PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:25 GMT, Monday, 17th Mar 2014, by
Evening markets: Crimea calm dents wheat. Rains cool coffee

There's nothing like a massive bullish bet by hedge funds on agricultural commodities to stoke thoughts that it might be time to get out.

After pointed out that hedge funds are the most bullish in three years on the main US-traded agricultural commodities, there was some chatter that this was a gigantic sell sign.

So it proved, in New York, where coffee tumbled more than 3%, besides in Chicago, where grains were little helped by the calm over the Crimea crisis, for now.

'Limited buying interest'

The weekend's Crimea ballot, while failing exactly to please Western nations, at least proceeded peacefully and with predictable results.

Crimeans voted overwhelmingly to secede from Ukraine, as markets had expected and, as expected, the European Union and the US imposed sanctions on more than 20 Russia and Ukrainian people deemed key to the ballot.

The lack of a more extreme reaction, or of the ballot sparking unrest, left investors with little cause to inject extra risk premium in grain prices, which have been lifted by concerns over the impact of the Ukraine turmoil on the country's barley, corn and wheat exports.

"The reality is that there is nothing new from late last week and that has limited buying interest," Darrell Holaday at Country Futures said.

CHS Hedging said: "Crimea voted overwhelmingly to join Russia in its referendum yesterday in a result that surprised no one."

Few shorts to cover

In fact, there was something new, with Russian president Vladimir Putin signalling that he might be prepared to negotiate a deal over Ukraine's future, maybe using Crimea as a bargaining chip.

However, the potential for accord was only an extra depressant for grain prices.

And even though the Ukraine Agribusiness Club cautioned over large losses in spring sowings because of a shortage of credit, the impact was eroded somewhat by a more benign assessment by the US Department of Agriculture last week.

And bears had other factors in their favour too. One was the switch by hedge funds to holding a net long position in Chicago wheat for the first time since October, limiting ideas of the amount of buying to come from further short-covering.

In fact, the gross short position in Chicago futures and options was the lowest since December 2012.

'Exports below expectations'

A further setback for bulls was weekly US export data which, at 496,396 tonnes, fell below some forecast, although proving more than 57,000 tonnes higher week on week.

"Wheat exports were reported below expectations," CHS Hedging said.

Besides it is not as if the US, and the European Union, are going to pick up all the exports lost by Ukraine from export setbacks, or worries about them. (In fact, "Ukrainian corn loadings last week were the highest of the year at nearly 700,000 tonnes," CHS said.)

Moscow-based SovEcon lifted to 24.0m-24.4m tonnes, from 23.1m tonnes, its forecast for Russian grain exports in 2013-14, citing possible disruptions in Ukraine.

Wheat for May fell 1.9% to $6.75 a bushel in Chicago, and by 1.8% to E207.75 a tonne in Paris.

'Basis values falling apart'

Corn fell 1.4% to $4.79 a bushel, feeling similar pressure, although weekly US exports at 976,472 tonnes were viewed more charitably, up some 40,000 tonnes week on week, with sales of a further 107,400 tonnes to Mexico announced through the US Department of Agriculture's daily alerts system.

However, countering that were weaker US cash markets.

"Corn and soybean basis levels continue to deteriorate in the upper Midwest," Darrell Holaday at Country Futures said.

"Transportation problems have left a lot of inventory in the north and cash buyers have little interest in buying cash grain that they cannot move. End-users have a lot of coverage."

CHS Hedging said: "Basis values continue to fall apart in the country as train logistics keep physical products from moving."

Still, Doane had some succour for bulls in saying that while "tensions have eased slightly following the referendum over the weekend for Crimea to leave Ukraine, the crisis is far from resolved which is likely to trigger ongoing cycles of 'risk on/risk off' behaviour by the trade".

Soy vs grains

Not that bulls were completely without reward, with soybeans for May closing up 0.2% at $13.91 a bushel not much of a gain, but a gain nonetheless.

Spreading was credited for giving the oilseed some strength, with "short grain-long soybean" bets, tor the closure of the reverse positions, seen as a factor.

But export news was supportive too, and not just the lack of confirmation of further cancellations by China of orders of the oilseed from the US, or even Brazil.

US weekly exports came in at 939,738 tonnes, down from 1.087m tonnes a week before, but a healthy total nonetheless, above the rate needed to meet USDA forecasts for the whole of 2013-14.

On top of this, the US sold 110,000 tonnes of soymeal to an unknown importer for 2014-15.

'Burdensome stocks'

However, Jefferies Bache cautioned that the threat of China ditching soybean import orders had not gone away.

"There are strong indications that lower demand in China and the accumulation of burdensome stocks will result in cancellations and once they begin to be announced, they could come quickly," the broker said.

And there were signs of progress in Brazil's harvest despite rain, with Safras estimating that the Mato Grosso crop is 84% in the barn, down only 3 points year on year despite heavy rains.

The overall harvest was pegged at 59% complete, up 1 point year on year.

And the El Nino might not prove such a setback for soybeans, or for many other crops, as many investors fear.

'Some showers'

In New York, arabica coffee got gripped by selling even more so than grains, falling 3.5% to 191.40 cents a pound for May delivery.

 Besides continued talk over the International Coffee Organization announcement that losses to rust in Central America had not been as big as thought, "some showers have been reported recently" in Brazil's coffee belt, Jack Scoville at Price Futures Group said.

In fact, Somar forecast only light rains this week for coffee areas, but said that March 22-26 might bring better precipitation.

Copper vs sugar

Talk of rain was hardly a help for raw sugar either, which dropped 1.2% to 17.05 cents a pound for May delivery, although propped up a little by resilience in copper?

"If the coffee market is our Brazilian weather proxy then copper is our 'China gauge' or 'global macro demand side' indicator," said Tom Kujawa, co-head of the softs department at Sucden Financial.

Copper ended at $6,749 a tonne in London, up $10.50, and having recovered more than $100 a tonne from its weakest level since July 2010 hit last week.

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