Financial markets opened on better form on Tuesday, as the
concerns over Cyprus's tax on bank deposits eased a touch.
Barclays, for instance, while acknowledging the risk of some
knock-on effects in other countries said that it saw "read-across to other
banking systems, and expect contagion to be limited in scale.
"The amounts involved are small in the macro context."
Shares on many Asian markets recovered ground, with Tokyo's
Nikkei index closing up 2.0%, and Shanghai stocks adding 0.8%, while Seoul's
Kospi gained 0.5%.
'Large global excess'
That helped agricultural commodities stage something of a Turnaround
Tuesday – the idea among Chicago traders that a strong trend seen in the first
day of the week reverses in the second.
But it was hardly an extreme version, handing back to soybeans only a small proportion of
Indeed, in New York, cotton
lost early headway to stand 0.2% lower at 90.65 cents a pound for May delivery
as of 09:30 UK time (4:30 Chicago time, 05:30 New York time).
However, raw sugar,
gained 0.3% to 18.35 cents a pound for May, if still well down for the week so
far, after its biggest loss in five months in the last session.
"Although sugar prices have been supported by Brazilian ethanol
policy changes set to increase demand for ethanol and draw down sugar stocks,
and port delays that are slowing Brazilian sugar exports, sugar prices remain
extremely susceptible to global market forces due to the backdrop of its large
global excess," Joyce Liu at Phillip Futures said.
"We hold on to our view that sugar prices may break out on
the bullish side, but we now expect it to come later in April."
In Chicago, soybeans
for May gained all of 0.1% to $14.11 ½ a bushel, but a potentially significant
0.1% nonetheless, in that, if held, it would give the contract its first
positive close in six sessions.
The oilseed is being
pressed by fears that a long-awaited slump in US soybean exports may have
arrived, as supplies from the Brazilian harvest reach buyers, even after hefty delays,
and with a worrying silence in terms of fresh Chinese orders from America, of
2012 crop at least.
"Large South American production and shifting demand remain
headline features, with no confirmation coming over the past week of any fresh
demand from China for US soybeans," Kim Rugel at Benson Quinn Commodities said.
"With talk of Brazilian cancellations that were also rumours
China may have shifted some cargoes to Argentina to push back shipment dates,
while some were saying China was able to cancel due to non-performance contract
Whatever, the weakened basis at US ports "says China is not
looking north for replacement".
And there is concern over China's demand for feed overall,
if worst case fears over a large dump of pigs into the Huangpu river, which
runs through Shanghai, are realised.
The carcass count is now approaching 15,000 animals, according
to local reports.
While only a fraction of the country's total herd, if the animals
are being dumped because of disease – which is only speculation – that could have
an impact on feed demand, if it were to reach the levels of previous epidemics.
However, these fears took a back seat when soybeans managed
a small rise on China's Dalian exchange, adding 0.2% to 4,735 yuan a tonne,
with soymeal up 0.2% at 3,210 yuan a
tonne and soyoil rising 0.8% to
8,108 yuan a tonne.
(Rival vegetable oil palm
oil rebounded in Kuala Lumpur too, adding 1.4% to 2,419 ringgit a tonne.)
Meanwhile, there has been some fuss over freezing
temperatures which hit Argentina at the weekend, potentially damaging soybean crops.
That said, weather service MDA said that "any freeze damage
in south eastern Buenos Aires was very limited".
Among the grains, wheat
rebounded a little too, adding 0.3% to $7.15 a bushel.
The news from US state crop inspection reports was not all
good for farmers, despite recent rains bringing much-needed soil moisture.
While the Kansas and Oklahoma briefings showed further
improvements in crop condition, winter wheat seedlings in Texas went back into
reverse, and Colorado came in with a weak reading, of 12% in good or excellent
Spree of tenders
And there are signs of end-user buying, with tenders from Algeria,
Jordan and Tunisia unveiled on Monday, if at a time when cash-strapped Egypt, the
top importer, looks to be doing its best to keep out of the market, a desire
helped by estimates of a strong 9.5m-tonne domestic harvest this year.
Last year's was some 8.5m tonnes.
Ukraine has done its bit to underpin hopes for US exports by
revealing plans for an extension into 2013-14 of an informal cap on wheat
exports, agreed with merchants, which the farm ministry says has allowed more
control over domestic prices.
Meanwhile, technical factors have helped too, after Chicago's
May contract successfully bounced off its 10-day moving average in the last
session, and closed back up at its 20-day line.
Wheat was also given a hand by fellow grain corn, which defied Monday's sell-off,
and continued to make ground on Tuesday, gaining 0.4% to $7.22 ½ a bushel for
May, so maintaining a small premium over wheat.
Indeed, Phillip Futures' Ms Liu said that the "trading of the
wheat-corn spread may be a profitable strategy now", saying wheat prices have
historically seen an "immediate rebound" versus corn after falling to a
"With wheat prices now trading at a slight discount to corn,
we foresee the spread to gravitate towards zero despite the tighter
fundamentals of corn," she said.
'Ready to add risk premium'
That said, corn's tighter fundamentals are counting, especially
in the run-up to a key US stocks report at the end of the month which has a
history of coming in below analyst estimates (in four out of the last five
"Corn appears ready to add risk premium in the ramp up to
the March 28 report," Richard Feltes at broker RJ O'Brien said.
Technically, corn is looking better too, with the May lot
finding a floor at its 50-day moving average in the last few sessions, and
rising clear of its 100-day moving average on Tuesday for the first time in
Bulls are not, though, having it all their own way, with
hopes rising for Brazil's corn crop.
Respected crop scout Michael Cordonnier, at Soybean and Corn
Advisor, lifted his estimate for the harvest by 2m tonnes to 74m tonnes, while
Safras pegged the crop at 77.3m tonnes – including a record 40.0m tonnes for
the second crop, or safrinha, harvest.