurricane Dennis may bring relief to the Illinois crops. . . . The reliability of a hurricane track six days out is very low, but the addition of the terrorist threat to the world economy may have been a factor which added to the reduced confidence of the longs, and the tendency of traders to step aside when uncertainty increases leaves the soybean market vulnerable to long liquidation selling ahead of updated weather models."

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