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Evening markets: corn closes below oats, despite strong data

Oats did it, hitting a record high, and closing above corn in Chicago for the first time in night on 12 years.

But can they hold on to their gains?

The latest splurge higher was driven by the threat of a railroad workers' strike in Canada, which is already struggling with its logistics, and in delivering south the supplies that US oat consumers rely on.

(The US imports nearly half its oats, with Canada the default supplier.)

March oats hit a record, for a spot contract, of $4.63 ¼ a bushel before easing to close at $4.56 ½ a bushel, up 3.0% on the day, and at a premium of some $0.13 a bushel to corn.

A tide of fund cash to agricultural commodities from bruised equity markets may also be in motion, although a rise in shares on Thursday could diminish that flow.

Coffee tumbles

However, coffee, bulls' other darling of 2014 so far, showed that what goes up has a habit of coming down.

Arabica beans for March tumbled 4.4% from the last session's eight-month closing higher to 136.75 cents a pound in New York.

Not that there appeared any improvement in the outlook for Brazilian weather, whose dryness and heat in central areas has fuelled arabica's rally.

The latest weather outlook from MDA shows that farmers in Minas Gerais, the top coffee-growing state, can expect little or no rainfall until at least mid-month.

However, any appetite to take profits on gains in coffee, which at Thursday's close are still 24% so far in 2014, was whetted by a forecast from Colombia's Fedecafe growers' organisation that the country could raise output a further 400,000 bags to 11.3m bags this year, offsetting at least some of any losses in Brazil.

'Sales were bullish'

As for corn itself, it eased 0.25 cents a pound to $4.43 a bushel for March delivery, again with profit-taking blamed largely for the decline despite some bumper US export weekly sales data

"Net sales of 1.70m tonnes for 2013-14 were down 8% from the previous week, but up 94% from the prior four-week average," the US Department of Agriculture said.

"Export sales this morning were bullish on corn, soybeans, and wheat," US Commodites said.

Benson Quinn Commodities said: "The corn market is indicating it has value."

'Three waves of winter weather'

OK, the USDA, through its daily alerts system, separately unveiled 220,000 tonnes in Chinese cancellations of orders of US corn.

But that was hardly unexpected, and small beer when the US has now sold 91% of the corn that the USDA has pencilled in for the whole of 2013-14, which is not even half way through.

This has only supported the idea that the USDA will on Monday, in its monthly Wasde report, raise its forecast for US corn exports in 2013-14, and trim the end-stocks number.

Furthermore, the cold weather looks like keeping on coming for the US, impeding supply deliveries and so providing support to short-term prices.

"Three waves of winter weather are expected in the next 10 days, slowing grain movement and firming nearby basis," CHS Hedging said.

Farmers selling up?

However, there are ideas that the cash market is not proving as strong as might be expected.

At Country Futures, Darrell Holaday said it was "worth noting that we are seeing some basis weakening for corn in some regional areas in the last two days.

"We have seen weakening of $0.04-0.10 per bushel - an indication that we are either seeing some cash movement or the end user is not willing to push cash bids to degree the futures market has moved up. "

"Technicals remain in an uptrend, but farmer pricing should again be seen as March futures approach the $4.50-a-bushel level," CHS said.

In fact, the contract peaked at $4.47 ¼ a bushel on Thursday.

Strong export data, but…

For wheat, the temptation to take profits was even stronger, despite decent weekly US export sales data here too.

"Net sales of 638,800 tonnes for delivery during the 2013-14 marketing year were down 15% from the previous week, but up 62% from the prior four-week average," the USDA said.

However, these applied to a period before this week's rise in prices, allowing investors to discount it somewhat.

Furthermore, the wintry weather which is disrupting transport is bringing enough snow to ease winterkill concerns and, indeed, bring hope of an easing drought threat too.

'Snow remains extensive'

"Snow remains extensive across much of the Plains wheat belt, especially in Kansas, Colorado and Nebraska, and this is helping protect whet from very cold temperatures," MDA said.

"The snow will help improve soil moisture as well once its melts."

Technically, a disappointment was that Kansas hard red winter wheat for March touched its 50-day moving average, for the first time in three months, only to lose its grip, and close down 0.6% at $6.47 ¾ a bushel.

Chicago soft red winter wheat dropped 1.2% to $5.80 ¾ a bushel for March delivery, its first decline in six sessions, but its Paris peer did better, at least holding steady at E194.00 a tonne, helped by further strong weekly European Union wheat export data, of 872,000 tonnes.

That takes to 18.2m tonnes the EU's licenced wheat exports so far in 2013-14, up from 11.7m tonnes a year ago.

'Understandably nervous'

For soybeans, US export sales were decent at 577,000 tonnes for 2013-14 "up 59% from the previous week and 25% from the prior four-week average", the USDA said, with a further 219,500 tonnes for next season.

Signally, that took sales for 2013-14 to 1.58bn bushels, less than half way through the season, but already above the 1.495bn bushels that the USDA has pencilled in for the whole year.

And, yet again, there was an absence of cancellations of orders by China, the top soybean importer, which many investors have been expecting to ditch US deals in favour of Brazilian supplies, now the South American country's harvest is up and running in earnest.

In fact, "even if China cancels 2.3m tonnes of orders and there were no additional soy sales for balance of 2013-14, soy shipments would still hit the USDA's [full-season] forecast," said Richard Feltes at RJ O'Brien.

"Trade is understandably nervous over mounting US soybean sales and the lack of Chinese cancellations to date."

'Heat is threatening soybeans'

Furthermore, US export sales of soymeal were strong too, at 283,700 tonnes for 2013-14, "up noticeably from the previous week and 87 percent from the prior four-week average", the USDA said.

The market has been particularly attuned to soymeal prices, given the rail hiccups to deliveries presented by cold US weather, at a time when Argentina's supplies are being curtailed by a reluctance by farmers to sell crops, which represent a hedge against a falling peso.

Meanwhile, as Jefferies Bache noted "heat is threatening soybeans in southern Brazil and persistent rains are slowing harvest in Mato Grosso".

Besides the obvious threat to Brazilian supplies, the harvest slowdown "may interfere with planting the safrinha crop, where soybeans have been expected to take acreage from corn this year".

Soybeans for March added 0.7% to $13.25 ¾ a bushel, the lot's best close since Christmas, while soymeal for March gained 0.9% to $442.00 a short ton.

India decision

Back among soft commodities, New York raw sugar for March fell 1.6% to 15.85 cents a pound, retreating back below its 50-day moving average after only one close above the line.

The sweetener was little helped by a decision by India's government to raise the minimum cane price mills must pay growers by 5% to 220 rupees per 100 kilogrammes from October, an increase seen as encouraging planting of the crop, and sugar production.

(There appeared to be no more news on the potential export subsidy which investors are more focussed on.)

Furthermore, consultancy Green Pool forecast a continuing world sugar surplus in 2014-15, of 1.6m tonnes, if below this season's 5.5m-tonne excess, on its estimates.

"Our 2014-15 first estimate will change, but without a major global weather surprise it seems unlikely it will result in a major deficit," the Australia-based analysis group said.

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