Trading volumes in agricultural commodities were a little
low on Monday, as might be expected when it brought America's partially-observed
Columbus day holiday.
And the mood was a little depressed too, in tune with
broader markets, as the continued uncertainty over whether Spain will need a
bailout cast a bit of a pall over risk assets, sending shares lower and the safe haven of the dollar 0.3% higher against a basket of currencies.
A firm greenback tends to depress values of
dollar-denominated commodities by making them less affordable to buyers in
other currencies and, indeed, the CRB
index dropped 0.5%.
Raw sugar did its
bit on the negative side by falling 0.6% to 21.54 cents a pound for March
delivery, also depressed by data highlighting the weight of net long positions speculators
have built up, yet with brokers warning over ample supplies of the sweetener.
And a turn for the drier in Brazil's weather depressed sentiment
too in speaking of an open cane harvest.
"Looking forward in Brazil we are still really weather
watching and it seems there is little on the horizon to put scaremongering into
the bears," Thomas Kujawa at Sucden Financial said.
"All in all, it seems weather staying 'normal' over Brazil
its building up for a scale sell opportunity for the bears."
And in Chicago, the row crops dropped too, especially corn, for which data on market
estimates ahead of Thursday's US Department of Agriculture's Wasde crop report
showed investors, on average, not expecting much of a downgrade to the harvest.
The average estimate was 10.6bn bushels, some 126m bushels
below the current USDA forecast, a ThomsonReuters poll showed, although the range of forecasts was unusually large.
Meanwhile, there are doubts over some areas of domestic US corn demand, notably for ethanol, as highlighted by a Credit Suisse note, besides exports, with
livestock feeders the notable exception.
Morgan Stanley flagged that livestock producers have yet to
make large cuts to output despite high grain prices, with the US hog herd 0.4%
larger at the start of last month than a year before.
Cattle on feed were, at 10.6m head, a modest 0.6% lower
'Enough old crop corn
Still, at broker Allendale, Paul Georgy appears to have
found one reason why livestock producers are managing to avoid the bullet of
elevated grain prices.
"Talking to dairy framers in southern Illinois, I was
surprised to learn that they felt they had enough old crop corn on hand to
carry them through May of next year before using drought damaged 2012 corn," Mr
Chicago corn for December dropped 0.8% to $7.42 a bushel,
closing back below its 10-day moving average.
Extra supplies swallowed
more modest in their declines, easing 0.2% to $15.51 a bushel for November delivery,
helped by ideas that even though the USDA is likely to lift its forecast for the
US crop, thanks to better than expected yields, demand is strong enough to mop
up the extra supplies.
Darrell Holaday Country Futures said that yield expectations
had recovered so much that in Thursday's Wasde report "any yield at 36.5 bushels
an in acre or lower would likely result in higher price levels.
Furthermore, "given the pace of export sales, USDA is going
to be forced to increase export projections if they increase the production
"If production goes up 50m bushels, we would expect a 50m-bushel
increase in exports
Signally, the November contract was able to recover after
earlier looking like tumbling back through its 100-day moving average.
Still, it was wheat which did best at flying the flag for
bulls, boosted by weather concerns in Australia, where the outlook is for more
dryness after some rain relief at the weekend, and in the US, where forecasts
removed rain needed for sowings of winter crop.
Indeed, the GFS weather model "turned significantly drier
for the central and southern Plains in the weekend models", Country Futures' Mr
"When everyone went home last Friday, there was strong
belief that a general rainfall event would invade all of the Plains late this
week and into the weekend.
"That has changed dramatically and the latest model run at
midday today has pointed to very weak event for the Plains."
The grain got an extra helped from a 600,000-tonne downgrade
to 35.9m tonnes in the French farm ministry estimate for the domestic wheat crop,
the European Union's largest.
And this when importers are looking to France for imports,
with Russia's drought-hit export supplies appearing to have run dry.
"With the French crop making up the bulk of EU exports this
year a crop downgrade will reduce the availability of third country exports,"
grain traders at a major European commodities house said.
Chicago wheat for December added 0.4% to $8.61 a bushel,
while in France itself, the November contract gained 0.3% to E259.75 a tonne.
London's benchmark November wheat lot climbed back above
£200 a tonne, rising 2.3% to end at £201.65 a tonne.