Not since July, in the early days of the current grains
rally, has wheat managed a run of
six (or more) successive positive closes.
But it chalked up that feat on Tuesday, and this time thanks
to its own fundamentals rather than four months ago, when it was largely hanging
on to the coattails of drought-beset US corn and soybeans that gave the grain
That the drought has hung on to threaten winter wheat seedlings
too was confirmed once again in the US Department of Agriculture's weekly crop
progress report (the last of 2012) which showed the proportion of the crop in "good"
or "excellent" health falling another point to 33%, a record low for the time of year.
Nor is there any sign of the rain which could yet foster a
"The current long-term [official US] forecast suggests
winter wheat conditions could worsen," Paul Georgy, president at broker
Short-term, "warm dry conditions continue in both the
northern Plains and southern Plains, and temperatures are expected to be above
to much-above normal," US Commodities said.
Gail Martell at Martell Crop Projections said: "The weather
forecast remains dry in the Great Plains while the new forecast calls for warming
Ominously, she mentioned the "N" word too, as in La Nina,
whose return could bring with it more of the heat and drought which has
affected the US for so much of 2012, and South America for much of the year
"Persistent drought suggests a La Nina influence may be in
effect," even if the main symptom, as in air pressure measures, "remains neutral",
Ms Martell said.
"A ridge of high pressure has dominated south west US. No
rain at all developed on the High Plains in November."
In the Midwest too, where early autumn rain largely assuaged
drought, "hardly any rain has been received this month".
'Cheaper than corn'
And it is not as though wheat may be that expensive, at
least relative to corn, in some
In Portland, on the US west coast, "soft white winter wheat
is cheaper than corn", Bill Tierney, chief economist at consultancy AgResource,
"At last for Asian importer of feed grain, one source of
wheat is cheaper than corn."
Nor was it surprising that wheat prices were moving higher
than supplies of the grain in major exporting countries were, compared with
demand, "almost at their lowest in 12 years".
The dynamics were even enough to lure back commodities guru
Dennis Gartman, who said that "because of the drought conditions in the hard
red winter wheat producing states here in the US, we finally decided yesterday
to buy Kansas hard red winter wheat", if hedged against a shot position in Chicago
soft red winter wheat.
Kansas wheat was "relatively cheap" compared with its Chicago
peer, said Mr Gartman – only two weeks after selling hard red winter wheat, holding
it for some three days.
"No sooner had we bought it but the market 'reversed' to the
downside," he said then.
And there is scope for speculators to get on board this time
too, with regulatory data showing net long positions in Chicago and Kansas
wheat well below their summer highs.
With some concerns over sowings in parts of Europe, namely the
UK and northern France, where it has been too wet, with parts of Russia viewed
as overly dry, March wheat closed up 2.9% at $8.88 ½ a bushel in Chicago.
Kansas wheat for March added 3.5% to $9.33 ¼ a bushel.
In Europe, Paris wheat for January closed up 1.3% at E273.25
a tonne, while London feed wheat for May stormed to a contract closing high of
£227.00 a tonne, a gain of 1.5% on the day, and helped by data showing an
upgrade to ideas for UK imports of the grain.
Wheat vs corn
Wheat's rise was supportive to Chicago corn too, given that the two grains are rivals in the feed market,
and corn has its own job on trying to ration demand after a disappointing US
While "there was definitely some wheat feeding going on in
the July-September time period, that price advantage has long-time passed in
the Plains areas", Darrell Holaday at Country Futures said.
Furthermore, the deterioration of the hard red winter wheat
crop, "has reduced the number of cattle that are on wheat for grazing and those
cattle have been moved to inside the pipes and are consuming forages, corn byproducts
and corn, or sorghum".
In states such as Texas, where wheat condition took an
especially big drop last week, wheat grazing is common practice.
Corn for March soared 1.7% to $7.64 a bushel.
Soybeans rose in
line, adding 1.7% to $14.49 ¼ a bushel for January, boosted by fresh concerns
over South American crops, fears which have hardly been dampened by talk of a La Nina, which Michael Cordonnier, the respected crop scout, also flagged.
Indeed, the oilseed got an extra boost from ideas from Oil World
that soybean prices were took low to take account of South American crop risks,
with the consultancy also throwing light onto the recent jump in demand for US soyoil, saying it was cheaper for
importers than that from Argentina and Brazil.
Soyoil itself added 1.7% for January delivery to finish at
49.58 cents a pound.
Country Futures' Mr Holaday reported "somewhat of a short
squeeze in soyoil", in which speculators have a huge net short position, of more
than 50,000 lots as of last Tuesday.
"They were not anticipating the large soyoil US export sales
that occurred last week," he said.
"This has prompted substantial short covering on any price break
and is a solid bid under the market."
Furthermore, there has been some speculation of a renewal of
the biodiesel blenders' tax credit at the end of the year, and with it an
encouragement to use more soyoil, the main raw material for the biofuel in the
Mr Holaday said he "questioned" the idea, "but that seems to
be the consensus in the market this week".
Coffee crawls higher
Among soft commodities, New York arabica coffee eventually managed a positive close, adding 0.25% to
149.15 cents a pound for the best-traded March lot, recovering from a two-year
low for a nearest-but-one contract.
The revival was helped by concern that the record level of
speculative net shorts in coffee futures and options, at approaching 27,000
lots, might make hedge funds less likely to pile on more, despite increasing
hopes for Brazil's 2013 harvest.
"The market today did move away from the downward momentum,"
Sucden Financial said.
Raw sugar for
March added 0.4% to 19.23 cents a pound, boosted by the Unica report on Monday
heralding the end of the Centre South cane harvest for 2012.