Grain futures departed from the script on Tuesday,
rebounding strongly from early lows even as fears unwound over the Ukraine turmoil
that has raised concerns over corn
and wheat supplies.
Assets which slumped in the last session on jitters over
Russia's deployment of troops to Crimea, in southern Ukraine, recovered this
time as Moscow sounded a less hostile note.
Vladimir Putin, the Russian president, said that "the tense
situation in the Crimea, associated with the possible use of the armed forces,
just dissipated", taken as a step back from potential confrontation.
1.7% in London and 2.5% in Frankfurt and Paris, standing 1.4% up on Wall Street
in late deals.
So grains - which soared in the last session on concerns of
what tensions might mean to grain exports from Ukraine, a big shipper of wheat
and corn, and Russia, and large supplier of wheat – should in theory have
While keeping to the script earlier on, and showing
reasonable losses, they lost the plot later in the day to close with
For wheat, which closed up 1.9% at $6.43 ½ a bushel in Chicago
for May, this meant a finish at a the highest in approaching three months, and
above the contract's 100-day moving average for the first time in 14 months.
For corn, which for May rocketed 2.9% at $4.84 ¼ a bushel,
it meant the best close in five months and the first finish above its 200-day
moving average in 14 months.
Indeed, technical buying was part of the reason for the
price rises, with corn's rally also taking it right to a Fibonacci point, and
the 62% retracement level from its August high.
But there were some fundamental reasons for strength too,
one being the deteriorating condition of the US winter wheat crop, as
highlighted in data overnight, particularly in the drought hit southern Plains,
and with the potential for further downgrades to come.
For corn, there are continued rumours of the Environmental
Protection Agency being poised to release revised estimates for the US ethanol
mandate, still indicating a cut in the level which needs to be blended into
gasoline, but not to the originally proposed range of 12.7-13.2bn gallons.
"Talk circulated about the EPA and the ethanol mandate
possibly being higher than previously indicated," US Commodities said.
Still, it has to be marked that prices have reached levels attracting
"Large farmer selling was reported yesterday when price
targets were hit," CHS Hedging said, noting that open interest on corn "was up
over 18,700 contracts on yesterday's rally".
'Tight cash market'
This time soybeans
gained too, although they continued to lag, in closing up 1.0% at $14.23 a
bushel for May delivery.
Several explanations were given for the rise, beyond the
mere pull upwards from grains.
"The strength in the soybean complex is still generally
explained by the continued strength in the Midwest cash soymeal values," Darrell Holaday at Country Futures said.
"This continues to create very good soybean crush margins in
a tight cash market and that is why we see futures bounce on all price breaks."
Still, in Chicago, soymeal itself for May closed down 0.2%
at $449.70 a short ton, with soyoil
the product with attitude, up 3.1% at 43.71 cents a pound for May, closing
above its 200-day moving average for the first time in 13 months.
Besides some concerns over vegetable oil supplies, given
dryness in parts of South East Asian palm oil country, "soyoil prices have
continued to advance off their key reversal set at the end of January", Anne
Frick at Jefferies Bache said.
Furthermore, Argentina, the main soyoil exporter, saw its
soybean crop downgraded by 1m tonnes to 53m tonnes, while Brazil's crop
attracted fresh estimate cuts too.
Oil World dropped its forecast to 84m tonnes, implying a rise
of a relatively modest 2.5m tonnes year on year on its estimates (if still
setting a record), although Informa's downgrade was less severe, by 900,000 tonnes
to 88.8m tonnes.
Michael Cordonnier, the respected crop scout, overnight cut
his estimate to 87m tonnes.
'Problems continue to
And as an extra bonus for bulls, another day went past
without evidence of cancellations by Chinese buyers, the top importers, of orders
of US soybeans, in favour of cheaper Brazilian offers.
"The soybean complex continues to make gains on tight stocks
and no news of export cancellations," CHS said.
Still, Country Futures' Darrell Holaday said that the "problems
in China continue to mount as the soybean crush margins continue to
"There are strong indications that China has to delay a
large amount of Brazilian soybeans that are to be shipped in the next 60 days
into July or August, or later."
Among soft commodities, arabica
coffee proved less resilient, tumbling 3.9% to 185.15 cents a pound for May
delivery, undermined by data showing a 40% surge, year on year, in Colombia's
coffee production last month, to 874,000 bags.
Exports from the second-ranked arabica producer were 36% up
at 976,000 bags, all boding well for offsetting at least some of the production
losses in Brazil to drought, and easing blenders' fears over the extent they
will need to pay up for supplies.
Colombia's output is in the grips of a structural recovery, as
trees planted during a programme to introduce rust-resistant varieties gain
Raw sugar, which has
also been lifted by Brazil drought concerns, eased 0.3% to 17.74 cents a pound
for May delivery.