Were US officials justified in raising their estimate for domestic
One of the more unexpected revisions in Tuesday's US Department
of Agriculture Wasde report, a key crop data briefing, was an upgrade to the
forecast for use of corn in making ethanol in 2013-14.
"The increase in ethanol demand by 50m bushels was a
surprise for the trade," Paul Georgy at broker Allendale said.
After all, the revision came against a background of a US
review of its ethanol mandate, which could cut to about 13bn gallons, from
14.4bn gallons, the minimum amount which must be blended into gasoline next
However, within 24 hours, separate US data provided support
for the upgrade.
US ethanol production soared 31,000 barrels a day last week
to 944,000 barrels a day, the highest in nigh on two years.
Margins have been supported by a corn price within shouting
distance of three-year lows at a time when ethanol, while putting in a poor
performance on Wednesday, tumbling 3.6% to $1.931 a gallon for January
delivery, remains amongst its highest levels in six months.
As an extra support for the UDSA Wasde revisions, which also
included a 50m-bushel increase to the estimate for US corn exports in 2013-14,
a sale of 120,000 tonnes of the grain to an "unknown" importer was revealed.
Often, unknown is considered a proxy for China. But not this
It appeared "unlikely to be China, given what appears to be
a brewing US-China trade dispute", Richard Feltes at RJ O'Brien said.
Indeed, corn may have needed all the bullish help it could
get from the likes of ethanol and export data to close higher (which it did)
when the story of Chinese rejection of US corn cargoes for containing an
unapproved genetically modified variety gained extra legs.
China has reportedly turned away a 59,000-tonne cargo, with
a further three in the firing line, after already rejecting 180,000 tonnes
worth of imported US corn.
"There are nearly 2m tonnes of US corn currently en route to
China, so it is likely there will be more rejections in the future," broker CHS
Still, Chicago's March contract managed to close up 0.8% at
$4.39 ¼ a bushel, its best finish in nearly a month, with technical factors
giving the lot an extra lift.
The contact has now for six successive days managed to close
above its 10-day and 20-day moving averages, a feat not achieved since August.
It is also getting close to its 50-day moving average, at
just over $4.41 a bushel (and falling), which it has not touched for more than
Indeed, the next session could be an interesting one, with
the 50-day line near, as well as a key point for Fibonacci followers in the
23.6% retracement level, at a bit over $4.42 a bushel, of the move from the August
high to early-December low in the price of the March contract.
And even wheat
managed to crawl higher to a positive close too, up 0.3% at $6.40 ¾ a bushel in
Chicago for March, after spending much of the day looking like it was set for a
fresh contract-low finish.
Again, technical factors played their part, after the lot failed
(just) to match or exceed the contract low set in the last session of $6.35 a
However, there were some fresh weather threats noted ahead
for the US crop too, with MDA highlighting a turn drier and colder for the forecast
around Christmas time.
"Cooler temperatures in the Plains and north western Midwest
will increase winterkill risks once again," the weather service said.
One problem is that "snow cover is expected to remain
limited in the north central Plains", leaving crops exposed to the cold.
Less positive was the failure of US wheat to secure its
first order this season from a tender by Egypt's Gasc grain authority. But
then, US wheat was not actually offered,
Gasc bought 300,000 tonnes split between Romania and France,
which looked likely to have won more had it not been for the extra shipping
charges to Egypt, compared with the shorter distance from the Black Sea.
With FranceAgriMer raising its estimate for French wheat
exports in 2013-14 too, Paris wheat for January rose 0.4% to E206.50 a tonne.
London wheat did better still, up 1.1% at £164.55 a tonne,
given an extra lift by weakness in sterling.
'Eager to source
Back in Chicago, soybeans
recovered too, closing up 0.4% at $13.44 a bushel in Chicago for January delivery,
amid signs of increasing demand, for now at least with the South American crop
still not made.
"The soybean market continues to show life as cash markets
remain firm with both the processor and exporter eager to source supplies,"
Benson Quinn Commodities said.
South Korea has tendered for 110,000 tonnes of soymeal, for
May arrival, and Taiwan for a small purchase of US soybeans.
Soybeans were helped by firm performances by the products,
with soymeal for January edging up 0.1%
to $438.90 a short tonne for January delivery, and January soyoil adding 0.7% to 40.40 cents a pound.
'Running out of
Among soft commodities, London robusta coffee suffered a relapse, dropping 2.6% from the last
session's three-month closing high to end at $1,747 a tonne for March delivery.
Many analysts have warned that strength in robusta beans is
being supported by a somewhat manufactured squeeze in supplies by Vietnamese
farmers, which is unlikely to last given that they are harvesting a record
Raw sugar's rally,
on data showing a late-November drop in Brazilian output, also ran out of
steam, leaving the March contract down 0.7% at 16.51 cents a pound in New York.
Still, "the market is oversold and we wonder what the
risk/reward is selling at these levels," Nick Penney, senior trader at Sucden
"At some stage we expect a corrective bounce. We almost had
one yesterday and the signs are that the market is running out of momentum on
However, cotton managed
a gain of 2.2% to 82.49 cents a pound in New York for March delivery, the best
close for a spot contract in getting on for two months, and despite a caution from Deutsche Bank over the potentially "substantial" negative impact on prices of ags such as cotton from a China policy revamp.
The fibre is being lifted by concerns of a squeeze in US
supplies, after data showed a further sharp drop in stocks for delivery against
New York futures, down to 61,519 bales last night from 88,950 bales the