Wheat futures closed at their highest in three months as agricultural commodities flexed their contrarian muscle on Wednesday, posting gains even as many other markets struggled with concerns about, another, US budget stand-off.
Shares lost ground, as did the dollar, amid concerns that the latest periodic wrangling over how to approach the US debt ceiling would lead to a government shutdown.
Grain and oilseed markets too had the prospect on Monday of a key quarterly US Department of Agriculture report, on crop stocks, to fret about too.
"The USDA report on Monday, the debt ceiling debate, the potential shutdown of the government and potential Fed policy changes have markets on edge," Paul Georgy, president of broker Allendale, said.
Argentine frost fears
However, that did not stop wheat futures adding 1.8% in Chicago, for December delivery, to close at $6.70 ½ a bushel – the best finish for a spot contract since July 12.
The acceleration in wheat's rebound from an early-month low was fuelled by the further growth of concerns over supplies, at a time of continued talk of strong demand, which has so far been borne out by US and European export data.
The latest production fears centre over Argentina, the southern hemisphere's second-ranked exporter, where frost is deemed to have added to yield losses from dry weather.
"Frost in Argentina could hurt the wheat production which is giving support to wheat markets today," CHS Hedging said.
Benson Quinn Commodities said that, while the USDA has pegged Argentine wheat output at 12m tonnes, "with the dry conditions that have been experienced along with the frosts, production ideas are quickly being revised lower".
However, "we also have Brazil, which is turning wet as they are getting into harvest", boding ill for quality, Don Roose, president of broker US Commodities, told Agrimoney.com.
"Ukraine and Russia have been too wet for harvest too," a factor highlighted by Ikar separately on a sugar beet report, "although things are improving", Mr Roose said.
And there are concerns too over Australia, where Gail Martell at Martell Crop Projections warned that "wheat potential has worsened from drought in Western Australia's northern wheat and also New South Wales' northwest wheat belt", even as rains have refreshed crops elsewhere.
In Canada, where initial tests showed a crop with depressed protein, Ms Martell warned that "intense drying", from late July into September had hit yields in parts of Saskatchewan, the top wheat producing state.
'Export pace on fire'
Meanwhile, the "US export pace is on fire", Mr Roose said.
And there was talk of further demand interest too, including from China, where cash wheat prices have hit a record high, above $450 a tonne, and futures set a contract high this week too.
"China and Brazil are showing interest in wheat, offering more support to wheat futures," CHS Hedging said.
Benson Quinn Commodities said: "In addition to Brazil showing interest, China is said to be looking at US offers in addition to Australian origin wheat for delivery in the new year."
'Starting to get singed'
And this against a background of a hefty hedge fund net short in Chicago wheat, which analysts warned earlier this week limited scope for price downside, but has in fact turned into an engine for price rises as funds have closed these positions.
"We have kept the shorts close enough to the fire for long enough that they are starting to get singed," Mr Roose said.
And other US wheat types kept up, with Kansas hard red winter wheat for December adding 1.9% to $7.18 ¼ a bushel, also a three-month closing high.
Minneapolis hard red spring wheat for December also rose 1.9% to $7.18 ¼ a bushel.
In Europe, Paris wheat for November added 1.7% to E190.75 a tonne, with London wheat for November up 1.9% at £155.85 a tonne.
'Corn following wheat'
Wheat's performance helped corn too, which dodged a gloomy price outlook from Deutsche Bank to close up 1.2% at $4.54 ¾ a bushel.
"The firmer trade in wheat is lending support to corn, which otherwise looked primed to retest previous contract lows near $4.45 a bushel on the December contract," Benson Quinn Commodities said.
Mr Roose said: "It is most definitely corn following wheat," whose premium to its fellow grain, having this week crossed the psychologically important, and historically elevated, $2-a-bushel mark, widening nearly to $2.16 a bushel.
Corn's rise came against a backdrop of continuing upbeat harvest results, and weekly US ethanol data which showed a drop of 6,000 barrels a day, to 832,000 barrels a day, in output of the biofuel last week.
'Mixed yield reports'
And corn in turn helped soybeans rise too, adding 0.7% to $13.21 ¾ a bushel in Chicago for November delivery, with a US export sale giving a boost too.
"Soybean markets have found light support after the USDA announced a sale of 140,000 tonnes of new crop soybeans to unknown destination this morning," CHS Hedging said.
Benson Quinn also noted that harvest reports for the oilseed have not been quite as upbeat as for corn.
"Soybean yields have mostly been positive thus far - however as progress advances results have been turning more mixed which is lending support to an oversold market," the broker said.
Among soft commodities, raw sugar continued to receive support from Unica's announcement last on Tuesday of a drop in output of the sweetener in Brazil's key Centre South district.
However, it got support too from Deutsche downgrade in its forecast for the world production surplus, by 2.8m tonnes to 2.6m tonnes.
"The narrowing has come both on the supply side, as well as the demand side, with the latter skewed to Asia," the bank said.
And there was the setback to Russian sugar beet hopes to factor in, suggesting the potential for more buoyant imports.
Furthermore, spot futures received a technical boost by
getting over their 200-day moving average, on a continuous chart, for
the first time in 14 months.
The October contract closed up 1.2% at 17.62 cents a pound – the highest finish for a spot contract in five months.
The better-traded March lot added 1.5% to 18.19 cents a pound,
Also in New York, cotton closed up, but by more pedestrian 0.3% to 84.65 cents a pound, supported by positive comments from Macquarie.