Are funds shifting yet more money from commodities into shares?

Equities continued gains on Wednesday, with Tokyo shares closing up 2.1%.

"The strength in the equities is regarded by many as a product of very loose monetary policy and is also friendly for commodities," broker EHedger said.

However, Benson Quinn Commodities took a different tack, saying: "Strongly higher equity markets with Dow making new all-time high may be weighing on the ag complex with investors leaving commodities for green pastures in the equity markets."

That one appeared more in tune with early price movements, which saw the default move for agricultural commodity futures as a little bit downward.

'Striking proof'

That was perhaps not such a surprise for Kuala Lumpur palm oil, which has come in for a bit of a pasting amid short-term concerns that soft Malaysian exports mean stocks will stay near record highs despite a seasonal downturn in production.

Meanwhile, prospects as outlined by a key conference in Kuala Lumpur have been mixed.

OK, one influential analyst, James Fry at LMC International, said palm oil prices will recover to about 2,775 ringgit a tonne come June or July, equivalent to $950 a tonne in Europe, helped by its appeal as a biofuel.

"We are seeing striking proof that markets work," he told the Bursa Malaysia conference, which ends today.

"Cheap palm oil in relation to crude oil does wonders for the use of palm methyl ester as a fuel.

"Many factors have reinforced the attractions of crude palm oil as a competitive source of fuel in recent months."

'A game changer'

However, another leading commentator, Dorab Mistry at Godrej International, cautioned that energy prices were on the slide, citing the "emergence of the US as a major crude oil producer" as "a game changer".

"One cannot be bullish on energy prices. This has a direct effect on the biggest bullish factor for palm oil – biodiesel," he said, forecasting palm oil prices trading at 2,300-2,500 ringgit a tonne until the late April, when they are set to drop to 2,200 ringgit a tonne.

Phillip Futures also cautioned that palm oil's current trading range, of 2,400-2,600 ringgit a tonne since November, was reminiscent of the one last summer which preceded the decline to current levels.

"Technically, crude palm oil is likely to break below the support level of 2,400 ringgit a tonne because rectangle price pattern, a continuation pattern usually resolves in the same direction as the main trend," the broker said.

Kuala Lumpur's benchmark May lot stood 0.1% lower at 2,398 ringgit a tonne at 08:35 UK time (02:35 Chicago time).

'Severe rationing'

And modest losses were the order of the day for fellow oilseed soy in Chicago too, despite the concerns over the tightness of US supplies that are raising ideas that the country may be forced to import at the end of the season.

Just as Russia overdid wheat exports early in 2012-13, forcing it to become an importer for the last few months of the season, the US has sold nearly all the 1.345bn bushels of soybeans the US Department of Agriculture has budgeted for the crop year within six months.

The latest sales, of 330,000 tonnes revealed on Tuesday to "unknown" took total commitments nearly to 1.3bn bushels.

"With six months left in the marketing year and most of export sales nearly shipped, rationing will need to be severe in second half of the year and will need to come mainly from the domestic crush sector," Benson Quinn Commodities said.

"Imports of soybeans and soymeal into US southeast this summer will compensate for some slowing, but will come at a price."

'Caution ahead'

Joyce Liu at Phillip Futures said: "Global importers are still turning to the US old crop soybean supplies as almost two months of hold-up in Brazilian grains port has led to delays that end up in cancellation.

"We can expect the market to test the $15.00 again today."

But as EHedger said, "South American production is coming online and our soy exports sales should drop off shortly".

Furthermore, as an extra reason for caution there is the prospect on Friday of a US Department of Agriculture Wasde crop report, likely to bring revisions to South American soybean harvest hopes, and with the $15.00-a-bushel level possessing something of a juju for investors.

Chicago's March lot "didn't close over it again" in the last session, despite a number of attempts, Mike Mawdsley at Market 1 said, urging "caution ahead".

The lot stood 0.2% lower at $14.93 ½ a bushel, with the better-traded May contract down 0.1% at $14.65 a bushel.

Bottom near?

And grains could not do any better, with wheat weighed by the rain improving Plains soil moisture levels, and winter crop condition too.

"Warmer temperatures and wetter soil this week is expected to put pressure on wheat prices, as the much require crop moisture is replenished," Phillip Futures' Joyce Liu said.

That said, there are some investors questioning whether the decline in US wheat values has gone just about far enough, given the competitiveness it has given supplies on export markets, besides against corn.

Benson Quinn Commodities said: "Factor in the competitive edge soft red winter wheat has versus corn and on the global market and I have a tough time believing the funds are going to be able to defend their short position in Chicago."

Chicago wheat fell 0.1% to $6.95 ¼ a bushel for March delivery, and 0.25 cents to $7.05 ¾ a bushel for May.

Data later

With wheat on poor form, it was hard for corn to extend its rally. Corn has, after all, already gained a large, and unusual, premium over wheat.

Still, on the export front, both Honduras and Venezuela are said to be seeking April offers on US corn, and Mexico looking for supplies too, even if South Korea's Nofi passed on their latest tender, for July-August delivery.

Corn for March eased 0.2% to $7.30 ¾ a bushel, with the better-traded May lot up 0.25 cents at $7.09 ¼ a bushel.

Direction later may be determined by weekly ethanol data – although their implication on corn demand may be becoming cloud by a switch among biofuels plants too to wheat.

Poet is said to be bidding for soft red winter wheat for ethanol mills in Ohio.