Can corn futures
bust up through a technical ceiling?
The benchmark July contract failed in the last session to
get above $5.10 a bushel, despite a persistent effort by bulls to break above
Getting above $5.10 a bushel "proved insurmountable on
numerous occasions, including a push to get corn bought in the last couple of minutes",
Brian Henry at Benson Quinn Commodities said.
He added that, technically, "the key levels in July corn are
Wednesday's high of $5.10 a bushel and last week's high of $5.13 a bushel".
'Prices can move
The July contract did break above that in early deals,
hitting $5.10 ½ a bushel, but eased back to $5.09 ¾ a bushel as of 09:30 UK
time (03:30 Chicago time), up 0.1% on the day.
The potential benefits of a breakthrough are large, in
opening up the potential, chart-wise, for another leg up in prices.
At Market 1, Mike Mawdsley said that "if planting delays are
seen as persisting, the market could run up to April highs," which for the July
contract was $5.24 ¼ a bushel.
"Prices can move quickly when weather/emotions/funds are
"After these levels, you should find some traffic between $5.17-5.20
a bushel and the spike high of $5.24 ¼ a bushel," Mr Henry said.
Whether the contract can get there, in this session, may
depend largely on two factors.
One is the US weekly export sales data expected later, which
are expected to come in at 500,000-800,000 tonnes for old crop, and 150,000-250,000
tonnes for 2014-15 delivery.
"The export sales pace has been rather strong this year,"
one broker noted, offering the potential for a higher figure.
Indeed, the US Department of Agriculture on Friday unveiled
the sale of 128,000 tonnes of US corn to an "unknown" importer this season, and
on Tuesday revealed 240,000 tonnes of corn sold to Mexico for 2014-15, both of
which came too late to fall into the latest data (taken in the week to April 17).
The other potential spur is a change in the weather outlook.
It as a turn wetter in the forecast which drove the gains in
the last session, after data late on Monday showed US farmers behind in
plantings, at 6% as of Sunday compared with the average of 14%.
"Weather concerns have traders nervous about planting
progress," CHS Hedging said, with upper Midwest areas in particular likely to see
cold and wet weather heading into May.
Mr Henry said: "It feels like many in the fund community are
poised to defend their rather large net long position until there is better
evidence of planting progress being made or a near-term weather forecast offers
better opportunity to make progress."
That said, while Luke Mathews at Commonwealth Bank of
Australia note that in the last session, "funds bought strongly on the back of
the slow pace of US corn planting… we think it is much too early in the season
to become worried about the US planting progress".
'Very little progress
will be made'
Weather is factor for wheat
too, both in terms of the need in the southern Plains for rain, to refresh
drought-hit winter wheat seedlings, and the requirement in the north for drier
conditions, to enable spring sowings.
In fact, Benson Quinn Commodities said that it "also looks
like very little progress will be made on spring wheat seeding, with regular
rains in the forecast for the next two weeks.
"It also sounds like the overall May outlook has turned wet.
Still, it is "way too early to get concerned about planting
pace as spring wheat can be planted well into June".
A revival in Minneapolis spring wheat futures for July stalled
with the contract at $7.26 ½ a bushel, down 0.25 cents on the day, just below
its 10-day moving average.
Benchmark Chicago soft red winter wheat for July after a
volatile start, flowing in and out of positive territory, stood 0.3% lower at
$6.81 a bushel.
In the absence of any large shifts in the Ukraine situation,
the grain has been taking its lead largely from corn besides from changes in the
southern Plains weather outlook.
But there are weekly US export sales to ingest too, expected
at 200,000-400,000 tonnes for old crop, and 250,000-500,000 tonnes for 2014-15
Furthermore, Statistics Canada will release data on Canada's
planting intentions, expected at 24.4m acres for wheat, down some 2m acres year
struggled too, setting course for a
fifth successive negative session, still feeling pressure from the continued concerns over import
order defaults by Chinese buyers, the world's biggest.
Sure, the US balance sheet looks like ending 2013-14 record
tight, as a proportion of demand, even assuming record imports of 65m bushels.
But strong imports are a dynamic which the Chinese order cancellations
are facilitating, reducing the need for the market to work to encourage them
with yet higher values.
With Canada said to be exporting some 20m bushels of
soybeans to the US, with 18m bushels of Brazilian soybeans already on the way,
leaving roughly 25m bushels unaccounted for.
"That is roughly the 10-12 cargos that China is rumoured in
need of washing out due to its letter of credit problems and negative crush
margin woes," Benson Quinn Commodities said.
Still, with the July contract down only 0.1% at $14.67 ¼ a
bushel, spreading appeared less of a factor this time.
The unwinding of long soybean-short corn/wheat spreads has
been seen as another factor supporting grain futures.
And the unwinding of long old crop-short new crop soybean spreads
has been in play too, meaning outperformance of the November contract.
Certainly, unwinding long old crop- short new crop spreads appeared
to be out of the picture for now, with the November contract down 0.5% at
$12.21 ¼ a bushel.
The July lot was 0.1% easier at $14.66 ½ a bushel.
Soybean export sales are expected to come in at -200,000-+100,000
tonnes for old crop, and 350,000-550,000 tonnes for 2014-15 delivery.
Among soft commodities, raw
sugar made a more negative start, with the July contract shedding 0.2% to 17.94
cents a pound for July, as investors took profits on the 2% jump in the last
session on Unica's first full estimates for the Centre South.
Unica pegged the cane crop at 580m tonnes, in line with estimates
from other commentators, but surprised by estimating that more cane will go to
make ethanol in 2014-15, rather than sugar, despite the revival in prices of
And will that cane harvest figure prove an overestimate?
"Traders are also now worried that El Nino could result in
above average rains through the remainder of the season, something which would
slow cane harvesting activities and reduce sucrose yields," CBA's Luke Mathews
"Despite the strong gains over the past three sessions, the
July contract remains trapped within its two month trading range of 17.0-18.5
cents a pound.
"However, if Brazilian sugar production prospects continue
to trend lower, prices may soon test the top end of this range."