The softs led a general upswing in the agri commodity
complex on Friday amid a mix of positive fundamental factors as well as
technical buying and short covering.
Pre-holiday book squaring was also evident as traders
wind-down ahead of the holiday season. A
total of 65,164 lots of wheat changed on the CME at the time of writing
compared with 78,766 lots on Thursday.
Wider markets continue to adjust their outlook for 2014
following the decision by the Federal Reserve Wednesday to begin to taper its
Economic indicators also pointed towards a stronger pace of
recovery in the world's largest economy than initially anticipated.
The final reading of third quarter US GDP was raised to 4.1%
from 3.6% previously.
In addition consumer confidence amongst the 17-member
eurozone nations improved to negative 13.6 in December from negative 15.4 in
As a reflection the euro stood up 0.2% against the US dollar in late trade.
markets, the German DAX index closed up 0.6% and the French CAC a similar
The Dow Jones Industrial Average stood up 0.6% and
S&P500 Index 0.8% in late trading.
Elsewhere in the commodity complex gold was up 1.2% at $1,206/oz with Brent
crude up 1%.
A mix of technical and dip buying helped sugar futures recover further ground after
the March contract settled Wednesday at 15.89 cents a pound, the weakest close
for a spot contract since June 2010.
"We were long overdue a bounce statistically
speaking," said Tom Kujawa, co-head of softs at Sucden Financial.
A more positive fundamental outlook was seen from Czarnikow,
which projected the world sugar market to record a 2.1m tonne surplus this
season, far below the majority consensus.
Kingman, the influential Swiss-based analysis house, earlier
this month raised by 900,000 tonne to 4.5m tonnes its forecast for the 2013-14
The raw sugar contract for March posted a solid 1.9%
gain by the close Friday at 16.45 cents a pound.
For how long?
Despite the recent bounce some were questioning the
sustainability of the rally.
"There is little it seems out there in the ether
other than the generally low prices, large fund net short positions and holiday
season which is contributing to the bounce," Sucden's Kujawa said.
The firmer tone
in sugar lent support to the other soft commodities.
settled 1.4% in New York trade at 115.30 cents a pound and cocoa
1% at $2,819 a tonne.
In Chicago, soybeans
also enjoyed steadier sentiment, lifted by firmer front end price concerns the
current hot and dry weather in Argentina will lead to crop "stress".
"The strong jet stream remains south of the
Argentina corn and soybean belt for another 4 or 5 days", suggest Anne
Frick, senior oilseed analyst at Jefferies Bache.
"This means the showers of next Wednesday will be
important. If they do not produce [rain] well then stress will continue to
build on developing crops".
Stronger usage levels in the US have also been a supportive
factor, and are "preventing the price break that often occurs in
December," said Frick.
'Funds are long'
She added that the turning point "may not occur until
January," referring to the record large South American soybean crop and an
increase in US soybean plantings anticipated in the spring.
Despite the threats to Argentina's crop there are
suggestions rallies could run into pressure.
"Funds are long soybeans and we could continue to see
some profit taking before the end of the year," CHS Hedging said
Furthermore, the recent rejection by China of some 545,000
tonnes of US corn cargoes, on grounds of containing an unapproved genetically
modified variety of the grain, has prompted concerns of a similar action again
"There appears to be commercial pressure on soybeans to
reduce exposure in case China begins to cancel soybean cargoes, as it has with
corn," noted US Commodities Inc.
March Soybean futures stood up 0.9 % at $13.31 a
bushel by the close.
benefited from some Argentine weather related support.
"Soil moisture reductions and hot temperatures should
increase stress on the developing corn crop, said analysts at US Commodities.
That said, conditions in Brazil "remain mostly favourable
for the developing corn" with corn growing areas "forecast for mostly
dry conditions into the weekend with high temperatures in the upper 80s to low
The steadier tone was also attributed to a degree of fund
rebalancing ahead of year-end.
are short corn and will need to buy corn to rebalance fund positions and may
want to book profits prior to the end of the calendar year," broker CHS
corn for March delivery stood at $4.32 1/2 a bushel by the close, up 0.5%.
Wheat saw a more
subdued day with the front March contract up by a modest 0.4% by the close,
settling at $6.13 ½ a bushel – but at least closing higher, for only the third
time this month.
In part players were waiting for the last Commitment of
Traders readings to gauge "whether managed fund wheat shorts added or took
profits on large short", Richard Feltes at broker RJ O'Brien said.
The outlook for wheat has softened amid "negative
weekly wheat chart action and more weekend moisture headed for two-thirds of the
US hard red winter wheat belt, added Feltes.
Despite extremely variable weather patterns across the US
traders appeared unconcerned of the threat to the wheat crop.
"Very heavy snow has accumulated in the northern
Great Plains and 4-6 times the normal amount," noted Gail Martell of
Martell Crop Projections.
"Thick snow is considered beneficial insulating farm
fields from a deep penetrating frost."