Evening markets: China order supports soy price. Wheat fades

Traders expecting timid markets in the run up to Tuesday's key Wasde crop report were disappointed when it came to soybeans.

The oilseed rose 1.4% to $13.43 a bushel in Chicago, for January delivery, the strongest finish for a spot contract in getting on for three months.

Technically, it was positive too, in lifting the contract clean over all its major moving averages.

On the continuous chart, Monday bought only the second close since July for a spot contract over the 100-day moving average.

Big order

Still, the spark was a fundamental one, with the announcement by the US Department of Agriculture of the export sale of 290,000 tonnes of US soybeans to China, all but 60,000 tonnes for this season.

Investors have been fretting over a lapse in Chinese business, given the country's rejections of US corn shipments on grounds of containing an unapproved genetically modified variety, but which some observers have feared could have a political dimension too, or merely a wish to curtail buy-ins in the light of a strong domestic harvest.

Furthermore, in December last year, Chinese purchases of soybeans tumbled.

"Many are now thinking we are past the peak of Chinese buying of US soybeans," Allendale said, shortly before the 290,000-tonne order was announced.

Soymeal soars

As a further support, soymeal for January soared 2.6% to $438.70 a short ton in Chicago, its own best close since September.

Earlier, on China's Dalian exchange, soymeal for May, the best-traded lot, added 0.7% to 3,369 yuan a tonne for May delivery.

Furthermore, it was helpful in Chicago that "there were no deliveries" against the expiring December contract, Jerry Gidel at Rice Dairy said, indicating that cash markets remain a better bet.

Soybeans also received help from firm US data on exports themselves, at a robust 60.4m bushels last week, up from 55.0m bushels the week before.

And the US Department of Agriculture's Wasde report on Tuesday is expected to cut the estimate for US stocks at the close of 2013-14, a price supportive revision.

Cargo rejections

The Wasde is expected to trim the estimate for US corn stocks too, although not by nearly enough to render supplies anything but ample.

US corn export sales have been strong, with shipments also decent last week, at 40.2m bushels, up from 36.0m bushels the previous week and 8.1m bushels a year before.

However, set against this is the concern provoked by China's rejection of cargos of US corn, in a move which many fear could set a trend.

"Reportedly, 18 cargoes of US corn sitting near China that have been rejected now looking for a new home," Darrell Holaday at Country Futures said.

'Conflicting cross-currents'

At Chicago-based RJ O'Brien, Richard Feltes detected "two-sided trade in corn, amid conflicting cross-currents of strong domestic demand and the prospects for a prolonged delay in resolving the US corn export glitch to China".

However, with the export data firm, and the Wasde ahead, the temptation was for investors to close some of the short positions on corn which have been profitable bets.

Corn for March rose 0.9% to $4.38 a bushel, staying healthily above its 20-day moving average, for a fourth successive close (for the first time in four months), and back within sign of its 50-day moving average.

'Little to no snow cover'

It was left to wheat to disappoint bulls, falling 0.1% to $6.50 a bushel in Chicago for March delivery for the contract's lowest close in nearly three months.

Sure, "some traders continue to focus on the risk of winter kill as cold temperatures stretch across the US and some of the wheat has little to no snow cover to protect it", CHS Hedging noted.

But there are no disaster scenarios as yet, with weather service MDA estimating that 5% of the US Plains hard red winter wheat belt was hit, of which only a small portion will have been damaged.

(Hard red winter wheat itself rose 0.1% to $6.96 a bushel for March delivery.)

US weekly exports were relatively modest, at 19.8m bushels, if up from 15.5m bushels the week before.

Meanwhile last week's "big production estimates out of Canada and Australia looks to keep wheat on the defensive", Benson Quinn Commodities said.

Coffee in demand

Among soft commodities, robusta coffee extended its recovery, adding 2.9% to $1,769 a tonne in London for January delivery, helped by ideas of squeezed supplies, if only temporarily, from Vietnam as producers withhold sales in a campaign, which seems to be working, to support prices.

As for how long it works, a record Vietnamese harvest is seen as forcing producers' hand at some point, and the March contract did achieve smaller gains, if still significant ones, up 1.7% at $1,723 a tonne, it best close in nigh on three months.

Technically, "London coffee prices [for March] have built on support offered by the 10-day moving average in recent sessions, with support around $1,650 a tonne holding up firm over the past few sessions," Sucden Financial said earlier.

But how far can the rally go?

The broker noted that, on the upside, at $1,730.87 a tonne, "resistance in recent months has held relatively firm".

Strong finish

However, raw sugar for March dropped 0.2% to 16.55 cents a pound in New York, the lowest finish for a spot contract in three months, ahead of data due on Tuesday expected to show a strong finish to the Brazilian Centre South cane harvest.

"There is little fundamental news of a bullish tint that is supporting values," Sucden said.

"Brazil's Centre South crop is continuing to be harvested and final crush numbers are now expected to approach 600m tonnes," well above ideas below 590m tonnes which have held until recent days.

Morning markets: grains post gains, as crop report looms
Agricultural Commodities
Agricultural Markets
Agricultural Companies
Agricultural Events