Two agricultural commodities, sugar and wheat, have
been rolling back the years, returning prices to levels of 2010.
Has their time travelling reached an end?
There was at least hope for bulls. Raw sugar stood 0.2%
higher at 15.06 cents a pound for New York's March contract as of 09:40 UK time
(04:40 New York time, 03:40 Chicago time).
It has to be noted that when raw sugar futures fell below
16.00 cents a pound, last month, that did herald a temporary recovery, to 16.58
cents a pound in the last session of 2013.
And Australia & New Zealand Bank has cautioned investors
about getting too downbeat on sugar, when Brail's Centre South is unduly dry
and hedge funds already have a substantial net short position, questioning how
much more selling might come from this department.
'One word – surplus'
Still, many commentators still hold a more bearish outlook.
At Commonwealth Bank of Australia, Luke Mathews noted that "last
night's session represented the first foray
below 15 cents a pound since the second quarter of 2010, at which time prices
slumped to 13 cents".
He also flagged expectations of increased Brazilian Centre
South sugar production, despite the dryness, from local player Safras e Marcado
which forecast output up 2.9% to 35m tonnes, "supporting global supplies at
(Safras e Marcado also upgraded to a record 600m tonnes its
estimate for the Centre South cane crush in 2013-14, and estimated next season's
at 618m tonnes.)
And Phillip Futures' Vanessa Tan said that the "fundamental
situation in the raw sugar market is clear and can be concluded with one word –
"With clear bearish fundamentals in market, we continue to
be bearish on raw sugar prices."
Buyers in town
gains too, with Chicago's March contract adding 0.6% to $5.64 ½ a bushel.
The grain is being offered support first by signs of
end-user demand, with Taiwan buying 73,400 tonnes of US wheat from Toepfer and Columbia
Grain on Thursday, following large purchases yesterday by Algeria and Iraq on
the international market.
Taiwan's purchase was a complex one, comprising: 16,510
tonnes of dark northern spring wheat, 14.5% protein, purchased at $352.27 a
tonne, on a fob basis; 10,840 tonnes of hard red winter wheat, 12.5% protein, acquired
at $311.25 a tonne fob; and 11,050 tonnes of soft white wheat, 10.5% protein,
bought at $266.15 a tonne fob.
Meanwhile, there is still talk of China being back in the
'Some damage has
Furthermore, there is some supply worry too.
The cold snap in the US is expected to do some damage, with
drought in the South a growing worry too.
It is a question how much harm – besides obvious plant
death, the impact of cold can be hard to detect until late in the growing
Brian Henry at Benson Quinn Commodities said: "Wisely, the trade
hasn't committed to owning wheat on the prospects of winterkill as it takes
time to evaluate any level of damage.
"However, I don't doubt that some damage has occurred."
Sure, as Richard Feltes at RJ O'Brien said, striking a more
bearish note, the US is not the only wheat supplier.
"Even through 2014 US hard red winter wheat yield prospects
are threatened, the fate of spring/summer wheat prices will be heavily
influenced by 2014 growing conditions across the former Soviet Union and European
Union," he said.
That said, a turn colder could cause some damage in the
former Soviet Union too, although Agritel was reassuring.
"In the Black Sea area, cold temperatures are forecast, but
they should arrive with snow that will serve as protection to crops," the
Wheat's resilience helped corn gain ground too, adding 0.3% to $4.27 ¾ a bushel for March
The grain is also
getting some support from technicals, having crossed back over its 10-day and
20-day moving averages, although the 50-day line at a little over $4.29 a
bushel looks likely to provide stiff resistance to upward progress.
Mr O'Brien also noted a trend among investors to "jump onto the
long corn/short soybean trade, amid
improving South American soy production potential, prospects for a large gain
in 2014-15 US soybean stocks at a trend yield this year, and with ongoing need
to keep enough cash corn flowing into ethanol/feeding channels".
More on ethanol dynamics will be known later with weekly US
production and stocks data.
Soybeans themselves indeed lagged, up 0.1% at $12.80 ½ a
bushel for March delivery, with some weather threats still to the Argentine crop.
It was notable that soymeal
failed to respond in Dalian to a firmer session in Chicago on Wednesday, adding
only 2 yuan overnight to 3,306 yuan a tonne for May delivery.
Chicago soymeal for March stood down 0.1% at $418.80 a short
ton in early deals.
Soyoil did better,
however, adding 0.6% to 38.07 cents a pound, helped by firmness in rival vegetable
oil palm oil, which gained 0.7% to
2,592 ringgit a tonne in Kuala Lumpur.
Palm oil was helped by comments by the Malaysian Palm Oil Board
that the country's stocks could fall to 1.6m-1.8m tonnes at the end of 2014,
from just under 2m tonnes now, sapped by firm exports.