If South American weather was all corn investors had to think about, the grain might have fared
The European weather model, if not the GFS, backed off the idea
of widespread rains next week for Argentina, where crops are battling with a dry
spell expected to continue into early next week.
"The early Thursday morning GFS again continues to show
significant showers and thunderstorms over much of central eastern and northern
Argentina, as well as eastern Paraguay and south east Brazil for the six-to-10 day
outlook," weather service WxRisk.com said.
"However, the European model is significantly drier and
pulls all the rain out of central and eastern Argentina in the six-to-10 day,"
if leaving southern Brazil, where crops also need precipitation, in the line of
fire for up to four inches of rainfall.
But corn investors did have plenty else to factor in.
There was an upgrade by Conab, the Brazil crop bureau, to
its estimate for the domestic harvest to 76m tonnes, up from the record 72.7m
tonnes in 2012-13, and well above the US Department of Agriculture's guess of
The positive point to central Brazilian growers of the
current rains is that they will moisten soils ahead of the sowing of the
second, safrinha, crop, seeded on fields cleared by the soybean harvest, and which now accounts for roughly half the total
domestic harvest of the grain.
The USDA, whose data set world benchmarks and which on
Friday revises crop estimates in its monthly Wasde report, "historically will
follow the Brazilian estimates", US Commodities said.
(The broker also noted that "Brazil corn exports have now
exceeded the US exports in the world market", as Agrimoney.com revealed on
Furthermore, US weekly corn export sales, once again, fell
below most trade expectations, coming in at 160,000 tonnes.
At broker RJ O'Brien, Richard Feltes said: "September-to-February
US corn exports are on track to be lowest since 1990, prompting analysts to
look for another cut in 2012-13 US corn exports tomorrow," in the Wasde report.
"There are precedents for surges in March-to-August US corn
exports, in 2008-09 and 2009-10, but both years had lower corn prices than
Then there is the weakening technical appeal of Chicago's
March corn contract to factor in, with the lot - in falling 1.4% to $7.12 ¾ a
bushel with half an hour of trading to go - comprehensively surrendering its
50-day moving average.
It got most of the way towards its 200-day line – the last
of the major moving averages it remains above.
'Struggled more than
"The corn market is the one that has struggled more than
expected," Darrell Holaday at Country Futures said.
"We anticipated the market would move up to $7.50-a-bushel
area, and it went to $7.46, and we are not surprised that the market has worked
"But we are a little surprised at how easy it has moved down."
That said, it was a difficult day for many risk assets, after
Mario Draghi, president of the European Central Bank, warned that the strength
of the euro could pose a threat to the central bank's inflation outlook.
The euro tumbled more than 1% against the dollar, which added 0.6% against a
basket of currencies, making dollar denominated assets, such as many
commodities, less appealing as exports.
The CRB commodities index dropped 0.6%, while amidst the
fresh uncertainty shares struggled
in Western markets too, closing down more than 1% in London.
It took a special story to resist the selling pressure,
which soybeans had, in the South American weather outlook and in bumper US
weekly export sales.
The came in at 1.67m tonnes – more than twice as much as
some analysts had expected, and largely to China, the country which made that
spate of cancellations last month.
"Export sales this morning were solid on soybeans," US
At Country Futures, Darrell Holaday said: "Over 869,000 tonnes
of old crop and over 770,000 of new crop were sold last week. Big numbers."
Too big perhaps, given depleted supplies?
"We don't really see how US soybeans will be used to meet
all of the old crop obligations," he said, cautioning of a "very high likelihood
that there will be cancellations or movement to new crop".
Brazil vs US
OK, it did not all go soybeans' way, with Conab lifting its
forecast for Brazil's crop to 83.4m tonnes, from 82.7m tonnes.
That would be enough for exports of at least 36.8m tonnes,
Conab said, raising its estimate from 36.4m tonnes last month, and signally eclipsing
the 36.6m tonnes that the USDA has down for US shipments in 2012-13.
Brazil's outcome "depends exclusively on logistics, above
all on ports and freight price, because international demand, especially from
China, remains quite adequate", Conab report said.
Still, Chicago soybeans had enough resilience to stand
unchanged at $14.87 ½ a bushel for March delivery.
Not so Chicago March wheat, which lost 0.6% to $7.58 ¼ a
bushel, a performance which at least allowed it to rebuild further its premium
The weekly US figure was OK, at 300,000 tonnes, within the
range of market expectations.
And "rumours continue that Russia/Brazil could import US
soft red winter wheat as import tariffs are removed," US Commodities said.
Agrimoney.com revealed that a shipment of US soft red winter
wheat has already been sold to the UK, for the first time in decades.
Still, more mixed for prices was talk of some moisture for
dry US winter wheat areas.
"The midday GFS is providing good chance of moisture in
Nebraska, eastern Kansas, eastern Oklahoma this weekend and early next week,"
Mr Holaday said.
Still, the "south west hard red winter wheat areas will see
minimal moisture from the system", and. the forecast beyond February 12 for the
Plains is dry".