It was hardly a busy day on agricultural commodity markets, with
pits closed in the US for President's Day holiday.
But what trade there was was broadly positive, especially in
London white sugar futures, which rose
1.6% to $497.90 a tonne, boosted by ideas that its New York-listed peer, raw
sugar, may make a strong, technically-inspired return from holiday.
Data from the US Commodity Futures Trading Commission, the US
regulator, late on Friday showed speculators hiking their net short position in
raw sugar to more than 25,000 contracts, a bearish positioning beaten only once
since 2006, when data start,
And that was in September 2007, when it preceded a massive
short covering wave, and a shift to a net long position of more than 63,000
contracts by the end of October 2007.
'Thrown in the towel'
There are ideas that the same may happen this time.
Nick Penney, at Sucden Financial, said that while the sugar
market "seems to have thrown in the towel", as evident in the positioning, and
a reflection of ideas of ample supplies of the sweetener, the increase in the
net short position "should sound a note of caution" to bears.
Luke Mathews, at Commonwealth Bank of Australia, went one
further, saying that "a short-covering bounce remains on the cards given the
massive short position accumulated by speculative investors".
In cocoa, speculators
retain a net long position, if a decreasing one amid fears, as highlighted by
Rabobank, that selling by West African producing countries is to weigh on
prices for the short-term.
London May cocoa closed down 0.6% at £1,409 a tonne, only £1
above an intraday low which represented the lowest level since April last year, and despite a weak pound (of which more below).
Buyers step in
As for grains, what news there was proved sufficient to help
positive closes, with Paris contracts continuing to gain support from ideas
that French supplies won the lion's shares, if not all, of an Algerian purchase
last week of some 400,000-500,000 tonnes of wheat.
And this after latest weekly European Union wheat export
figures came in at firm 420,000 tonnes.
Indeed, "markets have stabilised as consumers aware of tight
global supplies and new crops yet to be made did not want to miss the
opportunity to step in and buy", traders at a major European commodities house
"The weakness of the euro has helped support EU export
Paris wheat for March closed up 0.6% at E245.75 a tonne.
And London wheat for March matched it, in adding 0.6% to
£205.50 a tonne, although it might have been expected to have done better,
considering a fall in sterling, which fell to a seven-month low against the
dollar, and approached a 15-month bottom against the euro.
The declines came against concerns over the UK economy, which
were stimulated when Bank of England policymaker Martin Weale said the pound
may need to weaken further to protect growth.
closed down 0.2%, contrasting with a 0.5% gain in Frankfurt stocks and the 2.1%
jump in Tokyo shares, which are reacting better to a weaker currency, the yen.
Furthermore, fundamentals are behind London wheat too, with
a low rate of sowings, thanks to poor weather, raising fears that this year's
UK crop may prove significantly lower than last year's.
Strategie Grains is forecasting a 12.4m-tonne UK crop, "with
many in the trade working on a smaller number still", the commodities house
Furthermore, "what is planted is in variable condition
making forward trade commitments difficult".
Selling pressure from hedging by farmers, bitten from
20-year low yields in 2012, is certainly weak, as they remain cautious over
selling in advance crop they have not managed to get into the ground.
Some investors may be disappointed by the performance of
Paris rapeseed too, which closed up
only 0.1% at E467.50 a tonne for March, despite ideas that rains in Argentina
over the weekend meant to refresh crops of rival soybeans were a little
"One could make the argument that the rains over central, eastern
and northern Argentina were somewhat below expectations," weather service
"There were some areas which did get a a significant amount
of rain, but it was not the uniform widespread coverage that the models were
That said, the rain event isn't over yet, with the latest
forecast for a "band of heavy clouds now over the northern third of Argentina
to drop more significant rain over the north east and far north west portions
of Argentina today into Tuesday".