OK, the average commodity gained 0.1% on Tuesday, according
to the CRB raw materials index.
But that apparent lack of volatility concealed all manner of
movement in agricultural commodities, one of which, cotton, chalked up a seven-month
high in New York, where another, coffee, slumped 5%.
In Chicago, soybeans gained nearly 2%, while wheat lost
early gains to end more than 1% down.
As Mike Mawdsley at broker Market 1 warned earlier, it
looked indeed "time to get the Tums out again", referring to a US brand of heartburn
'Fund-led sell off'
Much of the movement reflected, at least in part, South
Rains in the centre of Brazil were viewed as helpful to 2013
sugar cane and coffee crops, fuelling a 1.4% drop to 18.12 cents a pound in
prices of New York raw sugar for
March, the weakest finish for a spot contract since August 2010.
Arabica coffee for
March tumbled 4.9% to 148.60 cents a pound.
"In one hour, we fell 6 cents a pound from the high on
pretty good volumes as a fund-led sell off stopped out the smaller speculators,
almost into a void of buyers," Sucden Financial said.
Why the liquidation?
"Various thoughts began to circulate why we sold off so
quickly. Index funds selling, but not sure why?
"Funds that had reduced their exposure putting it back on
and even origin wanting to add again?" the broker said.
"Honestly it could be a mix of all three."
Macquarie flagged the role of producer selling, with the
high prices tempting Brazil's growers to sell some of their hefty stocks left
over from a strong 2012 harvest, and with potentially more on the way if prices
'Caught the market short'
And South American weather, as in the undue dryness south of
central Brazil, was cited repeatedly as a reason for the strength in soybeans
and, to a lesser extent, corn.
"The weather models for Argentina and southern Brazil have
remained primarily warm and dry for the week, after two weeks of much warmer
and drier than desired," Darrell Holaday at Country Futures said.
"This has caught the market a little short."
'Adding risk premium'
Benson Quinn Commodities said: "Argentina and southern
Brazil will see only light showers over the next seven days with top soil
moistures in decline.
"This drier pattern appears to be in place into early February
raising some concerns for Argentine corn that is pollinating and Brazilian
beans that are blooming and pod filling stages."
And US Commodities said that "the weather in southern Brazil
and Argentina is expected to be warm and dry for the next 10 days. Thus the
market is adding risk premium".
Richard Feltes at RJ O'Brien reminded investors to "be
mindful that Argentine crop water use rates are increasing as crop development
advances", exacerbating the impact of dryness.
Chinese buyers on the
Indeed, there is plenty of talk that China, the top soybean importer,
is already giving up on hopes of imminent South American exports reducing its
dependence on high-priced US supplies.
"Rumours have China trying to source quick shipments of
soybeans from the US gulf and the Pacific North West," US Commodities said.
Country Futures' Mr Holaday said: "The rumour is that
Chinese inquiry for immediate shipment [soybeans] has picked up substantially."
That said, the only sales confirmed to China by the US
Department of Agriculture were of 120,000 tonnes for delivery next season, and
of "optional origin", meaning the order may not go to the US.
Still, Chicago soybeans for March closed up 1.6% at $14.51 ¾
a bushel, their highest close for a month but just short of their first finish
above their 75-day moving average for the first time since September.
Chart patterns in general "continue to turn positive and are
nearing breakout levels", US Commodities said.
Indeed, corn, as another crop affected by South American
weather, might have done better, and closed above its own 75-day moving
average, were it not for the retreat in fellow grain wheat.
Chicago's March corn contract ended up 0.1% at $7.28 ½ a
bushel, coming in short (as the contract has shown a recent habit of doing) of
its 75-day line at a little over $7.32 a bushel.
'Increased chances of
Chicago wheat for March dropped in a decline blamed on
profit-taking, after rises in five of the previous six sessions, and a gain in
early deals too to a one-month high of $7.99 ¾ a bushel.
That the contract failed to crack the $8-a-bushel mark was
attributed as one reason behind the tumble which followed, with the prospect of
moisture for the drought-hit US plains another.
"The GFS weather model is now pointing to increased chances
of rainfall in the US hard red winter wheat area, primarily Oklahoma and
Kansas, next week and that has lead to some selling in wheat and corn," Mr
There was some positive news from the former Soviet Union
too, with Kazakhstan talking up prospects for its, spring sown, wheat after sizeable
winter precipitation so far to water seedbeds.
Still, a refusal by Russia to lower its import tariff on milling
wheat, despite bumper exports early in 2012-13 raising the prospect of buy-ins,
was viewed as a bearish signal.
While US weekly wheat export data, as measured by cargo
inspections, weren't bad for wheat at 21.9m bushels, (and improving for corn
too, at 11.0m bushels, and strong for soybeans, at 48.1m bushels) Chicago's
March wheat lot fell 1.6% to $7.79 ¼ a bushel.
The weakness hurt some European prices too, with London
wheat for May closing down 0.8% at £216.00 a tonne.