The big crop report in a week's time came firmly into focus
on Friday – and a key preview did not make for happy reading, driving grain and
oilseed contracts firmly into negative territory.
The US Department of Agriculture will next Friday release its
latest monthly Wasde report on world crop supply and demand.
Wasdes are key events of the agricultural commodities
But this one particularly so, given that it is deemed likely
to adjust estimates for domestic corn and soybean crops at a time when, with
stocks so thin, any revisions can have a big impact on the apparent tightness
'More pivotal than
OK, the market is due next week to witness fund rebalancing,
when index funds sell top performing commodities of last year, and buy
laggards, to readjust portfolio weightings back to those of the index they
But "we have to view the rebalancing as market noise", Paul
Georgy, president at broker Allendale, said.
"The real focus will be the USDA final production numbers
for 2012 and their supply and demand estimates."
Rival broker US Commodities said that "the market is now more
focused on the January 11 crop report'.
At Country Futures, Darrell Holaday said: "Next week's
report is very important and will be more pivotal than most January reports."
'It is a market mover'
It may be little surprising that investors are growing quite
so fixated by the Wasde, given the history of January versions provoking big
moves in prices.
"It is a market mover. In five of the last six years the
market has had limit moves," three with Chicago corn prices falling the
exchange maximum, and two rising the limit, US Commodities said.
And the idea of next week's report proving a price
depressant gained ground when Informa Economics raised its estimates for both the
2012 US corn harvest, by 75m bushels to 10.8bn bushels, and the soybean crop,
by 69m bushels to 3.04bn bushels.
And all this when investors were already in selling mood,
with some talk of funds preferring equities to agricultural commodities, now
that South America appears to be breaking the cycle of poor weather in major
crop producing areas.
Brazil harvest talk
Indeed, while early harvest yields in Brazil have been merely
in line with last year's, at 36-42 bushels per acre, "they are expected to
improve to 50 bushels per acre as the harvest spreads south", US Commodities said.
"South American weather for now is non-threatening," the
In fact, there were other interpretations of Brazil's
"Early soybean yields in Mato Grasso are slightly below a
year ago because of dryness," Darrell Holaday said.
"There are other areas that are getting drier and the
forecasts for next week are getting warmer and drier."
But bears very much held the reins in grains, even after the
dollar fell back.
US monthly job creation data at a promising 155,000
supported hopes for the economy without being strong enough to provoke concerns
of an imminent pullback in ultra-easy US monetary policy, a withdrawal which in
reducing the risk of currency debasement would likely be seen positive for th
The dollar in fact stood 0.2% lower, so making
dollar-denominated exports, including many agricultural commodities, that much
Row crops drop
US weekly crop export sale data gave bears more ammunition,
in showing a corn figure of 49,000 tonnes, well below forecasts of at least
twice that much.
Corn for March closed down 1.3% at $6.80 ¼ a bushel, its
weakest finish since June, and feeling extra pressure after falling below its
200-day moving average for the first time in six months.
US soybean export sales were better, at 434,000 tonnes, towards
the top end of market estimates.
Still, Chicago's March soybean contract closed down 1.4% at
$13.67 ¼ a bushel, at least recovering from an intraday low of $13.56 a bushel
which matched a six-month low.
Wheat falls too
did a little better, with its own March contract falling 1.1% to $7.47 ¼ a
bushel, also a six-month closing low.
But then Informa cut its forecast for Argentina's wheat
harvest, by 2m tonnes to 9.5m tonnes, a figure below that of the Buenos Aires
grains exchange, at 9.8m tonnes, let alone the USDA, at 11.5m tonnes.
Informa also cut its estimate of last year's Russian crop by
1m tonnes to 38m tonnes.
Still, that could not prevent a fall in Paris wheat prices
either, by 1.3% to E243.50 a tonne for March delivery, also a six-month closing
London wheat for May eased 0.5% to £207.40 a tonne, a
two-month closing low.
Cocoa to rebound?
Many soft commodities were in downward mode too, with cocoa falling 1.6% to $2,220 a tonne in
New York, for March delivery, and 0.7% to £1,432 a tonne in London, for the May
contract, after hitting an eight-month low earlier.
The decline was attributed to selling of a crop in which hedge
funds retain a relatively large net long position, offering scope for long liquidation.
was sanguine on fundamentals, after Ivory Coast's Coffee and Cocoa Council said
the domestic cocoa crop would fall 13% in 2012-13, and because of structural
factors, such as a lack of investment in new trees, rather than weather.
"Political uncertainty, the civil war and low local prices
have discouraged farmers from investing to maintain and expand their cocoa
plantations," Commerzbank said.
"It is thus very unlikely that there will be any short-term
solution to the problem.
"The lower harvest in Ivory Coast, the world's largest
producer country, is likely to contribute to the first supply deficit on the
global cocoa market for three years in 2012-13, which should help cocoa prices
recover in the coming weeks and months."
Also in New York, raw
sugar for March eased 1.3% to 18.85 cents a pound, depressed by talk of
producers lowering their aim for selling prices, while end users hold off.
But arabica coffee recovered early losses to close up
0.6% at 147.25 cents a pound, helped by a return to growth in world exports in
Shipments reached 5.6m bags, up from 5.48m bags in October
and 5.39m bags in November 2011, the International Coffee Organization said.
Meanwhile, Brazil's Conselho Nacional do Café producers'
group urged farmers to hold-off sales, questioning ideas of an overhang of stocks
caused by producers holding off sales.
"Although market source claim that producers were holding
their sales in higher-than-normal levels that's not what we see when we look at
stocks in cooperatives," the council said.
A rise of 20-25% in stocks held by Cooxupé, the co-operative
giant, "do not show a halt in sales, but a typical volume for a year with a
Brazil in 2012 saw an "on" year in its cycle of higher and
lower producing seasons.