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
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
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 ½ 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 ¼ 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
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.
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 ¼ 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".
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
What may have been a deciding factor in Chicago wheat closing
up 0.9% at $5.90 ¼ 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.
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
However, Chicago's March contract recovered nonetheless to
close 0.7% higher at $13.34 ¾ a bushel, helped by a lack of confirmation of
such cancellations from the USDA (besides, of course, by positive Agrimoney.com 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".
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
"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."