Technical analysts had warned of a potential break-out by
corn and soybean futures, which had traded as they ran into congestion on moving
If US Department of Agriculture data last week had initially
suggested that the trend would be for an upward move, sharp losses in Chicago
on Monday, adding to those in the last session, made that move look like a
Once Chicago's November soybean contract traded beneath its
recent low of $15.04 a bushel, investors pushed lower to find the next floor,
and found very little resistance for another $0.20 a bushel or so, moving into
the $14s a bushel for the first time in months.
"Soybeans traded down to fill a portion of the gap left
between the trade dates of July 3 and July 5," Benson Quinn Commodities said.
'Unloading their long
Indeed, the November lot ran down to $14.85 ¾ a bushel,
actually the lowest for the oilseed on a continuous chart since late June
before recovering some ground in late deals.
The contract stood 1.9% lower at $14.93 a bushel with 20
minutes of trading to go in Chicago.
The lot got into a bit of a vicious circle as selling
worsened its technical picture which only encouraged further selling by funds and
speculators which still retain a hefty net long position in the oilseed, by
"The fundamental support from tight row crop supplies has
not provided enough support to offset the effects of long liquidation," Benson
US Commodities said: "Funds are now unloading their long
"As of last Tuesday funds were long 177,000 contracts of
soybeans and long 260,000 contracts of corn. It is this long position that is
short-term pressing the market lower."
At RJ O'Brien, Richard Feltes said it was also "interesting
to note that several crop scouts believe the USDA is still understating the US
soybean yield", even after an upgrade last week.
After all, upgrades in October USDA Wasde reports have a
habit of leading to others,
Still, it was actually corn
which ended up faring worse after soybean investors at least managed to pull some
bullish sentiment from weekly US export data.
Cargo inspection data showed the US shipping 57.8m bushels
of the oilseed in the week to last Thursday, up from 45.7m bushels the week
before, and 45.3m bushels a year ago.
For corn, cargo inspections came in at a soft 17.2m bushels,
down a touch week on week, and 4m bushels year on year.
US vs South America
The data touched a raw nerve, coming amid widespread rumours
of yet more imports by US livestock feeders of South American corn, and this
time from Argentina instead of/as well as Brazil.
At Allendale, Paul Georgy, noting speculation of further
imports of 1m tonnes, flagged that US corn was priced at $7.78 a bushel in
Toledo, $8.39 a bushel in the Gulf and $7.08 a bushel in Argentina.
"It is pretty easy to see why corn is being brought in," he
"They normally pull grain from the eastern Midwest which is one
of the hardest hit areas by the US drought."
Benson Quinn said: "The fact that feeders are securing
coverage in the corn market by importing South American supplies is a burden on
the corn market."
Corn for December stood 2.1% lower at $7.36 ¾ a bushel.
In fact, wheat's US export data were the worst, reaching a
miserable 7.0m bushels, down nearly one-half week on week, and more than one-half
year on year.
And decent rains across the southern Plains over the weekend
added to pressure, improving conditions for sowings of winter crop.
Still, the grain continued to gain support from the worsened
conditions in Australia, where "local crop concerns may again come to the
fore once after much of New South Wales received its coldest consecutive
October mornings in over 10 years over the weekend," Commonwealth Bank of
Australia's Luke Mathews said.
"Frosts at this time of the year have the potential to
cause significant yield losses to wheat crops."
'Rain outlook is poor'
Furthermore, "despite light showers over the weekend,
inadequate October rainfall means Western Australia yield potentials have
trended lower over the past fortnight.
"The rain outlook is also poor."
Wheat for December limited its decline to 1.1% to $8.47 ½ a
bushel in Chicago.
In Paris, wheat edged 0.1% higher to E259.00 a tonne, while
London wheat for November edged 0.3% lower to £199.00 a tonne, as traders
digested estimates that the UK would return to being a net importer of the
grain for the first time in 11 years.
The generally lower trend, by the way, does not imply that all
hope for the crop rally is lost, and with Tuesday of course the traditional day
of turnarounds in Chicago.
The USDA flagged the potential for renewed upward momentum in soybean prices, once harvest pressure eases.
Separately, broker Doane said that while "heavy farm selling
tied to harvest will continue to pressure grain futures, traders are monitoring
weekly harvest progress reports and cash basis trends in the countryside for
signs the farmer selling is abating and that the balance of the harvest may be
going into storage rather than into market channels".
It also flagged that "attention is building on ominous
weather forecasts for the 2013 outlook for crops in the US Northern Plains and
Canada where it's getting quite dry and a warmer-than-normal and
drier-than-normal winter may limit critical spring snowmelt soil moisture
Declines in Chicago were actually in tune with the broader
commodities complex, which lost ground after weak Chinese data on loans offset
better inflation and trade data to keep nerves alive over the country, a huge
buyer of raw materials.
The CRB commodities index was 0.7% lower in late deals.
Raw sugar did its
bit to depress the complex, falling 1.0% to 19.85 cents a pound for March delivery,
after India said it would allow exports for a further year, easing concerns
over supplies of the sweetener in the country after a weak monsoon damaged cane
hopes in some areas.
Indeed, India is believed the source of much of the talk of
ditched import purchase orders by end users which have also dogged the market
in recent days.
Nick Penney at Sucden Financial flagged "rumours of washouts
of recent physical purchases by two of the world's main consumers: India and
"With internal prices in India weaker, it seems the washouts
have occurred because profit margins have therefore eroded or disappeared."
Ethanol vs sugar
Data showing a large speculative net long position, implying
unfulfilled selling pressure, also hit values.
In fact, "the market will probably need to test lower levels
and maybe even the much discussed ethanol/sugar parity, estimated 17-18 cents a
pound, before final buyers are persuaded to step in", Mr Penney said.
coffee ended dong 0.5% at 160.85 cents a pound in New York for December
delivery, sunk by observations too of limited demand despite the lowest prices
in a month or so.