It was only three weeks ago that traders were pondering
whether soybean futures had the strength
to break back above $13.00 a bushel.
On Tuesday, the best-traded May contract touched $14.00 a
bushel for the first time for a nearest-but-one contract in five months.
The lot couldn't hold there, ending at $13.87 ¼ a bushel, up
0.9% on the day.
But it might have done had there been fewer doubts over a
huge order of US soybeans, of 568,000 tonnes, unveiled by the US Department of
Agriculture for 2013-14, and thought to be by Chinese buyers, the world's top
'A lot of confusion'
"The soybean complex was caught a little off-guard" by the
announcement, Darrell Holaday at Country Futures said, adding that "there is a
lot of confusion" about it.
"Obviously, the market does not believe the report.
"More importantly the market believes there is more to the
story or it would be much higher on the day," Mr Holaday said, adding that his
conversations showed that "everyone has the same confused reaction to the announcement".
Cause for doubts
The scepticism comes against a longstanding backdrop of
ideas that Chinese buyers are poised to cancel orders of US soybeans and switch
their orders to South America, responsible for taking May soybeans below $12.50
a bushel last month.
South America now looks certainly on for a strong harvest,
even at the estimate downgraded by Oil World on Tuesday.
Is the 568,000 tonnes perhaps some re-announcement of an existing
order, with China having a habit of officially unveiling large orders on state
visits to the US, deals fulfilled far later?
If the order is
genuine, the US balance sheet looks squeezed indeed.
"Thus far, cancellations have been limited," said Anne Frick
at broker Jefferies Bache.
"Currently, export commitments are 1.588bn bushels," excluding
Tuesday's order, "versus the USDA export forecast of 1.510bn bushels" for the
whole of 2013-14, to the end of August.
"If shipped, ending stocks would fall to 72m bushels, below
what is considered pipeline supplies," and before this order is factored in.
"Eventually the switch to South America will take place and
traders can better assess the US balance sheet.
"However, until [the market knows] how much is returned to
the balance sheet, it will be difficult to put sustained pressure on the market."
'Traffic woes got
Still, bulls have some element for hope, given the wet
weather in Brazil which has hampered further transport of soybeans to port,
besides raising some issues over the quality of the crop.
Brazil's transport infrastructure is notoriously creaky,
seen as a reason why Chinese buyers have not scrambled to switch origins.
"Traffic woes on Brazil's 'soybean highway' in Mato Grosso
got much worse over the weekend when a dam broke sending torrents of water
cascading over highway BR-163… leaving only one lane open for traffic," Michael
Cordonnier at Soybean and Corn Advisor said.
"This new problem along the highway could not have come at a
worse time as the harvest ramps up and thousands of trucks use this highway on
a daily basis hauling grain to southern ports and bringing back fertilizers and
"Delays getting through this section of the highway will be
futures, which have been a big support for soybeans, recovered too to close up
1.1% at $453.70 a short ton in Chicago for May delivery, the contract's best
finish ever, and the highest close for nearest-but-one lot in seven months.
'Genuine trend reversal'
In New York, coffee
and sugar, which have been supported
by dryness in eastern Brazil, struggled to maintain their upward momentum.
Raw sugar at least had some hook on which bulls could hang
their hat, with FO Licht forecasting that prices would probably climb to 20
cents a pound because of Brazil's dryness, and betting on a world production
deficit in 2014-15.
Commerzbank also said it "tended towards the expectation" of
a shortfall, adding that it saw this month's jump in prices "as a genuine trend
Still, Sucden cautioned that "it seems the market is such
that the sugar fundamentals will probably not be the key driver in the short
term", with technical factors such as short-covering by funds more important.
Raw sugar for May closed unchanged at 17.68 cents a pound,
but not before hitting 18.08 cents a pound, the highest for a nearest-but-one
contract in three months.
Coffee vs cotton
Arabica coffee for May eased 0.1% to 176.25 cents a pound,
although itself only after hitting a 16-month high of 181.25 cents a pound.
Buyers' attention focused on robusta coffee, which has been made to look particularly cheap by
arabica's rally, and closed up 0.7% at $2,017 a tonne for May delivery, the best
close for a second-in contract for nine months.
Still, both contracts did better than cotton, which closed down 2.2% at 87.35 cents a pound for May
delivery, having in the last session broken above 90 cents a pound for the
first time in months.
The decline was attributed by Keith Brown, at broker Keith
Brown & Co, to the uncertainty over China's economy evident in the fall in
the remninbi to a six-month low against the dollar, and in the 2.0% fall in
Shanghai stocks overnight.
China is the top producer, consumer and importer of cotton.
'Concerns of winterkill'
Back in Chicago, wheat
had a mixed session, as the cancellation by Egypt of a 110,000-tonne order of
US supplies did battle with forecasts of further cold American weather,
threatening winter wheat seedlings.
"A snow system is moving through Nebraska as temperatures in
the Corn Belt stay mostly below freezing," CHS Hedging said.
But in wheat terms, the trouble is the areas where there is
no snow to protect seedlings against frost damage.
"The return of cold weather has once again sparked concerns
of winterkill," the broker said.
US Commodities said that "extreme cold temperatures are
forecast for the Midwest, with soft-red winter wheat at risk after the recent
warm spell melted protective snow cover".
Furthermore, "limited rain will allow soil moisture to
decline and showers are needed before spring to prevent significant stress once
crops break dormancy".
Nonetheless, with concerns over demand at these higher
prices, investors proved reluctant to inject extra weather premium, and sent Chicago
soft red winter wheat for May up only 0.2% to $6.18 a bushel.
Still, that was the contract's highest close this side of
Christmas, and signally took it, just, above its 75-day moving average for the
first time in three months.
Paris wheat for May edged 0.3% higher to E199.00 a tonne.
Corn did better
at cementing gains in Chicago, closing up 0.8% at $4.61 ¼ a bushel for May, boosted
by cold concerns too, although this time in a logistical sense.
"As US corn export sales continue their impressive pace,
river logistics seem to be deteriorating." CHS said.
"A return of the polar vortex has renewed concerns of ice
restricting barge traffic, and an oil spill on the lower Mississippi has export
terminals concerned that corn origination for export may slow down
The rain in western Brazil is also raising some concerns, in
slowing sowings of safrinha corn with the ideal planting window now closed - although
the moisture will help crops already seeded.