PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 09:33 GMT, Thursday, 29th May 2014, by Agrimoney.com
Morning markets: ag prices gain despite spectre of month end

Month ends, as markets are approaching, are often viewed as negative times for agricultural commodities, as funds withdraw money to pay off clients.

And with funds holding a stack of long positions to liquidate, and weather improving crop hopes in the US and elsewhere, that might be seen as making a soft close to May pretty much a certainty.

Still, are some being tempted to take profit on short positions, which are sitting well in profit after price declines in corn and, especially, wheat this month?

"The wheat market is attracting some short covering after a swift drop," Brian Henry at Benson Quinn Commodities said.

Weak time of year?

Certainly, Chicago wheat made a positive start, adding 0.7% to $6.43 a bushel for July as of 09:30 UK time (03:30 Chicago time), aiming at what would be only its second positive close in 15 sessions.

And this at a time of year when prices often feel pressure, with harvest now begun in the US, and some other countries such as China too, meaning extra supplies and lowering the force of competition among buyers.

Indeed, hard red winter wheat basis has been easing in US Gulf ports, even as corn and soybean cash markets holds steady.

"The first part of July is normally a seasonal buy date," said Mike Mawdsley at Market 1.

Harvest results

Still, it was some succour for bulls that early US harvest results have been poor.

CHS Hedging reported that the hard red winter wheat state of Texas, where harvest is some 10% finished, had shown yields of a weak 10-12 bushels per acre, although with protein levels at a decent 13-14%.

Often crop stress, while hitting yields, boosts protein levels, although this is in itself not a guarantee of quality.

Importantly, test weights, the mass of grain per given volume, are believed to be coming in at promising levels too.

Spring rebound

Kansas City hard red winter wheat itself added 0.5% to $7.39 a bushel.

Minneapolis hard red spring wheat for July also gained 0.5% to $7.21 a bushel, despite ideas of an improved pace of sowings, both in Canada as well as the US, after a start hampered by wet and cold.

"Canada seeding is thought to be 50-55% complete as well," CHS said.

Still, technically, the Minneapolis July contract had the satisfaction of trading below its 200-day moving average in the last session, only to close comfortably above it.

Auctions to end?

Still, for gains, soybeans remained a more reliable bet, adding 0.7% to $15.08 a bushel for July, as waning fears for Chinese crush margins, and the implicit threat to imports of the oilseed, were replaced by the bullish concerns over the thinness of US supplies.

In fact, talk from China has turned more positive with ideas that the country is to start winding down its weekly auctions of soybean from state reserves, increasing the reason for buyers to turn to imports instead.

Soybean futures on China's Dalian exchange extended their rebound on Thursday, if by a modest 5 yuan to 4,641 yuan a tonne for January delivery, a fresh contract closing high.

Soymeal for September, the best-traded contract, did better, adding 0.8% to 3,794 yuan a tonne, and furthering ideas of improved crush margins.

'Flaw in the theory'

Technicals have proved supportive too, with the holding of the July, and November, contracts above their 20-day moving averages being seen as a boost from a chart perspective.

November soybeans were 0.6% higher at $12.51 a bushel.

Still, whether they deserve to be, when there is the prospect of some US corn acres being switched to the oilseed, which can be later sown, and when the world is expected to see record stocks at the close of 2014-15, well, some have their doubts.

The strength in November soybeans, compared with new crop December corn, "is not exactly known other than we are coming off of a very tight supply situation in the US this year and the market looks at November soybeans as being 'cheap' to July futures", one US broker said.

"The flaw in that theory is that they are in completely different crop year and supply situations," with record high world stocks ahead, and a stocks-to-use ratio of nearly 10% in the US.

"The last time the US carryout was listed above 7% we were trading near $9 a bushel."

'Lacks an appetite'

In fact, new crop December corn eased 0.1% to $4.69 a bushel, allowing the November soybean; December corn spread to nudge back to an elevated 2.67: 1.

July corn was 0.1% lower at $4.72 a bushel.

Sure, there are some bullish angles on the grain, with CHS Hedging noting "the potential to lose some northern corn growing acres due to wet conditions ahead of the prevent plant insurance deadline".

There is also analysis that China's domestic corn prices are at their highest premium to imports for four months, potentially spurring a fresh round of purchases by Sino buyers.

However, "the trade lacks an appetite to establish new length in the corn market," Brian Henry said.

"It appears end users are finding some value near the current levels, but find little reason to bid up for corn. It appears buying is stemming from speculative traders taking profits on short positions."

Coffee reheated

Among soft commodities, investors showed some appetite for arabica coffee, which added 0.6% to 177.20 cents a pound in New York for July, with the sell-off in the last session expected by many to encourage a bit of interest from roasters.

Robusta coffee for July, which led the last session's collapse, added 0.2% to $1,911 a tonne in London for July.

New York cotton extended its decline on improved US sowing conditions, thanks to southern Plains rains, with the July contract easing 0.3% to 84.64 cents a pound, and December cotton dropped 0.3% to 77.49 cents a pound.

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