Could Chicago grain and oilseed futures stage one of their
noted Turnaround Tuesdays, reversing a trend of the session before?
It helped soybeans,
at least, to put the brakes on its decline that futures managed a small
recovery on the Dalian market in China, which investors are looking to for a
lead amid talk of a stack of cancellations of import orders (from Brazil) by
the world's top buyer of the oilseed.
Dalian soybeans for September, the best-traded contract,
after falling more than 2% in the last session and putting in a fresh two-month
intraday low on Tuesday, recovered to end 0.2% higher at 4,374 yuan a tonne.
External markets firm
Not that the Chinese jitters are all over.
Soymeal for September
fell 0.6% to settle at 3,276 yuan a tonne.
At Benson Quinn Commodities, Brian Henry said: "Talk of
potential defaults is increasing. Port supplies of soybeans in China are ample,
while crush margins remain negative.
"It seems the Chinese priced too many beans the last month
Still, there were signs of some easing in concerns in
external markets too, with Shanghai shares
recovering 0.1%, after a steep fall in the last session on badly-received
Chinese trade data, and Hong Kong stocks posting a small gain too.
That was reflected in non-ag commodity markets too, with copper recovering 0.4% to $6.710 a
tonne and Brent crude edging 5 cents
higher to $108.13 a barrel.
'Doesn't solve the
tight balance sheet'
Furthermore for soybeans on the bullish side, it was not as
if the numbers in the US Department of Agriculture's Wasde crop report, which
preceded the selling, were exactly bearish.
The USDA trimmed its forecast for domestic stocks by 5m
bushels to 145m bushels for the close of 2013-14, a smidgen smaller than
analysts had expected but, with the export number upgraded, this factored in downgrade
to the domestic crush, which may imply some price rationing required.
And it is not exactly certain that even this export number,
at 41.6m tonnes, might not require further upward revision given that the US
has already sold 44.27m tonnes for 2013-14.
The report "doesn't solve the tight old crop US soybean
[balance sheet]", Richard Feltes at Chicago broker RJ O'Brien said.
Mr Henry said that "for the most part, these aren't numbers
that scream 'sell' on the old crop.
"But given the strong move of the last couple of months, the
speculative trade got ahead of itself."
Ideas that the USDA's latest forecast for US exports in
2013-14 may prove an underestimate received some backing from weekly data on
shipments, as measured by cargo inspections.
The total shipped last week topped 1.5m tonnes. Or as CHS
Hedging put it, "export inspections were huge - well above trade expectations."
Does such demand for US soybeans indicate that there may be
more than meets the eye to China's cancellation of Brazilian supplies?
The dynamic "could be related to growing concerns about the
overall quality of the Brazilian soybean production," Mr Henry said
"Some deterioration to the quality of the crop, due to heavy
rains, has been realised," as USDA observers noted.
Palm rally halts
However, with investors in profit-taking mode, and funds
sitting on a large net long position in soybean futures and options, Chicago's
May contract eased, by 0.3% to $14.15 ¼ a bushel as of 09:30 UK time (04:30
A drop in soymeal,
down 0.6% to $442.20 a short ton, was not helpful, although soyoil added 0.3% to 44.00 cents a
pound, defying a small retreat, on profit-taking in rival palm oil in Kuala Lumpur.
Palm oil for May eased 0.1% to 2,897 ringgit a tonne.
Data from cargo surveyors showing a decline of Malaysian
palm oil exports during the first 10 days of March of 5.0%, according to Intertek,
and of 3.7%, according to SGS, countered some of the positive tone flowing from
Malaysia Palm Oil Board data on Monday, and from talk of an El Nino, which
would likely hurt South East Asian production.
'Subject to watch'
Back in Chicago, corn
fell too, down 0.4% at $4.76 ½ a bushel for May delivery, as warmer
temperatures in the US ease concerns over a late start to sowings.
"Temperatures are moderating across the Corn Belt, getting spring
fever going in some," CHS Hedging said.
And there has been talk of "substantial frost in the ground",
after the cold winter, Steve Kahler, chief operating officer at Teucrium Trading,
"Some say two foot of frost. Others say up to 54 inches. It's
a subject to watch," he told Agrimoney.com.
There was some bearish talk remaining about Wasde revisions
to corn too.
Luke Mathews at Commonwealth Bank of Australia highlighted
in the increase of some 1.2m tonnes to 158.5m tonnes in the forecast for world
corn stocks, more than the market had expected.
"There were no changes to Brazilian or Argentinean corn
production forecasts," Mr Mathews said
"Furthermore, US corn export projections were not raised by
much as feared."
Still, the latest weekly US corn export data, at 934,000 tonnes,
exceeded handsomely the 893,000 a week needed to meet the upgraded estimate for
2013-14, of 41.3m tonnes.
Wheat leads – for now
It was actually left to wheat,
for which the Wasde made relatively few changes, to keep the flag flying for
bulls, with the May contract gaining 0.4% to $6.43 ¼ a bushel in Chicago.
However, there were suspicions that this was down to technical
factors, first from the unwinding of buy soybean-short wheat spreads, and also
from the simple fact that hedge funds remain net short in Chicago wheat futures
and options, offering less scope to take profits from selling.
It is not as if, after all, that all investors appear optimistic
of the chances of US exports reaching the 32.0m tonnes that the USDA foresees
Latest weekly exports, at 429,081 tonnes, where below the
expected 475,000-600,000 tonnes.
At FCStone, Jaime Nolan Miralles noted that Russian wheat
exports "continue to discount French" offers, which are in turn "still carrying
a discount to nearby US soft red winter wheat".
It was worth remembering that the US wheat is being
supported in part "but by significant freight premiums reflecting logistical
constraints", which will ease with warmer weather.