How far does a dead
cat bounce? Higher in a soybean pit
that a wheat one, if dealing on
Friday is anything to go by. (And especially when a dog does not bark.)
Many markets struggled
against heightened concerns that politicians in the world's biggest economy
will not be able to agree on a budget, meaning the triggering of measures
otherwise known as the "fiscal cliff".
Not only can
Democrat and Republican politicians not agree on a deal, but it appears there
are splits among Republicans too.
"A fiscal cliff
resolution before December 31 remains unlikely in our view, and continued US
political deadlock is likely to place further downward pressure on
risk-sensitive assets into year end," Barclays Capital said.
Wall Street shares stood 1.0% lower in late deals, with
stocks in London ending down 0.3% and Frankfurt 0.5%, with Brent crude down more than $1 a barrel too.
'You pick the explanation'
agricultural commodities managed gains, outperforming too a small drop, of some
0.1%, in the CRB commodities index.
Not that many investors
were getting too hopeful that a renewed rally is round the corner.
rally, dead cat bounce, or just oversold. You pick the explanation today for
the higher market," Darrell Holaday at Country Futures said, with none of the
alternative appearing causes for optimism over sustained gains.
"A dead cat bounce
is occurring," US Commodities said, a reference to the financial market idea
that even a deceased moggie will rebound if dropped from a big enough height.
'In need of a catalyst'
There is a feeling
that for more sustained gains it will, as Allendale's Paul Georgy said, "take a
report of some confirmed sales to convince buyers to come back to the table.
weekly corn sales and a negative
technical picture is continuing to weigh on the corn futures," after all.
US Commodities said
that "the market is in need of a catalyst to move higher - usually it occurs
from demand in these types of markets".
And there is hope. "End-user
buying is starting to develop. US wheat is now under the French and Indian
wheat values," even if, on corn, Brazil "continues to offer below US values".
'Great deal of liquidation'
Not that there was
too much in the way of export activity announced on Friday.
But one factor enabling
the dead cat bounce was a dog not barking – the US Department of Agriculture
avoided another announcement of Chinese soybean buyers cancelling US orders, of
the type which scared investors particularly on Thursday.
"The soybean cancellation
by China of 540,000m tonnes of soybean imports caused a great deal of
liquidation," US Commodities said.
sales still remain at 83% of the expected total for 2012-13" already, with the
season less than four months old.
gained comfort from a growing idea emerging that fundamentals are not so much
to blame for the drop in grain and oilseed values, but a technical factor –
preparations for index fund rebalancing.
This is the
exercise, associated with early January, in which tracking funds adjust their
portfolios back the index they track – meaning selling top-performing
commodities, and buying laggards.
And the revival in futures could be a sign that investors positioning for the rebalancing got ahead of themselves.
"Funds have been
sellers this week on technical weakness and month-end, quarter-end, year-end
liquidation," Benson Quinn Commodities said.
"Selling could also
be attributed to pre-positioning ahead of next month's index fund rebalance,"
which is expected to see sales of nearly 76,000 Chicago wheat lots, 11,000 on
corn, and 44,000 on soybeans.
They will also sell
some 15,000 soyoil lots, while buying
24,000 Kansas wheat and 61,000 soymeal
saw a round of positive finishes, including in wheat, which added 0.2% to $7.92
a bushel for March, and corn, which for March gained 0.8% to $7.02 a bushel.
have suffered particularly in the last previous three sessions, gained 1.5% to
$14.30 ¾ a bushel for January delivery, and 1.7% to $14.29 ¼ a bushel
Soymeal for March gained 1.5% to $425.00 a short ton, and
soyoil for March 1.7% to 49.12 cents a pound.
upward is in the soybean complex, but that is primarily because of the extreme
weakness since mid-week," Country Futures' Darrell Holaday said.
'More moisture in the Plains'
Kansas hard red winter wheat for March missed out on the rally,
easing 0.2% to $8.42 a bushel.
But then ideas are growing of moisture to refresh
drought-hit Plains crops.
"The midday GFS
model is a little more lenient with some moisture in western Kansas at midweek
next week and also indicating more moisture in the Plains out 10-14 days," Mr
Holaday said, if highlighting the difficulties of accurate forecasts.
"Remember, at one
time early this week the GFS indicated heavy moisture next week in the southern
Plains. That has dwindled to a chance of minor precipitation."
'Licensing is still pretty strong'
Paris wheat for
March did far better, rebounding 2.1% from a five-month low to E253.50 a tonne,
getting further help from decent weekly EU wheat export data on Thursday of
licensing is still pretty strong as we head into the Christmas break," Rory
Deverell at broker FCStone said.
"It will be
interesting see the pace of exports as the US are now firmly in the picture
going forward for the coveted North African and Middle Eastern export markets."
London wheat for
May added 1.9% to £211.00 a tonne.
commodities, New York arabica coffee
continued its revival, adding 2.8% to 146.60 cents a pound for March, as Brazilian
officials added to ideas that speculation may have driven prices artificially
low – and with ideas of further finance to help farmers hold off selling
inventories for now.
However, cocoa extended its decline, dropping
0.2% to £1,477 a tonne in London, for May delivery, taking losses for this week
nearly to 5%, depressed by ideas of recovering West African supplies.
Raw sugar for March held at 19.25 cents a pound, in line with a Rabobank report which
said that the sweetener was set to get support from a switch by Brazilian
Centre South mills to turning cane to ethanol – but not yet.