PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 21:13 GMT, Thursday, 6th Mar 2014, by Agrimoney.com
Evening markets: rapid US exports lift corn, soybean futures

Bull runs in grains need feeding with a daily supply of price positive news, traders say.

Just when it looked like one source of market boosting updates was drying up, with the Crimea crisis demoted to a back seat, a couple of others appeared.

The main one was some strong US export sales data for last week.

CHS Hedging said that "foreign demand refuses to slow down, sending corn and soybean prices to surprisingly high levels".

The data were good wheat, at 556,100 tonnes, of old crop, "up 52% from the previous week and 10% from the prior four-week average", the US Department of Agriculture said, with 44,000 tonnes for 2014-15 to.

That was towards the upper end of market expectations for a combined 350,000-650,000 tonnes.

For corn, sales reached 1.52m tonnes for 2013-14 -"up 81% from the previous week and 35% from the prior four-week average" - plus 165,000 tonnes for next season, well ahead of expectations of, at best, 1.0m tonnes for both seasons together.

Give us our beans back

For soybeans the sales - at 773,000 tonnes of old crop plus 257,000 tonnes of new crop – came in at the top end of market expectations, which had been swollen by some individual announcements in recent days, but still signally failing to include much unexpected in the way of Chinese cancellations.

Many investors have been expecting Chinese buyers to rush to cancel soybean orders from the US, with Brazil's harvest looking ample (if not as large as was once hoped) and offered cheaper.

And they need to, if the US is not to run dry of the oilseed by the end of the marketing year, with US soybean export commitments for 2013-14 more than 3m tonnes ahead of those the USDA has pencilled in.

That means that the US needs net cancellations of roughly 118,000 tonnes of soybeans a week from now until the end of the season to meet its forecast.

Tortured soy balance sheet

So little wonder that the odds rose that the USDA will upgrade its forecast for soybean shipments, when it on Monday releases its monthly Wasde crop report.

In fact, "today's report ups odds that the Wasde will increase export estimates for both corn and soybeans," Richard Feltes at RJ O'Brien said.

And it is not as if estimates for domestic consumption can readily be reduced to make up for the extra export demand (not that this is such an issue for corn, of which plenty remains).

"Don't overlook processing margins for soybeans and corn ethanol which remain well above average levels," Mr Feltes said.

El Nino threat rises

And a second factor supporting prices too was the shift by official US meteorologists to forecasting an El Nino weather phenomenon as a 50:50 change come northern hemisphere autumn or summer, rather than a possibility.

For the first time since October 2012, the Climate Prediction Center switched its status to El Nino watch.

Not that El Ninos are all bad for crop production. In the US, for instance, they typically mean a cooler summer, which is beneficial for corn yields.

But they are associated with abnormally dry weather in the likes of South East Asia - which is already experiencing dryness, sending palm oil prices to 17-month highs – and with a lack of rain in Australia's east coast, a negative for production of the likes of canola and wheat.

'Bearish sign'

All that undermined ideas around earlier that grain markets could be on for a negative day, with US Commodities saying earlier on that funds "have likely wrapped up their beginning-of-the-month purchases".

There are other negative signs too, such as falling levels of live futures contracts, which Agrimoney.com noted earlier, and were flagged by Darrell Holaday at Country Futures too.

"Numbers that indicate that most of buying yesterday was short covering as the open interest in all of the grains and oilseed contracts were lower," Mr Holaday said.

"That is generally a bearish sign as it indicates we were not seeing a lot of new buying at the higher levels."

Farmers sell

Furthermore, "we are continuing to see weakness in the US basis, a definite sign that funds have been the primary driver in the futures trade," he said.

The weak basis tallies with an observation by CHS Hedging that "there has been a notable amount of producer selling on the rally this week".

However, with the strong exports indicating that buyers are active even at these prices, corn for May closed up 1.8% at $4.91 a bushel, the highest close for a nearest-but-one contract in six months.

Buoyant beans

Soybeans for May ended up 1.2% at $14.38 a bushel, the best close for nearest-but-one contract in seven months.

The rise was underpinned by a 2.5% jump in soyoil for May, to 44.49 cents a pound, which was in helped by a 1.2% rise to a 17-month closing high of 2,867 ringgit a tonne in the price of rival vegetable oil palm oil in Kuala Lumpur.

Traders believe that Malaysian palm oil output last month could have fallen to 1.31m tonnes, allowing inventories to drop to 1.8m tonnes, from 1.935m tonnes in January, a poll showed.

There also remains talk that the US may renew a tax credit for biodiesel, made mainly in the country from soyoil.

Spring wheat springs

As for wheat, it lagged a bit in adding a modest 0.5% to $6.46 a bushel in Chicago for May.

Still, it had strongly outperformed corn and soybeans up to now this week, on Ukraine fears.

There remains some fundamental reason to buy, with Commodity Weather Group forecasting at least a further four weeks of dryness in the southern Plains US hard red winter wheat belt, which official data restated on Thursday is still largely in drought.

Nonetheless, it was a different weather note which sent Minneapolis spring wheat up 0.9% to $6.88 ¾ a bushel for May, with official forecasters saying that North American snow cover is the third highest since the 1966 record, beaten only by 1969 and 1978.

That bodes ill for spring wheat sowing progress in the northern US heartland, and Canada, when the snow melts…

Indian support

Among soft commodities, arabica coffee fell with rains in Brazil, besides the return of Brazilian producers from the Carnival, bringing fresh selling pressure.

New York's May contract fell 3.4% to 195.55 cents a pound, allowing London for May, which underperformed in the last session, to reduce its discount by adding 0.9% to $2,083 a tonne.

Raw sugar for May fell, but not as much as arabica beans, ending down 0.5% at 18.32 cents a pound.

"Apart from the fear of drought-related crop shortfalls in Brazil, reports from India recently have also lent buoyancy to the price," Commerzbank said, noting an Indian Sugar Mills Association estimate that the country's sugar production between October and February totalled 18.8m tonnes, down 10% year-on-year.

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