A positive start by grains and soybeans to 2013 proved fleeting – but coffee posted strong gains.
Many risk assets managed a strong start to the year, boosted
by agreement among US lawmakers to a US budget, averting a dive over the
so-called "fiscal cliff" and its automatic spending cuts and tax rises worth
1.8% in New York, having closed up 2.2% in London, where the FTSE 100 index broken
above 6,000 points for the first time in 17 months.
Commodities overall, as measured by the CRB index, added
0.9%, with Brent crude rising 1.1% to regain $112 a barrel.
However, corn, wheat and oilseeds missed out on the rally,
and in some style.
"It has been one of the ugliest days we have seen recently
in the grains," Darrell Holaday at Country Futures said.
"There was a big pool of selling waiting on the higher
opening" which crops, briefly, enjoyed in Chicago.
The declines were blamed in part on a revival in the dollar which, having fallen in early
deals, recovered to stand 0.2% higher, so making dollar-denominated assets,
including many agricultural commodities, less appealing to buyers in other
That time of year
However, other forces were at work too, including,
ironically, ideas that the settling of the US budget might increase American farmers'
willingness to sell crops, now they know their tax position.
Richard Feltes, noting also the "flip in the calendar to a new
tax year", said that the "resolution of the fiscal cliff, and a one-year Farm Bill
extension, removes key uncertainties that have slowed farm selling in recent
He also flagged that "fund rebalancing will be a key feature
of ag markets as traders gear up for 2013" - rebalancing being the process by
which index funds rejig their portfolios to adjust weightings back to those
specified by the index they follow.
That involves selling 2012's best performers, whose gains
will see them represent an unduly large part of the portfolio, while buying
First shall be last
And certainly, there appeared some preparation going on for
index fund sales, billed as starting on January 5.
for instance, a bullish star of 2012, during which it gained 19%, slumped 2.9%
to $7.55 ¼ a bushel on Wednesday, for March delivery, a fresh six-month closing
low for the contract.
which added 18% last year, dropped 1.2% to $13.92 ¼ a bushel for the March lot.
Soymeal, which soared
36% in 2012, finished the session 3.3% lower at $405.70 a short ton for Chicago's
best-traded March contract, its lowest finish for nigh on six months.
… and last shall be
Meanwhile, some of last year's main losers made headway.
dropped 6% in 2012, soared 2.7% on the day to 51.05 cents a pound for the March
contract, following on from similar gains overnight in rival vegetable oil palm
oil in Kuala Lumpur.
In New York, arabica
coffee - one of the biggest losers last year, plunging 37% - rebounded 3.9%
to 149.40 cents a pound for March delivery.
New York raw sugar,
another dog of 2012, dropping 16%, closed the session 0.9% above where it
started, at 19.69 cents a pound, earlier hitting a one-month high of 19.75
cents a pound.
The fund rebalancing theme wasn't perfect, with New York cocoa, which gained 6% last year, and
so should be in for a little selling by index funds, adding 1% to $2,259 a tonne
for March delivery.
'In jeopardy from
Still, it helped explain the weakness in, for example, Chicago
soybeans despite what might have
been seen as price-positive news, in some doubts over South American weather.
Gail Martell at Martell Crop Projections noted that "Mato
Grosso has experienced exceptionally dry conditions over the past two weeks,
which is unusual in December, one of the wettest months of the summer season.
"In the key Centre West area, where soybeans are heavily
cultivated, the December moisture deficit has increased to 100mm-150mm and
33-50% of normal."
"Perhaps 45% of Brazilian soybeans are in jeopardy from
drought, all together, when other dry states in the tropics are considered."
Corn falls too
And influential crop scout Michael Cordonnier has flagged
dry conditions in Brazil too, if in north central and north eastern regions, while
keeping its forecast for the country's soybean crop unchanged at 80m tonnes,
and corn harvest at 70m tonnes.
He also flagged the risk to corn in Argentina from delayed
sowings, slowed by persistent rains.
Still, Chicago corn closed lower too, down 1.1% at $6.90 ¾ a
bushel for March delivery, the contract's weakest close since early July.
Corn was a moderate gainer last year, closing 8% higher than
it started the year.