There was something of a "risk on" feel about markets, as
riskier assets pretty much across the board posted gains.
The headway was most remarkable in Shanghai equities, which rebounded 2.3%.
But then the market headway on Tuesday was seen largely as
down to China, and reassurance on its economic growth, which had been in
question after soft monthly data on both manufacturing and services sectors, fostering
losses of more than 3% in Shanghai shares in the previous session.
Wen Jiabao, the outgoing premier, said that China is aiming
to grow its economy by 7.5% this year, and keep consumer inflation running
which also had a dismal start to the week, falling to eight-month lows, stage a
Well, the rising market tide did lift all boats, to some
extent, enabling the grain to add 0.3% to $6.97 ¾ a bushel in Chicago for March
delivery, and 0.5% to $7.06 ¼ a bushel for May delivery as pf 09:35 UK time (03:35 Chicago time).
That was a fraction of the losses in the last session, of
course, fuelled by ideas of rains breaking the drought which has tested US
winter wheat seedlings.
"Melting snow in snow-capped US Plains added significant
moisture to the winter wheat crop," Joyce Liu at Phillip Futures said.
"With even more rains expected by end of this week and
weekly export inspections near the low end of trade expectations, the headwinds
for wheat prices are strong."
Furthermore, many investors believe the US Department of
Agriculture will in its monthly Wasde report, on Friday, lift its estimate for
end-2012-13 domestic stocks of the grain, by 11m bushels to 702m bushels
according to a Bloomberg survey.
However, the grain does have some friends, with some
investors questioning whether falls to this level are justified, by
fundamentals anyway, given that stocks of grains overall are hardly ample.
"The wheat market doesn't have any friends at the moment, as
wheat has a strong tendency to trade lower into the spring when the US carryout
is adequate," Benson Quinn Commodities said.
"For the moment, this seems to be trumping the tight world
carryout and signals from the commercial that wheat prices have fallen far
There appear plenty of importers interested in purchases,
even if Agritel added to ideas that US wheat did not feature in Saudi Arabia's
575,000-tonne purchase announced at the weekend.
"The American and European origins seem excluded in the
transaction considering the purchase price," the Paris-based group said.
Wheat's recovery was barely enough to tip the needle in any
effort to regain its typical premium over Chicago corn.
Indeed, March corn entrenched its premium, adding 0.6% to
$7.27 a bushel, with the May lot, in adding 0.5% to $7.07 a bushel, keeping
just ahead of its wheat peer.
Corn is being supported in part by ideas of a downgrade to
the Argentine crop in Friday's Wasde, more than offsetting better prospects for
Brazil, and also by ideas of resilient US demand, with exports picking up a touch
and the increasing value of ethanol Rins.
Rins - paper credits for ethanol production which blenders
can use as an alternative to the physical biofuel to meet mandated commitments,
and which have been worth next to nothing historically - approached $0.80 a
gallon on Monday.
"Better Rin values offer additional support to ethanol production
margins, and the domestic processor has been actively pursuing coverage on
improving margins," Benson Quinn said.
This time Chicago soybeans
gained in line, adding 0.3% to $14.65 ¾ a bushel for May delivery, and to $14.94
¼ a bushel for the March contract.
This brings the March lot within sight of the $15.00-a-bushel
level which has represented a ceiling to upward progress since November.
Whether the contract gets through it conclusively before it expires
on March 14 may turn out to depend on the Wasde, in which analysts also see
some scope for cuts to the USDA's forecast for Argentine harvest, after early-2013
drought, and the Brazilian one too, thanks to early-2013 inundations.
Latest estimates for the Argentine crop have come in below
50m tonnes, compared with a current USDA estimate of 53.0m tonnes.
The Brazilian crop was downgraded by Safras e Mercado to
82.2m tonnes, and by Clarivi to 82.6m tonnes, below a USDA estimate of 83.5m
tonnes, although Agroconsult has the crop at 84.2m tonnes.
Celeres this week held its forecast at 80.1m tonnes.
Competition for cane
Soft commodities made a modestly positive start too, with New
York raw sugar extending its
recovery, adding 0.4% to 18.15 cents a pound for May delivery, helped by
Brazilian government support, through tax exemptions, for ethanol manufacture.
"Brazil's ethanol are produced from sugar and any jump in
ethanol production will help draw down on the record high sugar stocks now,"
Phillip Futures' Ms Liu said.
"At the moment, we still do not expect large gains in sugar
prices but we can expect prices to resume the 18-19 cents-per-pound trading
Cotton for May
rose 0.5% to 86.62 cents a pound in New York, within an ace of a nine-month
high, helped by ideas that the USDA will in Friday's Wasde lift its estimate
for domestic exports of the fibre in 2012-13.
'Mini slump in prices'
But in Kuala Lumpur, palm
oil missed out on the rising tide, falling 0.4% to 2,404 ringgit a tonne.
The market felt some negative effect from a slowdown in
operations at some Malaysian palm refineries, amid unrest on Borneo island,
where Filipino gunmen were blamed for an attack on police officers on Friday.
Eyes are also on a key industry conference in Kuala Lumpur, at
which not all the mood music has been price positive.
Frost & Sullivan said that palm oil producers needed to
find new uses for palm oil to avoid sustained weakness in prices.
Oversupply from increased plantings in Indonesia "will take
time to alleviate", the trader said, adding that "we could possibly see another
mini slump in prices in 2013".