The idea that agricultural commodities might stabilise ahead
of Friday's slew of reports from the US Department of Agriculture took another
It had appeared a quite reasonable theory that the uncertainty
presented by the USDA reports on US grain stocks and winter wheat sowings,
besides the monthly Wasde reports, coupled with the index fund rebalancing
process might act as deterrents against further selling.
The index fund rejig, after all, apparently involves buying
some 90,000 corn contracts alone, to
plump the grain back up to mandated weights after the grain's dismal 2013
But any reluctance to sell ahead of USDA briefings which are
expected to turn out on the bearish side – eg raising forecasts for US corn
production and stocks in 2013-14, and for Brazil's soybean harvest – evaporated, in grains at least, after weekly
export sales data gave investors fresh cause to sell.
"Export sales across the ag complex were sharply
disappointing with not only soybeans putting in a marketing year low but wheat
and soymeal as well," Benson Quinn Commodities said.
Soybean sales last week, at 155,500 tonnes old crop, were "down
84% from the previous week and 80% from the prior four-week average", the USDA
Wheat sales were "down
55% from the previous week and 76% from the prior four-week average".
Sales of corn for 2013-14 of 155,300 tonnes, while up a
little week on week were "down 79% from the prior four-week average", and like
the others, well below market expectations.
Sure, there was some excuse in that the week included the
New Year holiday.
And soybeans had some offsetting good news, with USDA confirmation,
through daily alerts, that Chinese importers bought 110,000 tonnes of the
oilseed, albeit for 2014-15.
(That said, the sale, of two cargoes, fell short of the four
cargoes of business that the market rumour-mill had suggested.)
Furthermore, the oilseed had some support from a firmer soymeal market, up 0.4% at $414.30 a
short ton for March, helped by a bottoming out in the market for rival
distillers' grains, after its post-Christmas tumble.
'Weather is drier'
As an extra fillip, soybean prices on the Dalian exchange in
China, the top importer of the oilseed, firmed overnight. RJ O'Brien contrasted
the Dalian's "four-day gain of 51.5 cents per bushel versus the 2-cent three-day
loss in Chicago".
And weather outlook turned a little more threatening in Argentina,
offsetting some of the bearish pressure from an upgrade by Brazil to its
"South American weather is drier in Argentina for the
weekend. The weather forecast in Argentina has helped to support soybeans this
morning," US Commodities said.
At RJ O'Brien, Richard Feltes said that the weather "leans
positive" for markets, "with the scaling back of rains in both one-to-five and
six-to-10 day periods".
Soybeans managed some gains, adding 0.4% to $12.73 ¾ a bushel
in Chicago for March delivery, if falling just short of retaking the 200-day
The same could not be said for corn, which fell again, this time by 1.2% to $4.12 a bushel for
March, equalling the lowest close for a spot contract since August 2010.
In fact, Brazil's Conab agency nudged higher its forecast
for the domestic corn crop too, contrary to market expectations, given the
incentive from prices for growers to focus on soybeans instead.
The upgrade was "very bearish for corn", said Darrell Holaday
at Country Futures.
And a turn by producers to selling has hardly helped either.
"There has been a pick-up in cash movement as basis levels
have not strengthened on the $0.20-a-bushel price break in futures," Mr Holaday
'Panic selling frenzy'
Poor chart signals from corn hardly helped either, after the
March contract ended the last session below what he termed a "critical
technical support level".
"After closing below the $4.17-a-bushel level yesterday, it
opened the door to a large amount of long liquidation and some new technical
"The ethanol inventory number started the sell-off
yesterday, but when the market moved below $4.17 it has become a panic
technical selling frenzy."
So much for support from the index fund rebalancing.
Hard vs soft
With corn tumbling, it was hard for wheat to perform much better.
And indeed it didn't, falling 0.8% to $5.84 ¼ a bushel in Chicago
for March delivery, a fresh two-year low for a spot contract.
That said, interestingly, Kansas City hard red winter wheat
maintained its outperformance, adding 0.2% to $6.39 a bushel for March.
While Chicago soft red winter wheat has fallen by 3.5% so
far in 2014, hard red winter wheat has dropped a modest 0.3%, supported by
concerns of damage from the US cold snap to seedlings in its central and southern
Plains heartland, where some areas lack snow cover.
Furthermore, hard red winter wheat has shown signs of competitiveness
on export markets, to judge by results from Egyptian tender last week.
Hard red winter wheat was also the beneficiary of what
support there was by from a downgrade by the Buenos Aires grains exchange of 250,000
tonnes, to 10.1m tonnes, in its forecast for the Argentine wheat crop.
Brazil is turning to the US for its hard wheat needs, after
finding it difficult to wrestle supplies from its neighbour.
Soft red winter wheat, meanwhile, had to grapple with talk
of a record 100m-tonne Indian wheat harvest this year, and ideas that the
country will be forced to lower its prices further to get shot of supplies.
'Some awful problems'
French wheat for March ended down 1.4% at E196.75 a tonne, a
three-month closing low for the contract, which surrendered its 100-day moving
average for the first time since then.
Prices have moved down to protect a decent export record,
with European Union shipments topping 14m tonnes so far in 2013-14, compared
with less than 10m tonnes a year ago.
March wheat tumbled in London in sympathy, by 2.4% to £156.85
a tonne, the contract's weakest close since September, and despite setbacks to
UK wheat seedlings from heavy rains.
There have been "some awful problems in Oxfordshire with the
ongoing wet weather today - many roads closed with all rivers bursting their
banks", one trading house said.
"However nationally we still don't believe there is too much
damage to the wheat crop in the ground. Yes, there are some isolated incidents
but in the main, crops have got off to a great start and can withstand this
'Bears sitting very
Among soft commodities, arabica
coffee, after some initial headway, dropped 1.3% to 119.35 cents a pound in
New York for March delivery on some "buy the rumour, sell the fact" thinking.
While Conab forecast a potential drop in Brazilian coffee
production this year, and a definite fall in arabica output, many investors had
been prepared for this by broker reports earlier this week.
Raw sugar maintained its downswing, falling 1.7% to 15.48
cents a pound for March, the weakest finish for a spot contract in more than
Sucden Financial noted how prices had "sliced slowly through
the anticipated support levels like a surgeon with steady hands.
"Overall, the bears are sitting very comfortably in not just
the sugar business but the wider commodity markets."
Indeed, separately, Black Rock said that commodity exchange
traded products suffered their worst year on record in 2013, with $42.9bn
withdrawn (albeit mostly from gold) as investors switched to shares.