PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:45 GMT, Wednesday, 26th Feb 2014, by Agrimoney.com
Evening markets: demand fears hurt wheat prices. Soy gains

Many recent sessions in Chicago have been marked by early weakness giving way to late buying, viewed as a sign of the fund buying which many traders have flagged in ag markets of late.

"There is choppy pressure early in the trading session, but good buying surfaces and pushes these markets higher by midday," Darrell Holaday at Country Futures said.

But not on Wednesday, when late deals, in wheat at least, were marked by weakness rather than strength.

The best-traded May contract lost some 1% of its value in the last 15 minutes of trading to end at $6.05 a bushel, down 2.0%, closing below its 10-day moving average for the first time in three weeks.

The March lot at one point fell below $6 a bushel before recovering some ground to close exactly on the $6.00 mark, a decline of 2.4%.

Cold weather

Concerns over a US cold spell, and its potential impact on winter wheat seedlings, remained live.

In fact, Richard Feltes at RJ O'Brien said that "weather premium is likely creeping into markets, with little relief across the dry US hard red winter wheat belt over the next two weeks, along with the likely continuation of below-normal Midwest temperatures through March".

Kansas City hard red winter wheat for May at least managed to limit its decline to 1.8%, leaving it at $6.78 a bushel.

There was also some comment at a report by the US Department of Agriculture's Riyadh bureau estimating Saudi Arabian wheat imports at 3.0m tonnes in 2013-14, above an official USDA forecast of 2.7m tonnes.

'Priced out of the market'

But that was about as good as it got in terms of demand news, or rather the absence of it, which investors switched to, questioning whether prices had got so high as to deter buyers.

"The Chicago wheat market continues to trade the news of 110,000-tonne cancellation of US soft red winter wheat exports announced yesterday," CHS Hedging said, with Egypt ditching the order.

Indeed, US offers of soft red winter wheat, as traded in Chicago, "have steadily priced themselves out of the market versus Russian wheat as evidenced by yesterday's cancellation by Egypt," Benson Quinn Commodities said.

"Interest from Brazil for US wheat supplies is also thought to be fading," the broker added.

While Paris wheat for May managed to close higher, at a seven-week high of E198.50 a tonne, there are doubts that this resilience can last for long.

All this said, Egypt's Gasc grain authority, after the close of trading in Chicago, did announce its first wheat tender of the month.

Fall from high

Weakness was even evident in oats, although its tumble, on a May basis, had come earlier in the session (supporting ideas indeed the grain is a leading indicator - "oats knows", as traders say).

The lot, having set a contract high of$4.98 a bushel, supported by ideas that Canada's logistical hiccups are denying US much-needed supplies, closed at $4.60 a bushel, down 1.6%.

Still, with the squeeze particularly acute short-term, with US mills said to be down to their last three weeks' supplies, oats for May maintained upward progress, hitting a record high for a spot contract of $5.33 a bushel and closing up 0.8% at $5.06 a bushel.

'Liquidating short positions'

The March contract managed to keep its premium over corn, which eased by 0.25 cents to $4.55 a bushel for March, although May corn regained the advantage over oats in falling 0.25 cents to $4.61 a bushel.

These closes were more in line with the late recoveries investors have got used to.

"Corn futures are trading near the top of the recent trading range as speculative funds continue to liquidate their short futures position," CHS Hedging said, adding that funds were estimated short 12,000 corn contracts.

And it was helped by ideas of US cold fouling up logistics, besides a forecast by Macquarie that the Ukraine corn harvest this year could prove some 5.2m tonnes below Kiev estimates.

The bank attributed its reasoning to ideas over the long-term impact of a weakening Ukrainian hryvnia, which obliged by sinking to a record low of 10 to $1.

'Did not make sense'

And soybeans managed the usual late strength too, ending up 0.7% at $13.97 a bushel for May, a contract high.

The March contract retook the $14-a-bushel mark, closing up 0.6% at $14.07 a bushel, a fresh five-month high for a spot lot.

The gains were "spurred by the absence of soy export cancellations, and additional old crop soy sales announced yesterday", said RJ O'Brien's Richard Feltes, flagging the continued lack of ditching by Chinese buyers of US orders in favour of Brazilian ones, besides the 568,000-tonne order on Tuesday which continued to cause bewilderment.

"It did not make sense to purchase old crop US supplies that hold a premium to South American prices," Anne Frick at Jefferies Bache said.

'Painfully tight'

However, CHS Hedging said that "it is possible that the recent slowdown in South American harvest progress" was behind the deal, with Brazil's harvest and crop transport being hampered by rains.

Benson Quinn Commodities restated an idea that the order was "now assumed to be for August/September shipment that will likely be filled with new crop supplies.

"Nonetheless US ending stocks on soybeans look to be painfully tight and domestic processor demand should continue to be strong with favourable margins in place."

It also helped that even though soymeal flagged, closing unchanged at $453.70 a short ton for May, soyoil gained 1.5% to 41.46 cents a pound for May, the contract's best close in three months.

"Prices firmed overnight on stronger trade in competing world oil markets," Ms Frick said, with Kuala Lumpur palm oil soaring 2.5% to settle at 2,810 ringgit a tonne, the best close for a benchmark contract in 17 months.

The vegetable oil was supported by ideas of lower-than-thought production in Malaysia, thanks to dry weather, and potentially in Indonesia too.

Crop losses to drought

Among soft commodities, arabica coffee for May firmed 0.8% to 177.70 cents a pound after a report from agriculture officials in Minas Gerais, Brazil's top coffee-producing state, confirmed damage to plantations from the ongoing drought.

In south Minas, plantations in Tres Pontas had lost 45% of their crop, with 25% losses in nearby Machado.

"South Minas was very affected," the officials said, flagging that while rains could not repair damage to the 2014 crop, "it could help 2015 output" by promoting growth ahead of flowering in September or so.

However, a raw sugar for May eased 0.01 cents a pound to 17.67 cents a pound, despite an assertion from Commerzbank that it represented a better bet than arabica coffee, and downbeat comments from Job Economia on prospects for the Brazil Centre South cane crop, because of drought.

Still, that close represents a strong recovery from an intraday low of 17.03 cents a pound, a loss of 3.7%.

Cotton drops

Cotton extended its losses too, falling 1.2% to 86.37 cents a pound for May, little helped by a downgrade by Standard Chartered to its forecast for prices.

The bank cut to 82 cents a pound, from 90 cents a pound, its forecast for prices in the second half of the year, and to 81 cents a pound, from 95 cents a pound, its expectation for front month New York futures for 2015.

The bank cited the changes ahead for Chinas subsidy regime, and "our expectation of higher cotton acreage in the US as farmers react to improved prices in 2013 relative to 2012, thereby boosting already-high global inventories".

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