At last, a positive day within the grain and oilseed
And because of wheat,
rather than despite it.
Wheat has been something of a depressant to futures across
Chicago and beyond as, with the grain fallen below a long-term pricing
corridor, investors pressed to see just how far values would go before demand
(Chicago's March contract hit a six-month low in the last
But data on Friday showed that importers were indeed turning
to US wheat. The US sold more than 1m tonnes of the grain last week, the
biggest weekly number since January last year, and well above market estimates
of a figure between 500,000 and 700,000 tonnes.
'Cheapest in the
"The number was somewhat of a shock to the market," Darrell
Holaday at Country Futures said.
"US wheat has become the cheapest in the world," US
Commodities said, adding that technically, the grain "has become heavily
oversold and is looking to bounce back".
Benson Quinn Commodities said: "US is currently seen as
cheapest wheat on the global after recent price break with weekly sales
And, indeed, futures managed a positive close, adding 0.8%
to $7.78 ¼ a bushel for Chicago's March contract.
The question might be why prices did not revive further,
given the size of the exports.
However, reticence was explained in part by the ongoing ag
market caution, with end-of-year fund liquidation a feature of recent sessions,
and with the prospect of fund rebalancing potentially a weight on values too
early in 2013.
In the rebalancing process, index funds rejig the weightings
of their portfolios back to that of the index they track, meaning selling top performers
in 2012, including grains, and buying laggards.
Furthermore, there is talk of further rain/snow for
dryness-pressed hard red winter wheat regions.
"The optimism regarding some moisture next week in the US hard
red winter wheat areas has capped the rallies today," Mr Holaday said.
"The forecast beyond early next week is much drier and
warmer through mid-January in the Plains area."
Still, Chicago's rise was enough to help Paris wheat for March gain 0.6% to E249.75 a tonne, with London wheat for May adding 0.5% to £211.75 a tonne.
export sales number was not so upbeat, at 104,000 tonnes, below all but the gloomiest
"The US continues to miss out on corn exports, with its
market priced $20-30 a tonne above best global offers," Benson Quinn
What sales there had been in the latest week had gone "mainly
to traditional destinations of Mexico and Japan".
However, corn got more help from weekly US ethanol data, which
showed production up 12,000 barrels per day week on week at 834,000 barrels per
"That is a yearly pace of corn use of 4.634bn bushels" on
Country Futures calculations, ahead of the 4.5bn bushels the US Department of Agriculture
has factored in for 2012-13.
Furthermore, US ethanol inventories dropped 523,000 barrels
to 20.32m barrels, suggesting demand for this extra output.
And an extra fillip to the grain came from Argentina, where
wet conditions are prompting many growers to rejig seeding plans.
"Many farmers are in Buenos Aires are having doubts about
planting late corn and are thinking about planting soy instead," US Commodities
"Expectations had been for a record 28m tonnes of 2012-13
corn production, but output is now likely to be 26m-27m tonnes because of the
wet weather and planting delays."
First notice day
Chicago corn for March added 0.4% to $6.94 a bushel.
But the news was not so good for soybeans, which managed only a 0.3% gain to $14.18 a bushel for
Soybean export sales were hardly upbeat, factoring in the
large Chinese cancellations already unveiled last week, and leaving net export
sales at a weak 87,000 tonnes, the weakest since April last year.
As an extra concern for soybean investors, the January lot
reaches first notice day on Monday, the start of the expiry process, with no deliveries
against the contract expected - meaning plenty
of scope for disappointment.
Soft commodities found headway harder to come by, which was
actually more in line with the broader market mood amid persistent doubts about
whether US politicians will agree a budget to avoid the country falling over
its fiscal cliff.
New York raw sugar
for March edged 0.2% lower to 19.42 cents a pound, losing momentum after in the
last session closing over its 50-day moving average for the first time since
for March, which remains well adrift of its own 50-day moving average, dropped
0.7% to settle at 146.85 cents a pound.
And New York cotton
for March lost 1.8% to 74.66 cents a pound, undermined by US weekly export
sales which while not dismal at 287,000 running bales, old crop and new
combined, were the weakest in nearly two months.