Month ends, as markets are approaching, are often viewed as
negative times for agricultural commodities, as funds withdraw money to pay off
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 ¼ 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.
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.
Kansas City hard red winter wheat itself added 0.5% to $7.39
½ a bushel.
Minneapolis hard red spring wheat for July also gained 0.5%
to $7.21 ¾ 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,"
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 ¼ 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
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.
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 ¼ 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."
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.
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.