PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:22 GMT, Friday, 20th Dec 2013, by Agrimoney.com
Evening markets: ag futures manage firm end to tricky week

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 asset purchases. 

US revival

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 November.

 As a reflection the euro stood up 0.2% against the US dollar in late trade.

 On share markets, the German DAX index closed up 0.6% and the French CAC a similar 0.4%. 

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%.

 Sugar 'overdue a bounce'

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 surplus.

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. 

Arabica coffee settled 1.4% in New York trade at 115.30 cents a pound and cocoa 1% at $2,819 a tonne.

 Soybean "stress"

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 other crops.

"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.

 Corn 'rebalance'

Corn also 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 90s Fahrenheit".

 

The steadier tone was also attributed to a degree of fund rebalancing ahead of year-end.

"Funds 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 Hedging said. 

Chicago corn for March delivery stood at $4.32 1/2 a bushel by the close, up 0.5%.

"Beneficial" snow

Wheat saw a more subdued day with the front March contract up by a modest 0.4% by the close, settling at $6.13 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.

'Thick snow'

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."

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