Bull markets need feeding, the saying goes.
And they got their ration, in grains and oilseeds at least,
on Tuesday, when soybean and wheat prices jumped 2% in Chicago, with
gains in corn futures not too far
The further decline in US winter wheat condition, reported
by US Department of Agriculture scouts overnight, was one supportive factor, especially
given the prospect that more of the wind, cold and dryness that has plagued
seedlings in the central and southern Plains is on the way.
"Weather leans positive [for prices] with a slightly colder
outlook next week and confirmation of ongoing dryness across more than half the
US hard red winter wheat belt," Richard Feltes at RJ O'Brien said.
A "red flag" warning from the US National Weather Service of
"very high to extreme" concerns over wildfires in western Oklahoma and parts of
Texas only reinforced the message.
A further boost for US wheat came when it scooped part of a
175,000-tonne order by Egypt's Gasc grain authority, with Romanian and Russian
supplies also featuring.
This victory came despite the handicap to US wheat of the
extra shipping charges, of perhaps $16 a tonne, for getting it across the
Atlantic to Egypt, rather than just from the Black Sea, as with Romania and
And it indicated too the freeing up of supplies after the
logistical hurdles posed by cold weather in recent weeks.
"It is that that has been an issue in getting competitively
priced grain out of the US," one European commentator told Agrimoney.com.
In further signs of demand, even at current prices up more
than 20% from late January levels, Lebanon bought 25,000 tonnes of milling
wheat from Kazakhstan for arrival by April 7, Japan is tendering for 119,000
tonnes of milling wheat, and Tunisia is out for 42,000 tonnes of optional
origin durum for shipment in April-May.
A third support came in the form of an uptick in the Ukraine
tensions, after an unnamed officer was killed in an attack by pro-Russian
forces on a military base in Crimea.
"These markets are very difficult because of the political
dimension, which is so difficult to anticipate," a European grain trader said.
"A person gets killed in Crimea, and the markets are up and
The Ukraine situation is viewed as important to markets
because of the country's status as a major wheat exporter, the third-ranked
corn shipper, and a big seller of barley
too – of which about one-third of the Ukraine winter crop is grown in Crimea.
Talk differs hugely about the actual impact of the crisis on
Ukraine's grain industry.
Although there is agreement that actual shipments of
existing orders have not been disrupted too much, some such as the Ukraine
Agribusiness Club say that new purchases have dried up and others that spring
sowings are badly behind because of a lack of finance for farmers.
In fact, Ukraine said that its spring sowings, mainly barley
and wheat up to now, have reached 693,000 hectares, or 24% of the expected
"Even if the situation in Ukraine remains uncertain,
producers are working to advance their spring work," was Agritel's take, adding
that official data showed that "the proportion of cultures considered in good
conditions is confirmed up to 93% for winter grains and up to 94% for rapeseed".
Also, "respectively 82 % and 91 % area in winter grains and
rapeseed have now received a first passage of nitrogen fertilizers".
Still, with the bulls getting enough to feed on, wheat for
May closed up 2.7% at $6.92 ½ a bushel, the best finish for a nearest-but-one
contract since late October.
In Europe, London wheat for May added 1.2% to £167.965 a
tonne, but in Paris gains were more limited, with the May wheat contract ending
up 0.5% at E207.75 a tonne.
There was some disappointment at Gasc's failure to choose
any French wheat, although it was close in contention, not far above the winning
Romanian offer, but with higher shipping costs.
Indeed, when stripped of some premiums for dealing with
Egypt, the French offer showed an "aggressive basis", FCStone said, noting that
basis in both France and Germany is below average levels for this time of year.
One topic that may gain more attention too is growing talk
of dryness in Central Europe.
Gail Martell at Martell Crop Projections said that the "most
serious drought is in Bayern, southern Germany, where winter rainfall was less
than 50% of average.
"Troublesome drought has continued in March," and indeed "seems
to be spreading into Poland another important wheat-producing country", the
third ranked in the European Union in grains output overall.
"Central Europe could definitely do with a bit more rain
once plantings are over," the European commentator told Agrimoney.com.
Big report ahead
Back in Chicago, corn
closed up 1.5% at $4.86 ¼ a bushel for May, lifted itself by the Ukraine
jitters, and by wheat.
The relationship between the two grains will come into sharper
focus in the quarterly US grain stocks report on March 31, which is taking an
increasing place in market thinking.
There were signs of demand for corn too, with South Korea's Nonghyup
Feed purchasing 193,000 tonnes of the grain at tender, sourced from the US and South
And the cold US weather outlook is hardly helpful for US
farmers seeking a warm-up in soil temperatures ahead of spring plantings, to
'Sellers waiting on
Soybeans, for which
Ukraine is not such a direct influence, added 1.9% to $14.18 ¼ a bushel for May
nonetheless, helped by yet another day without evidence of Chinese
cancellations of orders of US cargoes, as has been expected with the South American
harvest online in earnest and with supplies apparently backing up in Chinese
"Support continues to be generated by the need to ration
demand and the lack of adequate export sales cancellations," Jefferies Bache
"There continues to be discussion about 500,000-1.0m tonnes
of sales begin cancelled thus far, with much more to follow.
"However, the lack of confirmation of larger volumes has
prospective sellers waiting on the sidelines, not wanting to initiate positions
in case cancellations fall short of expectations."
That said, not every comment on soybeans was bullish.
Oil World warned that "a significant slowing-down of the
year-on-year growth in Chinese soybean imports in the April-June quarter could
have a bearish impact on soybean prices, unless any new export problems arise
in South America".
However, bulls had other reasons too for backing beans.
Richard Feltes at RJ O' Brien said: "The soybean market
regains its footing on the heels of improving crush margins, slow farm sales,
firming processor bids, an uptick in South American soymeal premiums, a dearth
of Argentine farm sales," besides the "absence of any sales cancellations today".
Evidence for decent US crush margins came in processing data
on Monday, showing the February crush at 141.6m bushels, above market expectations,
and will hardly have been hurt by a 2.1% gain to $455.80 a short ton in May soymeal futures.
And, from technical perspective, April soybean options
expire on Friday with the largest open interest at the strike price of $14.20 a
bushel, a level that futures may tend towards.
In New York, soft commodities had a better day too, although
not a banner one, with the drop in arabica
coffee prices in the last session switching off producer selling, and
helping May futures edge 0.1% higher to 191.55 cents a pound in this one.
Although much-needed rains have been forecast for Brazilian coffee
growing areas, there are doubts as to how much will arrive and how much good it
will do, given the extent of damage already to trees and cherry production.
Remember that Volcafe has cut its 2014-15 global coffee
ending stocks estimate to a deficit of 6.5m bags, the first in five years, from
a December projection of a 5.3m-bag surplus.
Raw sugar for May
added 0.5% to 17.14 cents a pound, helped by the revival coffee, given the
Brazil's cane crop has also been affected by drought, if against a backdrop of
concerns of a seasonal sell-off.
It was actually cocoa
which fared worse, dropping 0.5% from last night's two-year closing high to end
at $3,014 a tonne for May delivery.
Still, cocoa remains supported by ideas of a second
successive world production deficit in 2013-14, while demand is viewed as
Lindt & Sprungli reported a rise of 8% in chocolate
sales last year, beating a 6% target, which it expects to hit in 2014.