What will it take to get investors out of their grump with wheat?
Thursday provided some cause to question the idea of a declining
US wheat export performance which has been a key comfort to bears who have been
feasting on the grain, driving prices to a succession of contract lows in
Chicago, Kansas City and Minneapolis, the main US markets.
Yet still US futures fell, to further contract lows.
The US Department of Agriculture reported weekly US export
sales of 656,100 tonnes last week, plus 3,000 tonnes of 2014-15 crop the strongest
performance since September.
"Net sales for 2013-14
. were up 76% from the previous week
and 47% from the prior four-week average," the US Department of Agriculture
Furthermore, the figure was well ahead of expectations of at
best 400,000 tonnes.
"Corn and wheat markets have been begging for some good news,"
Darrell Holaday at broker Country Futures said.
"They received a small dose of it this morning as the export
sales were supportive."
'Brazil needs wheat
And there is reason to expect more demand from Brazil too,
with fears growing that neighbouring Argentina is going to offer only limited,
if any, exports.
Brazil's biggest flour milling group, Moinho Pacifico, said
on Thursday that it had received notice that an Argentine trader would not be
able to meet delivery of a contract for January.
"Brazil needs wheat now and will have to shop elsewhere if
Argentina can't deliver," Paul Georgy at Chicago-based broker Allendale said.
Minneapolis-based Benson Quinn Commodities said: "Difficulties
should push Brazilian interest back to US hard red winter wheat."
Prices drop anyway
OK, Strategie Grains forecast a 2% rise in European Union
soft wheat output next year, but that was hardly unexpected, with sowings up by
(Besides, the UK trimmed its estimate of the latest crop by
Yet still wheat, besides spending much of the day in
positive territory, could not end there, closing down 0.3% in Chicago at $6.10 ¾
a bushel, a fresh contract finishing low.
It was the lowest close for a spot contract in 18 months, as
it was for Kansas City hard red winter wheat for March, which ended down 0.2%
at $6.52 ¼ a bushel.
Paris vs Chicago
One factor working against US prices was a tumble in exports
themselves, by 33% week on week to 376,500 tonnes, which played to concerns
about capacity constraints, as exports struggle with huge volumes of soybean shipments
(1.57m tones) and corn volumes (693,400 tonnes).
The European Union again outshone its competitor across the
Pond, issuing export licences for a mammoth 818,000 tonnes this week, which
helped steady Paris prices.
There, the January lot closed up 0.4% at E208.50 a tonne, while
London wheat added 1.2% to £164.50 a tonne for January, lifted also by the UK
Furthermore on the negative side, the Western Australia crop
received an upgrade, boosting the prospect of competitiveness from that country
which also won a high-profile Iraq tender for 350,000 tonnes.
And technically, US wheat futures appear currently beyond redemption.
"Technical momentum in wheat continues to add to ideas that
plenty of supply is available and the matter that US wheat is not competitive
on the higher profile tender," Benson Quinn said.
"All three wheat markets [Chicago, Kansas City and
Minneapolis] have experienced multiple days of speculators willing to sell into
"New lows for the move have been a daily occurrence, which
allows the weak technical momentum to build."
It may little have helped the technical picture that wheat
futures traded an outside day, ending lower, nearly at their intraday lows in
something of the opposite seems to be occurring, with chart signals keeping the
oilseed in investors' good books, despite some poor export sales data.
The US sold 415,500 tonnes of soybeans for 2013-14 last week
a low for the marketing year and well below expectations of at least 700,000
Furthermore, the figure factored in a big decrease reported
for "unknown destinations", which might have been expected on another day to
trigger concerns that the cancellations of Chinese orders of US soybeans have
begun, as expected in the face of a strong and looming South American crop.
"There appears to be commercial pressure on soybeans to
reduce exposure in case China begins to cancel soybean cargoes, as it has with
corn," US Commodities said.
'Beware of the GFS
Still, in the oilseed's favour was that the actual exports
of 1.57m tonnes included 900,000 tonnes to China, helping support the idea that
even if cancellations do come through, there will be relatively little to
Furthermore, ideas of a huge South American crop are coming
a little into question with heat and dryness in Argentina.
Sure, "the GFS weather model
for the Argentine production
areas indicates a wetter pattern after Christmas," Country Futures' Mr Holaday
But Commodity Weather Group urged investors to "beware of the
GFS model on Argentina".
"Argentina is in for net drying over the next two weeks,"
Richard Feltes at RJ O'Brien said.
Soybeans for March added 0.4% to $13.19 a bushel, nearly regaining
their 10-day moving average.
For corn, the Argentine weather was seen as bigger, if not
huge, threat with numerous mentions of crop "stress".
"Argentine corn areas are forecast for temperatures in the
90s to 100s Fahrenheit with light scattered showers seen late this week into
early next week," CHS Hedging said.
"Soil moisture reductions and hot temperatures should
increase stress on the developing corn crop."
US Commodities said, exactly, the same: "Soil moisture
reductions and hot temperatures should increase stress on the developing corn
Combined with solid weekly export sales of 827,000 tonnes,
ahead of forecasts of 550,000-750,000 tonnes, and ideas of speculators closing
short bets in corn in favour of shorts in wheat, corn for March closed up 1.3%
at $4.30 ½ a bushel.
'Make good some
Although grains' underperformer, wheat, failed to buck up
its act despite decent trade news, soft commodities' latest dunce, raw sugar, did closing up 1.6% at 16.15
cents a pound for March, helped by Indonesia's issue of import licences and
plans to stockpile 300,000 tonnes.
"We are confident that raw sugar prices will be able to make
good some ground again in 2014," Commerzbank said, without expanding on its
However, there are plenty of commentators who have cautioned
against betting on values falling too far below 16.00 cents a pound, a level expected
to spur end user interest.
But robusta coffee
fell 0.9% to $1,684 a tonne in London for March delivery, on ideas of supplies
in Vietnam freeing up, and with Macquarie the latest to caution that the "unusual
and sharp rally" prices looks unsustainable, in being based on withholding by
producers with a huge crop to sell.
"We believe the sharply inverted robusta futures forward
curve is mispriced and will likely soon attract more stocks onto LIFFE, as well
as greater selling from Vietnam, which after all nearly finished with a harvest
that could be a massive record crop," Macquarie's Kona Haque said.
"At the first signs of physical selling we would expect the robusta
market start to sell-off sharply and bring down with it arabica."