Morning markets: China helps grains start December firmly

Has the coming of December brought a change of impetus to grain markets?

Many investors remain downbeat over long-term price prospects.

"After the first of the new year, we believe farmer selling will pick up again and push corn to new lows," one US broker said.

"This is especially a risk for the spring and early summer timeframe."

Strong Chinese data

the positive sentiment abroad in Chicago soybean and wheat pits on Friday's, shortened, session continued into Monday, taking corn with it this time too.

New months often, by repute, bring fresh money into commodity markets.

It helped that China over the weekend came out with some better-than-expected purchasing managers' index data for its important factory sector, with a figure of 51.4 for November, higher than investors had expected.

Any reading above 50.0 indicates expansion

And a separate purchasing managers' index survey by HSBC/Markit gave a reading of 50.8, beating economists' forecasts of 50.4.

Export sales boost

China, being a huge importer and user of commodities including agricultural ones, is a key influence on ag markets.

Indeed, the data chimed with strong US crop export sales data released on Friday, including decent corn (131,500 tonnes) and soybean (993,000 tonnes) sales to China, with some wheat (60,000 tonnes) sold too.

This data continued to attract comment on Monday, with Luke Mathews at Commonwealth Bank of Australia noting that, for wheat, overall US weekly export sales of 562,200 tonnes were "toward the high end of trade estimates and total sales over the past four weeks are running 29% higher year on year".

For corn, "cumulative sales over the past four weeks are running 182% higher year on year on the back of improved supplies", Mr Mathews said.

And for soybeans, "already, 93% of USDA's forecast for the full year [2013-14] export programme is committed, increasing the potential for carryout stocks to be significantly tighter than the US Department of Agriculture's current forecasts".

China ban

Not that all the news from China is so supportive to prices, with a report from the Xinhua news agency that the country is to "ban state stockpilers from purchasing imported corn and soybeans this year to guard against genetically modified organism (GMO) risks".

The report added: "This year, given the cheaper grain prices on the international market, China will strictly prevent imported corn and soybeans from entering state reserves to protect farmers' interest."

The recent rejection by China of a cargo of US corn on grounds that it contained an unapproved (in China) GMO variety continues to cause some background concerns,

Indeed, late last week, Bell Chen, senior vice president of RJ O'Brien & Associates, told a conference in Jinan that the cargo rejection was "pressuring" US corn prices and "rattling" the cash market.

Dalian prices rise

However, Chicago corn for March edged 0.1% higher to $4.25 a bushel for March delivery, as of 08:30 UK time (02:30 Chicago time).

After all, it was not as if Chinese corn prices moved much on Monday, with the benchmark May futures contract settling up 1 yuan at 2,362 yuan a tonne.

For the soy complex too, the influence from China was positive, with May soyoil gaining 0.5% to 7,328 yuan a tonne on the Dalian, and May soymeal 0.9% to 3,376 yuan a tonne.

That helped soybeans themselves, from which soyoil and soymeal are processed, add 0.7% to 4,421 yuan a tonne for May.

Stronger soy

In Chicago, soymeal, which has been a particular support of late to soybean prices, rose 0.9% to $440.60 a short ton for January delivery, earlier hitting $442.10 a short ton, the best for the contract in more than two months, and approaching a contract high.

Domestic US demand too has been strong, besides decent export sales, with rival supplies from South America not so forthcoming yet, ahead of harvests there starting early in 2014.

(That said, South America looks like having a strong harvest, with the USDA bureau in Buenos Aires raising the bar on forecasts for the Argentine crop, with the only, and so far minor, concern that El Nino may return.)

Soybeans themselves rose 0.5% to $13.42 a bushel in Chicago for January delivery.

'Threaten winter wheat'

As for wheat, it had some extra support from concerns of cold damage to US winter wheat seedlings.

"Very cold conditions were expected in the US Plains this week and could threaten the winter wheat crop," Vanessa Tan at Phillip Futures said.

"Should there be no snow protecting the crop before the cold conditions kick in, we may see an adverse impact on the US winter wheat crop."

Furthermore, "Russian wheat is too expensive to compete in the global export market while Russia, Australia and Argentina are experiencing problems with their harvests", she added.

'Harvest delays'

Argentina last week estimated its harvest at a lowly 8.5m tonnes, while Australia has been seeing some disappointment in its harvest results, prompting some, small, downgrades to crop estimates, with quality issues in focus too.

Futures for Australian east coast wheat have been remarkably buoyant, given harvest pressure, and held at a three-month high of Aus$295.00 a tonne for January delivery.

In fact, harvest pressures may ease temporarily, with CBA's Mr Mathews noting that "showers are forecast to sweep through South Australia tomorrow and heavier rain is forecast for of Victoria and southern New South Wales Wednesday/Thursday. 

"Harvest delays are likely for virtually all east coast producers at one stage or another this week."

Chicago wheat for March gained 0.6% to $6.73 a bushel.

'Expect more supplies'

Among soft commodities, the sugar complex had the price-negative influence of a resolution of a dispute between Indian mills and growers over the cane price, with the Uttar Pradesh state government caught up in it too in defending farmers.

"Sugar mills are about to begin the crushing of cane after settling a standoff with the government," Philip Futures' Ms Tan said.

"With the start of crushing in the world's second largest producer, we can expect more supplies of raw sugar which would further pressure prices."

However, it was white sugar which took the news worst, falling 0.8% to $460.20 a tonne for March in opening indications in London.

Raw sugar for March eased but 0.01 cents to 17.16 cents a pound in New York.

Evening markets: ags - bar corn - end month on positive note
Agricultural Commodities
Agricultural Markets
Agricultural Companies
Agricultural Events