How much more are investors willing to bet on the Ukraine
Not much, to judge by financial market reaction on
Risk assets were back in demand as investors took more
notice of decent Chinese economic growth, of 7.4% in the first quarter, that
Ukraine tensions, with shares rising
0.7% in London and 1.6% in Frankfurt, while standing 0.8% higher on Wall Street
in late deals.
Many industrial commodities had a better day of it too, with
nickel rebounding to a 14-month
high, and copper adding 1.2% to $6,619
a tonne in London.
EU accord tested
Indeed, in a reverse of the last session, the CRB
commodities index rose, while grains struggled, in particularly wheat, which has become to a large
extent a barometer of worries about Ukraine, a major producer of the crop, and
part of a Black Sea region crucial for supplies.
Certainly, the prospect of European sanctions against Russia
waned as many corporates, such as Germany's BASF, Italy's ENI and UK-based BP,
which have interests in the country cautioned over the threat of a backlash
With trading this week foreshortened by the Good Friday
holiday in many Western countries, many investors took the opportunity to bank
profits, sending Chicago wheat for May down 2.0% to $6.88 a bushel, just above
its 20-day moving average.
The better-traded July contract shed 2.0% to $6.95 ¼ a
There was also some talk of weather relief too, in terms of frosts
this week proving less damaging for southern Plains winter wheat seedlings than
had been feared, and with rain on the way to ease drought concerns.
An event forecast for the weekend "has the making of a
change in longer-range weather pattern with potential for near-normal to normal
rains seen in the extended outlook through mid-May", Benson Quinn Commodities
However, the broker acknowledged the "lack of confidence in
the weather forecast", and there was certainly no easy consensus over rain
Darrell Holaday at Country Futures said, for instance, that
weather models "are still not generous with any rain in the western hard red
winter wheat areas".
Weather service MDA, meanwhile, said that the six-to-10 day
outlook was drier for central and south western areas of the Plains wheat belt,
and the 11-to-15 day outlook drier in the east.
And before then, well, while parts of the southern Plains
will see rains this weekend, which "will improve moisture a bit for wheat…
significant reductions in drought and drop stress are not anticipated".
Turning to the extent of crop damage to this week's freeze,
MDA said that "some spotty winterkill is occurring on jointing wheat in Ohio",
as of early today.
Indeed, "soft red winter wheat in the Ohio River Valley was
exposed to temperatures in the high 20s Fahrenheit last night," CHS said.
As for hard red winter wheat, as traded in Kansas City, as
opposed to soft red winter wheat traded in Chicago, "agronomists are estimating
hard red winter wheat production 1% lower after suffering freeze damage", the
In a potential sign of fund involvement in today's 2% fall
in Chicago soft red winter wheat, Kansas City hard red winter wheat, far less
popular with speculators, lost a more modest 1.4% go $7.65 ½ a bushel for May,
and 1.5% to $7.60 a bushel for July.
'Dryness continues to
Paris wheat for May did better still, in shedding 1.2% to E218.75
a tonne, receiving some support from growing concerns over dryness in the
European Union too.
Toepfer pegged the German crop, the EU's second largest, at 23.95m
tonnes, down 920,000 tonnes year on year, cautioning that recent rains had
refreshed northern grain growing areas, farms further south and west were still
The Toepfer estimate took some of the wind out of the sails
of a 100,000-tonne upgrade, to 24.74m tonnes, in the estimate for the crop by
the German farm co-operatives association.
And MDA highlighted that "dryness continues to build across
north central Europe", including parts of France, Hungary, Italy and Spain as
well as Germany.
While some of these areas will receive rains next week, "dryness
will continue in western Germany and north eastern France", much of which has received
20% of normal rainfall or less since late February.
Back in Chicago, there was less debate over the weather
outlook for the Corn Belt, and the prospect of higher temperatures to boost corn germination prospects and
"Models have continued to indicate much warmer conditions in
the Corn Belt next week," Country Futures' Darrell Holaday said.
"There is a strong indication that corn planting could
explode next week and that has resulted in a lack of buying in the corn."
CHS Hedging said that "favourable extended weather forecasts
are limiting corn price advancements," while Benson Quinn Commodities said that
"trade is looking for corn planting to jump to 40% by end of April".
