One of the solaces for grain bulls in the last session, when
prices ended lower, was that at least there was some recovery from intraday
That was especially true in corn, which for May recovered from $4.94 a bushel at one point to
close at $5.01 ¼ a bushel, down only 1 cent on the day.
"All in all, you have to be impressed with the performance
of the corn market on Thursday after recovering from early losses and gathering
support into the close," Benson Quinn Commodities said.
The broker also highlighted the potential for external
markets to be influencing revival in agricultural commodities.
"It's worth noting, the recovery in the ag markets gained
strength as equity indices sold off."
Shares performed weakly on Friday too, falling 2.4% in
Tokyo, where they hit a six-month low, but 1.0% in Sydney and by 0.8% in Hong Kong.
In Europe, stocks opened 1% down in London, Frankfurt and
Paris, in a decline blamed on weak data from China – the latest being statistics
showing a 0.5% drop in consumer prices last month.
Another factor behind the recent pullback in shares is
nerves ahead of US company results, with JP Morgan Chase and Wells Fargo among
corporates reporting on Friday.
Whatever, weakness in shares has tended this year to
encourage agricultural commodity investors.
Palm oil, for
instance, was trading 0.2% higher at 2,63 ringgit a tonne in Kuala Lumpur a of 10:20 UK time (04:20 Chicago time), despite
Thursday's data showing a surprise rise in Malaysian stocks of the vegetable
oil, and again showing a sharp recovery from intraday lows.
Chicago corn was
0.4% higher at $5.03 ¼ a bushel in Chicago for May delivery, continuing to feel
some of the momentum from the last session, and with cold weather still a worry
ahead of the US planting season, if not yet a mega worry.
Often in weather markets, futures prove reluctant to move
too far on a Friday, or see profit-taking, for fear of what the change in
forecast might bring over the weekend, without the ability to trade.
Currently, the forecast is for Midwest rains which are
something of a mixed blessing.
"Abundant rains in western areas should replenish moisture,
but rains in southern areas will stall fieldwork," weather service MDA said.
Also in the mix in corn is a tender by South Korea for
70,000 tonnes of corn, as well as 70,000 tonnes of feed wheat, the results of
which should be revealed today.
And US exports, while performing OK, with latest weekly old
crop US sales at 658,700 tonnes, do have something to live up to after the US Department
of Agriculture on Thursday raised by 125m bushels, to 1.75bn bushels, its forecast
for exports in 2013-14.
Macquarie became the latest to question this figure, calling
it "unjustified", and viewing as "highly unlikely" the 5.0m-tonne import
estimate for China, a forecast which has also concerned many other commentators.
Corn's resilience helped wheat too, which added 0.25 cents to $6.62 ½ a bushel in Chicago
for May delivery, attempting its first positive session in three.
The market had the support of a surprise tender by the Gasc
grains authority in Egypt, the world's top importer of the grain, of which the
results will be unveiled later.
The tender was revealed only hours after Egypt's supplies
minister, Khaled Hanafi, revealed that the country, which is attempting to
reduce its reliance on imports, had set aside about 10bn Egyptian pounds ($1.4bn)
to buy wheat from local farmers.
This helped counter some of the negative talk coming from the
US weather outlook, with improved rain prospects for the parched southern
Plains, although it has to be said that weather models, and interpretations of
"Improved rain prospects across the US hard red winter wheat
belt over the next 10 days could, according to some models, measurably trim
areas currently under stress," said Richard Feltes at RJ O'Brien.
However, at Texas A&M University, Mark Welch said that
while "the precipitation forecast for the next 5-to-7 days calls for beneficial
amounts in eastern Kansas, most other areas are missing out again".
This after "most of the hard red winter wheat production
area has seen precipitation levels well below normal over the last 30 days".
Interestingly, in Australia, while drought has retreated in
eastern areas, which are in focus because they are prone to undue dryness
during El Nino periods, Western Australia, the country's top grain-growing
state, has reemerged as under threat.
"Dryness is rebuilding in Western Australia, "MDA said,
adding that "drier weather through the next 10 days will allow dryness to build
however, kept on the downward path, falling 0.4% to $14.77 a bushel for May, amid
continued concerns over the talk of Chinese defaults on import orders.
"Unable to get a letter of credit, Chinese crushers
defaulted on at least 500,000 tonnes of US and South American shipments due to
poor crush margins," CHS Hedging said, summing up market thinking.
"China processors are losing an estimated $80-100 per tonne
Another broker said: "Rumour has it that China has cancelled
roughly 500,000 tonnes of beans from Brazil and are trying to cancel another
Still, it also has to be pointed out that Chinese buyers
have only 262,800 tonnes of orders of US soybeans left to fulfil, having already
taken receipt of 27.4m tonnes in 2013-14 (which started in September).
That speaks of only a limited direct effect on US soybean
prices, although there could be an indirect one, in terms of washed out orders
from Brazil being put on to the world market, so pressing on prices, or even
being shipped to the US itself.
In fact, the Brazilian soybean export basis is already trading
some $0.50 a bushel below Chicago July futures, a level "which is $0.30 below
normal", according to RJ O'Brien's Richard Feltes.
And the USDA is, after all, forecasting record US soybean
imports of 65m bushels in 2013-14.
Soft commodities also had something of a mixed feel early
on, with arabica coffee, which has
been firm this week on Brazil dryness concerns, retreating on end-of-week
profit taking by 0.8% to 204.40 cents a pound for May delivery, falling from a
two-year high close to the last session.
The better-traded July contract dropped 0.8% to 206.70 cents
But cocoa for
July added 0.2% to $2,991 a tonne in New York, and the same to £1,873 a tonne
in London, continuing to shrug off Thursday's soft European cocoa grind data,
showing a 0.4% rise in the first three months of the year rather than the 3% growth
Still, that was "a difference of 8,840 tonnes in real terms,"
said Eric Sivry, Head of agri options brokerage, at Marex Spectron terming it "not
exactly a gigantic tonnage in the grand scheme of things.
'The big question'
He added that "it feels as if US grinds [data] next week may
not be much better".
But is this just down to more processing being undertaken at
origin, rather than in the Western consumption countries?
"The big question really is, what will the West African and
Asian grinds look like? They should be much better than the other two if one
believes in the Nielsen chocolate projections.
"All in all, we fear that first quarter grinds in isolation
may have zero impact on the market."