Not since June has wheat
fallen below $7 a bushel in Chicago.
It did again on Monday, with the March lot dropping to $6.98
a bushel in late deals, before closing at $6.99 ¼ a bushel, down 2.2% on the day.
The May contract, which is now the best traded, ended down 1.9%
at $7.05 ¼ a bushel.
And this when, by contrast, Chicago corn kept its footing, closing up 0.5% at $6.93 ½ a bushel for
March, and by 0.2% at $6.85 ½ a bushel for May.
This reduced the discount of corn and wheat to less than
$0.06 a bushel for the spot contract, what appears to be the weakest since May
'No more than pain relief'
OK, it was always going to be difficult for grains and
oilseeds to show mega-gains on Monday, given the prospect of huge crops ahead
in 2013 which are increasingly grabbing investors' attention.
"Bullish participants in the market retain the appearance of
a terminally-ill patient in denial of the assured pending outcome fast approaching,"
Jaime Nolan-Miralles at broker FCStone said.
"Logistical delays in Brazil, expected Chinese buying in soybeans
post its holiday season and possible adverse weather appear to be no more than
pain relief for what is in effect a market on the cusp of a notable rebound in
supply for 2013-14."
All this, of course, is reflected in the bearish position
which speculators have taken this month, driving their net short positions in
the likes of New York arabica coffee
and raw sugar futures and options to
record highs, and a massive drop in net long holdings in corn.
In fact, speculators' net long in major US-traded
commodities fell to its lowest level since March 2009 in the week to last
Tuesday, according to Rabobank.
"This was the second consecutive week of managed money net
long positions declining by over 100,000 contracts, and only the second time on
record," the bank said.
US Commodities said: "The market now believes large
production is highly possible," after forecasts for huge US crops were
underlined by the US Department of Agriculture at its Outlook conference last
week, and with South American weather improving.
"Funds are liquidating their long positions."
'Moisture deficit cut
However, investors found extra cause to put wheat through
the mangle, despite Friday's positive US weekly export sales data, of 766,000
The main one is the precipitation which is improving
prospects for US winter wheat regions where drought has been setting back
(More will be revealed on crop condition in monthly data due
out on some US states later on Monday.)
"The morning radar shows very heavy precipitation in the
southern Great Plains including previously dry wheat areas of the Texas
panhandle," Gail Martell at Martell Crop Projections said.
"Drought is rapidly resolving from back-to-back snow storms.
Very heavy precipitation last week cut the Kansas moisture deficit in half."
In fact, more moisture is on its way to the southern Plains,
and "seems to be tracking south of the previous storm and could offer rain and
a foot or more of snow to portions of Oklahoma and north Texas", Benson Quinn
Weather service WxRisk.com said: "The next weather system is
going to be a massive one that will strongly impact the central and lower
Plains over the next 48 hours.
"Blizzard warnings are in effect for the entire Texas and
Oklahoma, panhandles as well as eastern Colorado and south western Kansas."
Furthermore, "there may be another rain and snow event for
the lower Plains, March 4-5", WxRisk.com added.
Then, as if easing supply pressures were not enough to cheer
bears, the demand picture got a dent too, from the growing ideas that Egypt,
the top wheat importer, may be sidelined from purchases for some time.
"Comments out of Egypt on the weekend indicated they had a
10-month inventory of wheat and would not be in the market for wheat for a while
added to downward pressure," Darrell Holaday at Country Futures said.
"There is really a lot of question as to whether that is
true, but it has certainly pressured the market."
That was true in Europe too, where Paris wheat for May
dropped 1.7% to E233.50 a tonne, the contract's lowest close for seven months.
London wheat for May lost 0.5% to £205.15 a tonne, at least
given some protection by the weakness of sterling, exacerbated by the UK's
downgrade by Moody's.
'Physical prices remain
performance reflected some more positive news on the demand front, with the USDA
unveiling US sales of 127,000 tonnes of corn to "unknown destinations" – some of
it for 2012-13 delivery.
This just as importers were seen preferring by a distance alternative
origins, including Brazil (strikes allowing) and Ukraine, where supplies are
less constrained than in the US.
After all, in the US, "commercial traders are still finding
it difficult to buy corn, and whilst the futures have fallen in the face of
fund selling, physical prices in the US remain firm", a major European
commodities house noted.
And this when speculators have sold down their net long
position in corn futures and options so much – by more than 110,000 contracts,
or 65%, in two weeks – that many believe hedge fund appetite for a further negative
lurch is limited for now, despite ideas of a huge US crop coming in 2013-14.
"By now, most of the news of increasing supply should be
priced in," Commerzbank said.
Would soybeans side
with corn or wheat?
The oilseed had export demand on its side, with the USDA
unveiling sales of 120,000 tonnes to China, of new crop.
But growing ideas of a resolution to the Brazil port strike,
which has been shifting demand to the US, besides data from AgRural showing the
South American country's soybean harvest 27% complete - ahead of the 20% a year
ago, despite some heavy rains – suggested lower prices.
As did a weakened technical picture, after the oilseed's
late pullback in the last session, which took the March contract back to its
200-day moving average.
US buying from
In fact, the contract fell through its 200-day, 20-day and
100-day moving averages on Monday, in dropping 0.7% to $14.51 ¼ a bushel.
The better-traded May lot ended down 0.6% at $14.35 ¼ a bushel.
Rumours that the US is turning too to South America for
soybeans did little to help, with the talk going that east coast US livestock
feeders have bought some Paraguayan soybeans for shipment into Norfolk,
"It is true that about 1bn bushels of corn will need to be
rationed and about one-third of the US soybean crush," US Commodities said.
"Brazil imports could bridge the gap."
Moves among soft commodities were a little lower too, defying
ideas that speculators huge net short positions in raw sugar and arabica coffee
would at least see these contracts bounce, on ideas that appetite for further short
positions would be limited.
That worked for a bit in helping raw sugar, which traded in
positive ground for most of the day in New York, also gaining support from a
Macquarie caution over the extent of negative consensus, before the pressure
returned to send the May lot down 0.3% at 18.09 cents at the close.
Arabica coffee for May lost early gains to end down 0.5% at
143.10 cents a pound.
Macquarie said: "While the problems in Central America
continue to be a serious threat for next season's production," a reference to
disease pressures, "positive production developments elsewhere are countering