In the end, wheat
futures did not pussyfoot around in surrendering their, usual, premium over
fellow grain corn.
They held its own for most of the day, helped by ideas that prices
near eight-month lows were attracting buyers.
"Bottom line is that wheat has simply got cheap enough for
this time, given the strength in corn," Darrell Holaday at Country Futures said,
towards the end of the trading day.
And that proved just about true for Chicago's best-traded
May contract, which edged 1 cent higher to $7.12 a bushel.
But the March contract succumbed to a late-session capitulation
which appeared based on technical factors.
After losing its premium over corn with some 20 minutes of
trading to go, the lot dropped from about $7.08 a bushel, and a reasonable
gain, to close at $7.04 ¼ a bushel, a decline of 0.2% on the day.
March corn, meanwhile, consolidated to close at $7.09 ½ a
bushel, a gain of 0.6%.
Signally, the March corn contract also raised its premium
over the May corn contract, which ended up just 0.5 cents at $6.95 ¼ a bushel.
There were a few forces at work in supporting corn, one
being data on weekly US ethanol production
which bounced back 15,000 barrels a day last week, to 812,000 barrels a day, a
That is reapproaching levels which would meet US Department of
Agriculture forecasts for corn use in making the biofuel in 2012-13, and with
the summer driving season to come.
And it lends weight to ideas of capacity coming back on
stream, after being mothballed last year as corn prices hit record highs.
In another sign of a tighter ethanol market, US stocks fell 121,000
barrels to 19.37m barrels.
'Cash is king'
Furthermore, there was talk from research group Yigu
Information Consulting that China's imports of grain, notably corn, might be in
for an uptick, on concerns of domestic supplies running low ahead of the autumn
Commodities guru Dennis Gartman said he would buy the grain,
albeit at lower levels that today, at $6.77 a bushel, targeting $7.10-7.25 a
And, signally, there was the idea of US stocks being
incredibly tight for now, a factor reflected in ideas of zero deliveries
against the soon-to-expire March contract, meaning cash markets are a better
place to sell, and leaving holders of short positions rushing to find coverage.
"With first notice day today, the shorts are now wondering
where they are going to get the corn to deliver and they are scrambling to buy
back their position," Mr Holaday said.
"The short squeeze that we have talked about throughout
February is occurring. Cash ownership is king in the corn market."
That was enough to overcome a few negatives, such as better farming
"Weather still leans negative [for prices] with beneficial
rain/snow across the US Midwest and Plains, another storm across the southern
Plains, eastern Midwest and Delta in the 11-to-15 day forecast, a wetter
weekend outlook across Argentina, and timely rains headed for Chinese rapeseed
areas," Richard Feltes at RJ O'Brien said.
US Commodities said: "Argentina's dry area has shrunk from
50% fewer weeks ago to 25% currently."
However, weather held some favours for bulls too, with Mr
Feltes saying that it was "important to note that Brazilian port weather, after
a dry patch this week, will shift wetter next week", meaning potential
disruptions to loading cargoes.
(This is especially true of raw sugar, which recovered from a two-year low in New York to close
up 0.3% at 17.84 cents a pound. The better-traded May contract added a more
modest 0.2% to 18.08 cents a pound.)
And this when ships are already queuing up in Brazil to load
up with soybeans from the early harvest.
Indeed, ideas of buyers still opting for higher-priced US supplies,
which they can at least get hold of, gained renewed focus when the USDA
unveiled the sale of 120,000 US soybeans to China for 2013-14, and a further 120,000
tonnes to "unknown" for 2012-13.
"We all assume it was China. There seems to be no end as
they continue to buy some old crop," Country Futures' Mr Holaday said.
Soybeans for March ended up 0.7% at $14.57 ½ a bushel, with the
better-traded May lot adding 0.5% to $14.39 ½ a bushel.
Among soft commodities, sugar was not the only riser, with
New York cotton adding 0.3% to 84.38
cents a pound for May delivery, and closing for December up 0.2% at 84.70 cents
a pound, the contract's highest finish in nine months.
The fibre is being boosted by ideas of sustained Chinese demand, despite the huge stockpiles the country has run up.
But arabica coffee
for May edged 0.05 cents lower to 145.45 cents a pound, providing little
comfort for growers, notably in Colombia, concerned about the halving in prices
from 2011 highs.