The curve ball to the corn pit was on the demand side, with
official data showing US ethanol
production last week soaring by 43,000 barrels a day, or 4.8%, week on week to
939,000 barrels a day.
That was one of the fastest rates of growth on record, and made
last week comfortably the biggest this year for US ethanol production.
Meanwhile, ethanol stocks tumbled 455,000 barrels to 15.95m
barrels, rather than growing, implying demand for this extra production.
Still, any support to corn was diluted when futures in ethanol
themselves tumbled, with investors apparently focused on the production rather
than the stocks, with Chicago's June contract dropping 2.9% to $2.079 a gallon.
"This has certainly pressured corn," Mr Holaday said and,
indeed, corn futures for May closed down 1.2% at $4.97 ½ a bushel, with the better-traded
July contract ending 1.2% down at $5.03 ½ a bushel.
Contract highs in
But bears proved unable to savage soybeans, which closed up 1.2% at $15.18 ¼ a bushel for May, the highest
close for a spot contract in nearly nine months, and the highest finish ever
for the contract itself.
The July lot gained 1.4% to $15.08 ¾ a bushel, ending above
$15 a bushel for the first ever for the contact itself
The strength was evident in soymeal too, in which the May lot ended up 0.7% at a contract high
of $491.00 a short ton, ditto the July contract, which finished up 1.1% at
$479.80 a short ton.
While soyoil, the
other major soybean processing product, finished nowhere near contract highs,
it did outperform, in adding 2.0% to 43.93 cents a pound for July delivery,
helped by rival palm oil, which
finished up 0.8% at 2,684 a tonne in Kuala Lumpur.
Soybeans are being helped in particular by the squeeze on
the US balance sheet, which looks even tighter after Tuesday's data showing the
US crush last month far bigger than thought.
crush reached a record high level in March despite the low supplies and the
need to sharply curtail usage," broker Jefferies Bache said.
CHS Hedging said: "The US crush pace runs well ahead of the
needed pace to reach the current USDA annual estimate of 1.685bn bushels.
"A nearly unprecedented slowdown will need to be seen in the
next five months [to the end of 2013-14] to resolve the US balance sheet."
Benson Quinn Commodities said that "private analysts are
lowering estimates for US soybean ending stocks to near 100m bushels from the USDA's
135m estimate in last week's Wasde report".
And there were other support factors too, with China's
economic data a tonic for bulls, given that the country is the top importer of
soybeans, and a major buyer of palm oil too.
Ideas for Argentina's soybean crop are being downgraded
thanks to recent heavy rains, which are seen causing crop damage, besides slowing
And then there is El Nino to factor in too, seen as a big
threat to palm oil production, so boosting demand for soyoil.
In fact, Barclays on Wednesday flagged a brighter outlook
for palm oil prices, citing El Nino and decent demand from China and India, in
a note which put an "overweight" rating on shares in palm oil-to-sugar giant Wilmar
Among soft commodities, raw
sugar staged a rebound, closing up 2.2 at 16.92 cents a pound for New York's
At Price Futures, Jack Scoville noted that "there are
worries that El Nino is starting and that it would reduce rains in India, but
increase rains in Brazil," potentially slowing the 2014-15 cane harvest
currently in its early stages.
But arabica coffee
proved unable to pull out of its decline, adding losses of 3.2% to the last
session's 6% tumble, and closing at 188.85 cents a pound for July delivery
Technical factors were again blamed, after the contact's
failure to breach a level of 210 cents a pound which had been seen as a key
chart point, with pre-weekend profit-taking seen as a factor too.
'Coffee price is embattled'
"From a chart perspective, the coffee price is thus
embattled, which also suggests a further price decline in the short term given
the substantial overhang of speculative long positions," Commerzbank said,
viewing futures as likely trading at 150-200 cents a pound for now.
Still, the bank added that "it is probably coming too late
to bring about any major improvement in the prospects for this year's Brazilian
crop", which has been badly hurt by drought.
This means that, if downbeat estimates for Brazil's
production are realised, "the price could become established at above 200 US
cents due to the expected significant supply deficits".