Wednesday was a tricky one for many markets.
returned to trading with something of a hangover, after a four day weekend. The
Nikkei 225 index tumbled 2.9%, after Bank of Japan minutes cautioned over a
pick-up in domestic wage inflation.
And that cast a bit of a pall over other stockmarkets.
Shares dropped 1.2% in Hong Kong, and opened lower in Europe
too, by 0.4% in London and 0.5% in Frankfurt.
And the negative mood spread elsewhere too, with rubber, for instance, tumbling 4.7% to
197.50 yen a kilogramme in Tokyo, very nearly the lowest for a benchmark
contract since September 2009, amid lingering concerns over Thai plans to sell
220,000 tonnes of the tyre ingredient from its stocks.
Rubber's fellow industrial crop, cotton, eased also, if by only 0.04 cents to 93.94 cents a pound in New
York for July delivery as of 09:30 UK time (03:30 Chicago time), and remaining within sight of two-year highs for a
Chinese subsidy reforms prompted a 25% fall in the country's
cotton imports from India, according to Indian industry sources, cotton which
will need to find a new home, potentially weighing on prices.
Still, on the most supportive side for prices, "adverse
weather conditions in Texas", the top US cotton producing state, "will continue
and there is little chance of rain over the next 10 days", Sterling Smith at Citigroup
'Very little relief
The weather in the US southern Plains is being most closely
watched, of course, for its potential impact on wheat output.
But, the downbeat market mood took a toll on the rally in
the grain too, even though the outlook is hardly too promising for region and
its drought-hit hard red winter wheat crop.
"Rain activity will increase later in the week, but favours
eastern hard red winter growing regions," said Brian Henry at Benson Quinn
"Very little relief is expected in central and western
CHS Hedging noted that "crop ratings for hard red winter
wheat", the type grown in the southern Plains, "are at the near record lows
dating back into the mid-1980s".
'US wheat uncompetitive'
Still, CHS also noted that "US wheat remains uncompetitive
in world export markets after the recent futures rally", and will have got even
more so since losing out in the tender by Egypt's Gasc grain authority last
Other wheat markets have, signally, failed to keep up with
US ones, with conditions in the likes of Australia, Europe and the former
Soviet Union throwing up some dryness worries, but nothing like on the scale of
the southern Plains.
Luke Mathews at Commonwealth Bank of Australia said: "Interestingly
enough, European markets remain relatively subdued, despite the Ukraine
situation," another major prop to wheat prices, thanks to the country's large
exports, and on Europe's doorstep too.
The divergence in performances signals "that the primary driver
of price action is the US-centric hard red winter wheat crop issue", he said.
In fact, US hard red winter wheat fell 0.5% to $8.41 ½ a
bushel, while Chicago soft red winter
wheat for July was down 0.4% at $7.35 ¾ a bushel.
the market are bullish'
But will the correction last?
"We see that wheat prices are moving lower today but that is
most likely due to profit-taking as factors affecting the wheat market are
bullish," Vanessa Tan at Phillip Futures said.
Benson Quinn Commodities's Brian Henry said: "Charts
indicate the path of least resistance is still higher, but continues to push
into overbought territory.
"Outside of some profit-taking the speculator isn't showing
any interest in selling these markets unless the technicals fail."
Spring vs winter
Interestingly, Minneapolis hard red spring wheat held its
round, at $8.04 ¾ a bushel for July delivery, amid some uptick in concerns over
sowings, with just 26% completed as of Sunday, compared with 41% normal by that
time of year, according to US Department of Agriculture data.
Unlike winter wheat, too much rain is the problem here, and,
with the forecast remaining wet, "little planting progress is expected this
week", Mr Henry said - if noting that last year, "Canada made very little
progress before May 10th and re-wrote the record books" on production.
Still, Richard Feltes at RJ O'Brien clocked a seasonal
tendency for Minneapolis wheat to gain on Kansas City hard red winter wheat
from mid-May to late June.
"Historically, hard red spring wheat seldom trades at a
discount to hard red winter wheat," Mr Feltes said.
"The bottom line is that the steep premium of hard red
spring wheat over hard red winter wheat is vulnerable to a sharp correction
once Kansas City wheat is unable to advance further."
This could occur "either on speculative exhaustion,
unexpected southern Plains rains, above-average hard red winter wheat harvest
sales due high prices, or a marked shift in bread quality wheat demand from hard
red winter wheat to hard red spring".
With wheat stalling, corn
struggled to hold on upward momentum, with many investors dubious about just
how serious, in terms of yield prospects, a slow start to US spring plantings
"Planting continues to progress nicely, even in some of the
wetter northern areas," CHS Hedging said, adding that "rains later this week
will be fine with many, as some will wrap up corn planting by then".
Still, investors were reluctant to remove too much from the
price, with corn already at a large discount to rival grain wheat, and not all
analysts quite so blasé about farmers having 29% of corn in the ground as of Sunday.
This figure "pales to the figure of 42%", Phillip Futures' Vanessa
Price direction later may depend on weekly US ethanol production
data, which a week ago revealed a drop in output to 898,000 barrels a day and
stocks recovered to 17.2m barrels.
Corn for July was 0.1% lower at $5.16 ¾ a bushel.
Soybeans were lower
too, continuing to be infected by weakness stemming from China, where the
ministry of commerce has cut short-term import forecasts for the oilseed, and there
are fresh rumours over sales from state inventories.
This talk emerged last month, only to quickly disappear, but
has re-emerged with a vengeance, with the speculation specifically of ales of
3m tonnes of soybeans, with a late-May start date to the sell-down.
On China's Dalian exchange, soybeans for September settled
down a further 1.1% at 4,418 yuan a tonne, on top of the 1.2% loss in the
Chicago soybeans for July were 0.4% lower at $14.53 ½ a bushel.
At least, elsewhere in the oilseeds complex, palm oil managed a small gain, up 1
ringgit a t 2,569 ringgit a tonne, showing signs of stabilising around three-month