Has Dennis Gartman got it right?
The veteran commodity investor said he had, "until very,
very recently", been "bullish of corn", and indeed had bought some March
futures at $7.28 a bushel and $7.32 a bushel.
But that thinking changed on Friday, when the contract made
a "near reversal". It closed lower, despite trading higher than the previous
session managed at one point, but didn't tick every box in having its intraday
low above Thursday's – rather than marking a true so-called "outside day".
Still, "action late last week, especially on Friday, when
old crop traced out what looked very much like a textbook reversal to the
downside, turned us to the sidelines", Mr Gartman said, adding that he would exit
his position "at the market and immediately".
That may hardly have been his most profitable trade, with Chicago
corn for March closing down 0.7% at $7.29 a bushel.
But it was in tune with the downbeat sentiment on grains, which
this session not only fell, but underperformed.
The average commodity, as measured by the CRB index, added
0.4%, helped by an easing dollar
this time, whose depreciation improved the affordability of dollar-denominated
raw materials as exports.
And share markets
recovered well from early weakness, helped by news of Dell's $24bn buyout by a
consortium including its founder, Michael Fell, and software giant Microsoft.
London stocks closed up 0.6%, while New York shares, as
measured by the Dow Jones Industrial Average, were up 0.9% in late deals.
Corn's latest drop was blamed by some on a change for the
wetter in Argentina's weather forecast, although it was not clear that is
supported by information seen by Agrimoney.com.
WxRisk.com talks of some models adding rain in northern Argentina
in the six-to-10 day outlook, but further ahead, in the 11-15 day timespan, "the
12z GFS model has now shifted the significant rains from central Argentina
northward", to areas including south eastern Brazil.
The model shows less than 0.75 inches over Santa Fe, Cordoba,
Buenos Aires and Entre Rios, the weather service said.
Nearer term, MDA said that "with dry weather expected to
continue through the weekend, soil moisture levels will continue to decline
across the major [Argentine] crop areas, further increasing stress on corn and
"Heat will be increasing late this week and this weekend,
leading to additional stress on crops."
At broker Country Futures, Darrell Holaday said: "The models
this morning were drier through February 16 in most of the Argentine production
also highly sensitive at the moment to the South American weather outlook,
managed gains, adding 0.4% to $14.95 ½ a bushel in Chicago, for March delivery.
Official data showing Canadian stocks of rival oilseed
canola a little lower than expected at the close of 2012 - at 7.37m tonnes, a
decline of 24% year on year and the lowest year-end figure since 2006 - were
also seen as boosting values.
"Canola stocks were tighter than anticipated, and that number
has provided some price support to the soybean complex," Mr Holaday said.
And ideas of strong export demand, boosted by Monday's US
cargo inspection data, also helped
"Soybeans have a brighter picture as traders are looking for
a pick-up in exports to China," Paul Georgy at Allendale said, adding that
harvest delays and logistical hiccups meant the backlog of ships loading in
Brazil, the main rival to the US for soy supplies, "is now estimated at 40 days".
But, unlike soybeans, corn faces the prospect of an increase
to US estimates for domestic inventories
when the US Department of Agriculture on Friday unveils its monthly Wasde
report on world crop supply and demand.
"The trade is looking for nominal changes in US balance
sheets with wheat and corn stocks
expected to be slightly higher on lower export demand, while soybean stocks
could be lower on better crush and export sales pace," Benson Quinn Commodities
While Morgan Stanley suggested mild support for corn prices
from the livestock sector, on its analysis that US feeder cattle supplies, for
fattening on feedlots, may not be as tight as some investors believe, ideas on
ethanol were not so upbeat.
Richard Feltes, at RJ O'Brien said that analysts have
flagged "a 12% marketing-year-to-date
cut in ethanol production versus USDA's 10% cut", as currently forecast for
"Thus the corn ethanol category in Friday's crop report is
subject to downward revision."
Another plant mothballed
Such ideas only gained further momentum from talk that Ag
Processing Inc, a US co-operative, has temporarily closed a corn processing
plant in Nebraska, citing "challenging economic conditions" in ethanol
This would appear to be in addition to the 36 US ethanol
plants, out of 211, that have already been shut down as of January 29, according
to the Renewable Fuels Association.
Nor did wheat help its fellow grain corn by closing down
0.7% at $7.57 ½ a bushel in Chicago for March delivery.
'US wheat would be
And this despite what might have appeared upbeat news, in
Canada's stocks at the close of 2012 being pegged at 20.69m tonnes, 1.0m tonnes
lower than investors had expected.
Furthermore, Russia announced its long-awaited decision to scrap
its 5% import duty on wheat, although it will not come into force until April
and last only until the start of July.
Still, it will in theory open the doors to imports from the
"With the import levy lifted, US soft red winter wheat would
be competitive with Russian values even after the freight, although the demand may
be for higher grade wheat," traders at a major European commodities house, with
considerable Russian interests, said.
However, wheat faced the setback not only of a potential
upgrade in Friday's Wasde to the estimate for US stocks, but improved hopes for
drought-tested US winter wheat seedlings.
"The prospect for moisture in the Plains has improved for
the next seven days and that is driving wheat prices lower," Mr Holaday said.
"There is little doubt that today's weakness in being led by
the wheat market."
In Paris too, wheat fell despite the prospects of easier
shipments to Russia, with the March contract closing down 0.5% at E246.25 a
London's benchmark May contract shed 0.2% to £214.00 a
'Bulls are running out
Among soft commodities, raw
sugar failed to hang on to early gains, sapped by a stream of bearish talk
from the Dubai sugar conference.
"The medium-to-long term consensus for the market seemed to
have 16 cents a pound targeted by many at the conference," Thomas Kujawa at
Sucden Financial said.
And shorter term, "it seems that the bulls are running out
of time to generate some upside momentum to flush the funds out of their
75,000-lot short" position in raw sugar, as estimated by the market consensus.
New York raw sugar for March closed down 0.9% at 18.56 cents
But cocoa gained
ground, adding 2.4% in London to £1,468 a tonne for May delivery, amid fears of
pirate activity, and deteriorating weather, around Ivory Coast, the top
Suspected Nigerian pirates have hijacked a French-owned, but
Luxembourg-flagged, tanker with its 17-member crew off Ivory Coast.
New York arabica
coffee for March lost 0.2% to 144.05 cents a pound, pressed by a small
upgrade by the International Coffee Organization to its estimate for world coffee
production in 2012-13.