PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 21:07 GMT, Tuesday, 11th Feb 2014, by
Evening markets: farmer sale fears stop corn joining rally

Corn has sure lost its party spirit.

The grain, having recovered for much of 2014 on ideas that values near three-year lows were spurring demand, received confirmation of its popularity on Monday, with the US Department of Agriculture's monthly Wasde report.

The briefing hiked the estimate for US corn exports in 2013-14 by 150m bushels, and cut the estimate for inventories at the close of the season likewise, to 1.48bn bushels, a figure well below that investors were expecting.

Prices ease

But ideas, as logic might appear to dictate, that corn prices would react positively to the news were unfulfilled in this session, as they were in the last.

"Long positions holders are mindful of the fact that the corn market failed to sustain higher trade [on Monday] despite supportive USDA estimate," Benson Quinn Commodities said.

Corn for March closed down 0.3% at $4.41 a bushel in Chicago, weighed by ideas that prices much higher will draw out a rush of selling by producers, who have been hoarding the grain in hope of higher values than the $4.06 a bushel that futures fell to a month ago.

'May be more selling'

Sure, "the trade continues to be surprised by the strength and duration of export demand, which has been mostly unaffected by Chinese cancellations", CHS Hedging said.

But the broker noted that "there is still a great amount of old crop corn in the bin.

"If the market remains comfortable there may be more selling as weather is expected to improve logistics."

At RJ O'Brien, Richard Feltes said that traders "know that corn rallies trigger farm selling", besides banking on the prospect of a rise of 400m-500m bushels in US corn stocks over 2014-15 "in the absence of crop adversity".

After all, the US achieved a record harvest last year even after one of the slowest spring sowing seasons on record.

Safrinha swing factor

Furthermore, investors had a beefy estimate from Brazil's official Conab bureau on the size of the South American country's crop to factor in too.

Sure, Conab downgraded its harvest estimate to 75.47m tonnes, from 78.97m tonnes.

But that remained well above the USDA forecast on Monday of a 70.0m-tonne harvest.

And it reflected a methodological issue, in Conab switching to a "proper" estimate for the safrinha crop, planted as a follow-on after the soybean harvest, rather than repeating last year's as a stop-gap measure.

While the safrinha crop was seen falling by 3.4m tonnes year on year, this represents a smaller drop than many observers expected earlier, when low corn prices left the crop a poor bet for farmers.

"The economics of planting the safrinha crop have improved and weather is typically favourable," Benson Quinn Commodities said.

Oats rebound

With corn easing, could other grains make forward progress?

Oats did, recovering poise after a correction blamed on the lack of a bid for supplies which turned up in Texas, when consumers are meant to be clamouring for all of the grain they can get, given the logistical problems besetting Canada (and now a potential problem for potash too at least, according to producer Mosaic).

Oats for March added 3.6% to $4.37 a bushel, although not quite enough to regain the premium over corn gained fleetingly last week.

More dry weather?

And wheat made ground too, extending its gains after the USDA on Monday cut its estimate for domestic stocks by 50m bushels, surprising investors.

There was some idea of support from US weather too, although it has to be said ideas on bullish influence were not universal.

Commodity Weather Group forecast a further 30 days of below-normal precipitation for the US southern Plains, threatening to worsen a dryness situation which burst onto the market radar a week ago with crop condition data for winter wheat seedlings.

In fact, data from Texas highlighted the deterioration, with a report overnight showing a 1 point drop to 18% in the proportion of the state's winter wheat rated "good" or "excellent".

'Little-to-no stress'

However, CHS said that "more snow is forecasted later this week in western Kansas", the most important US wheat producing state, where dryness is also a concern.

"The recent cold push is expected to cause little-to-no stress as there is adequate snow cover."

Furthermore, Abares lifted its estimate for the latest Australian crop.

What may have been a deciding factor in Chicago wheat closing up 0.9% at $5.90 a bushel for March was continued covering by hedge funds of their lofty short bets on the grain.

"The wheat market is finding support from the Wasde report most likely due short covering," Paul Georgy at Allendale said.

"There is a large speculative position in wheat as traders have been selling wheat against long positions in other contracts."

Wheat found support in Paris too this time, adding 0.5% to E195.75 a tonne for March delivery, but London wheat for May eased 0.1% to £155.25 a tonne.

Chinese cancellations?

Soybeans looked likely early on to end sharply lower, hurt by persistent talk of Chinese buyers cancelling, or flipping, of orders of US soybeans.

"There is talk that 2-10 cargoes are cancelled, or shifted to South America this week," Allendale said.

Others talked of China attempting to sell 6-8 cargos for February-March delivery.

However, Chicago's March contract recovered nonetheless to close 0.7% higher at $13.34 a bushel, helped by a lack of confirmation of such cancellations from the USDA (besides, of course, by positive comment).

In fact, the USDA unveiled the sale of 116,000 tonnes of US soybeans to China, albeit for 2014-15.

'Still strong demand'

CHS Hedging said that there is "still strong demand for US soybeans at the processor and in the export market".

Furthermore, the news on Brazilian weather wasn't all great, with rains at the weekend following continuing dryness for now.

"Rainfall at 50% of normal is damaging late-harvested soybean yield," CHS said.

Richard Feltes flagged "some indications that expanding dryness in central growing areas, including Parana, is starting to negatively impact yields".

Besides, soymeal posted a strong session, adding 1.2% to $449.20 a short ton in Chicago.

'Market will go lower'

Among soft commodities, arabica coffee managed to extend its rally, adding 0.7% to 137.15 cents a pound for March, as the Brazilian dryness continued to concern investors.

But raw sugar foundered, closing down 1.2% at 15.46 cents a pound for March, if remaining just above its 20-day moving average.

The decline was blamed on confidence at ample global supplies beating concerns over weather damage to Brazilian cane.

"We still feel the market will go lower, despite the weather implications, which we feel will only begin to affect values further down the line if damage is indeed as great as has been talked about," Sucden Finanacial said.

"We still have stocks both at producer level and pipeline stocks at destination to get through before any effect of a production/consumption deficit is seen on futures values."

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