PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:49 GMT, Tuesday, 14th Jan 2014, by Agrimoney.com
Evening markets: corn returns into reverse. But wheat gains

As a rule of thumb, changes in market trends, caused by the likes of surprise data, take three days to work through, traders say.

It was a measure of the headwinds facing corn bulls that its price revival only last two days.

Tuesday, the third session since Friday's US Department of Agriculture inventory estimate shock sent corn prices soaring 5%, witnessed a retreat.

Chicago's March contract ended down 0.7% at $4.31 a bushel.

'Farmer selling'

The fall came amid further downbeat talk on prospects for crop prices overall, from the likes of banking giant Deutsche Bank and boutique broker Evergrain.

However, the negative sentiment appears focused on corn, given that even the latest USDA estimate for US stocks at the close of 2013-14 implies a near-doubling over the season, and amid ideas of sluggish growth in demand for the grain for use in making ethanol.

Furthermore, there is persistent talk that growers are ramping up sales, now that the new tax year has begun.

"Farmer selling has corn futures down for the first time in three sessions," CHS Hedging said.

'Talk of additional rejections'

Also ranged against the grain was talk of fresh Chinese rejections of US cargoes of distillers' grains (DDGs), the byproduct of corn ethanol used as a livestock feed, on grounds of containing traces of a GMO corn variety unapproved in Beijing.

While it had appeared that this threat had passed, "there is talk of additional rejections of US DDGs in China, which adds to the defensive tone", Benson Quinn Commodities said.

At least for bulls' sake Chicago's March corn contract retained some positive technical indicators, closing above its 50-day moving average for a third successive session, for the first time in nearly eight months.

'Heat stress'

There was more talk of deteriorating Argentine weather conditions too, with CHS Hedging noting that the "10-day forecast shows that the dryness in southern Argentina has no sign of letting up.

"The latest weather update predicts at least six days will top out near 100 degree-Fahrenheit temperatures and no rain.

"All this occurring at the key pollination stage for much of the region's corn crop."

US Commodities said: "The South American forecast has 6 days of 100+ degrees in the southern one-third of Argentina's [grain] belt.

"One-half of the Argentine corn crop could see heat stress during this time frame."

'Even hotter'

At RJ O'Brien, Richard Feltes said that the "weather leans positive" for prices, with "upcoming Argentine temperatures even hotter than yesterday, and not much relief from showers next week.

"The 11-to-15 day outlook across Argentina looks warm as well."

However, it was soybeans which managed to gain some succour from the forecast, closing up 1.0% at $13.07 a bushel for March delivery.

"The weather models are still providing some support to the soybean complex as the market would like to see more rain and milder temperatures in central Argentina," Darrell Holaday at Country Futures said.

Brazil upgrades

The strong performance by US exports also continued to support the oilseed although, unusually by recent standards, no export sales were announced by the USDA through it daily alert system.

"Sales of beans to 'unknown', or to China, are continuing to fuel the bulls until we see some cancellations," Paul Georgy, president at broker Allendale, said.

Certainly, it helped ease the concerns at upgrades for Brazilian soybean harvest estimates by oilseeds industry group Abiove, which raised its estimate by 1.0m tonnes to 87.6m tonnes, and by Agroconsult, which lifted its forecast by 900,000 tonnes to 91.6m tonnes.

(The USDA, whose data set global benchmarks, pegs the harvest at 89.0m tonnes.)

And technically, the March contract regained its 100-day and 20-day moving averages, to close above all its major lines.

Wheat rallies

Wheat added 1.0% too, to $5.79 a bushel in Chicago for March, regaining some of the premium over corn surrendered on Friday.

In fact, hard red winter wheat, as traded in Kansas City, was the focus for bulls, with the March contract bouncing from an eight-month low (for a spot lot) of $6.17 a bushel set early in the session to end at $6.31 a bushel, a gain of 2.0%.

The contract received support from two factors, the first being the slow release by Argentina of the 1.5m tonnes of exports it has permitted, with only 500,000 tonnes up for grabs for now.

Allendale said: "This not what Brazil wanted to hear," being an importer of largely hard red winter wheat, and typically from its neighbour.

'Additional Brazil buying'

The dearth of Argentine supplies mean Brazil looks likely to continue to turn to the US for imports, and indeed, there is persistent talk of further purchases on this route.

"Cash traders expect additional Brazil buying of US hard red winter wheat in come weeks."

And dryness in the US Plains, hard red winter wheat country, is "prompting some buying", Country Futures' Darrell Holaday said.

"The GFS weather model for the US Plains continues to point to 10 days of completely dry conditions and warmer-than-normal temperatures," not what is needed when there is still plenty of time for frost damage.

Technically, the session offered a key reversal too, with the March contract trading outside the bounds of the previous session and closing higher.

That was not the case with Paris wheat, which ended unchanged at E192.00 a tonne for March delivery, matching a three-month closing low.

'Everyone is so bearish'

Among soft commodities, arabica coffee, which has like corn staged a little-touted recovery, like corn saw its revival fade, ending down 0.5% at 119.20 cents a pound in New York for March delivery.

Technically, "short-term, we expect further consolidation within the recent range with potential for modest gains toward the 125.71-cents-a-pound area", Sucden Financial said.

And raw sugar  for March dropped too, by 0.7% to 15.49 cents a pound after industry group Unica revealed a relatively firm end to 2013 for production in Brazil's key Centre South district.

The decline left the contract within an ace of a fresh three-year closing low.

In fact, "what may be supportive [for prices] is rather the fact that everyone is so bearish," Sucden said.

"Technically the markets are oversold and a corrective rally is possible, although the feeling is that producers are lying in wait to sell into anything above 16 cents a pound."

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