PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:51 GMT, Monday, 16th Dec 2013, by
Evening markets: Argentine dryness threat revives soy prices

A day which began on a negative note for agricultural commodities ended less so - at least for soybeans, and for arabica coffee which hit a two-month high.

The negative impact of soft Chinese factory data, with an HSBC/Markit "flash" purchasing index of manufacturing activity fell to 50.5 this month from 50.8 in November, waned as Monday matured.

European and Wall Street shares failed to follow the negative lead from Asia, with London stocks closing 1.3% higher and the Dow Jones Industrial Average up 0.9% in late deals.

Crush data

And that was one help for soybeans, of which Chinese is the top importer, which shrugged off a negative close to end up 0.8% a $13.37 ¾ a bushel in Chicago for January delivery, ending back above its 10-day moving average.

The oilseed had other props too to support it in the face of US crush data for November which, at 160.1m bushels, were strong - and indeed up from 157.1m bushels in October the best for a November since 2009 - but not as strong as the 161.3m bushels that investors had expected.

One was a strong US export figure, with shipments, as measured by cargo inspections, averaging 62.5m bushels, well ahead of estimates of a 52m-58m-bushel number.

Only some 19.2m bushels a week are needed to meet the US Department of Agriculture estimate for US soybean shipments for the full 2013-14.

Up to eight inches of rain…

Of course, US exports are expected to see a sharp drop in 2014 as bumper South American crops come onstream.

But doubts began to grow about exactly how bumper these will be, too, with dryness emerging in Argentina.

"The weather models continue to show a very distinct wet vs. dry pattern over South America," weather service said.

"Over the next five days both the European and the GFS models continue show this wide band of heavy rains coming in from the southwest portions of the southern Atlantic Ocean into east central Brazil," giving rains of 2-6 inches.

"The European model is developing areas of 8 inches over northern Minas Gerais."

'Completely dry'

However, "most of south eastern Brazil Paraguay and all of northern, central and eastern Argentina remain completely dry.

"Temperatures in the next five days will be above normal over Argentina."

While generally only warmer than average "by a few degrees , La Pampa will see temperatures turn much above normal over the next five days".

And the pattern "shows no sign of changing" heading into Christmas.

While hardly cause for panic, the forecast did encourage investors to inject a little risk premium back into soybeans.

At Jefferies Bache, senior oilseed analyst Anne Frick said that "it is not certain how long this ridge might hold, but while it is in the picture we will see hot, dry weather impacting central agri areas of Argentina especially, but southern areas of Brazil to some extent as well.

'Under pressure'

Grains, however, remained on the downward path.

For corn, the prospect of some damage to the South American crop is not so vital, given the record US harvest, which has replenished domestic stocks far more convincingly that the strong soybean crop.

Furthermore, US export data were weak, at 25.1m bushels, down from 40.5m bushels the previous week.

And, while Morgan Stanley may be relatively upbeat about corn prices, the concerns about China's rejections of US cargoes continues to concern investors, even if it does mean more sorghum shipments.

"The corn market is under pressure due to concerns that China may reject further GMO corn," CHS Hedging said.

Corn for December closed down 0.5% at $4.23 ¼ a bushel in Chicago for March delivery.

Winterkill fears ease

For wheat, US exports were not so encouraging either, at 17.6m bushels, although still ahead of the average of 15.4m bushels needed to meet the USDA forecast for 2013-14.

The showing by Australia as significantly the cheapest grain offered to an Iraq tender did little to support Chicago prices, while industry group Coceral chipped in for bears by raising its estimate for European Union soft wheat production by 600,000 tonnes to 135.9m tonnes.

Furthermore, concerns over crop loses to cold are fading, with CHS noting that "snow cover in the eastern and central growing areas in the US should reduce the risk for winterkill".

And with a Russian upgrade to hopes for the 2014 grains harvest, and little expectation of winterkill in Europe either, Chicago wheat for March dropped 1.1% to $6.24 ¾ a bushel, a fresh contract closing low.

Paris wheat for January eased 0.2% to E208.00 a tonne, continuing to gain some support from last week's strong European Union export data.

Still, a further test of export competitiveness comes on Tuesday, with the announcement of an Egyptian Gasc tender unveiled after the close of markets on Monday.

Sugar recovers

Among soft commodities, raw sugar managed to close flat at 16.27 cents a pound for March delivery, after earlier falling to 16.24 cents a pound, but with some ideas that hedge funds may have sated their desire for short positions.

Data late on Friday revealed a record slump in speculators' net long position in the sweetener, raising questions over whether selling appetite was sated for now.

Arabica coffee, which has also been under the weather amid ideas of a huge world surplus, did better, closing up 0.4% for March delivery at 115.30 cents a pound.

Besides being pulled up by robusta coffee's performance in the last session, investors also have data from Brazil's Conab crop bureau on Friday to factor in.

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