Have copper and wheat begun cohabiting again?

At various times, price movements in the metal and the grain have shown an uncanny correlation, despite their being no apparent crossover in fundamentals between the conductor of power and the source of flour.

One such time was in 2011, when Australia & New Zealand Bank termed the price correlation "scary" and attributed it to fund outflows.

Most lately, copper on Thursday posted its worst session of 2013, wheat is second biggest losses.

'Hedge funds exiting positions'

And on Friday, both were back in demand again, a little, despite there being no obvious change in the fundamentals, although both are still heading for weekly losses.

This would play to the commentators, such as Brian Quinn at Benson Quinn Commodities, who believe there was more to the last session's 2% drop in Chicago wheat prices than heavy snow which has raised Plains farmers' hopes of a break in the drought threatening winter wheat seedlings.

"Ample snowfall stretching over much of Kansas and Nebraska also offered a negative tone the market, but the primary influence on Thursday's trading seemed to be significant technical weakness with little fundamental support," Brian Henry, at Benson Quinn Commodities, said.

"There are rumours of one or multiple hedge funds exiting positions commodity positions of all types due to poor performance," he said, also flagging the negative influence of a rise in the dollar to five-month highs.

A stronger dollar weakens the affordability of dollar-denominated exports, including copper and wheat, to buyers in other currencies.

'Mood is bearish'

At Market 1, Mike Mawdsley, in another observation of broader commodities weakness, noted that the Continuous Commodity Index on Thursday fell to its lowest level since mid-July.

"Funds are either exiting commodities, or adding short positions," he said.

It is the latter which has certainly been the case in many agricultural commodity futures of late, with speculators piling on short positions in the likes of wheat, corn and sugar.

"Are we making a February low, or is this the beginning of a larger drop? The mood is bearish."

Data later

Still, in Friday, the dollar rally took a break, with the greenback easing 0.2% in early deals, which was one help to improved sentiment.

Another, for wheat, is the prospect of US export which a market poll of investors has estimated at between 400,000-600,000 tonnes, but over which there are suspicions of a higher figure still.

The previous week's topped 700,000 tonnes.

"Weekly sales will be good, which should work as we have plenty to sell," Mr Henry said.

More moisture needed

Furthermore, there are ideas that the US snow, while helpful, and in some places reported at more than 1 foot, is not a drought-breaker.

"If follow up precipitation occurs, the crop may have favourable soil moisture levels when it comes out of dormancy," World Weather said.

And the idea from the International Grains Council that the Black Sea region, a source of competitively-priced wheat, may be a reduced threat to other exporters in 2013-14 too, as it continues to recover from last year's drought-hit harvests, was also a positive to prices.

Wheat for March nudged 0.3% higher to $7.23 ½ a bushel as of 09:00 UK time (03:00 Chicago time).

Chinese buying spree?

It gained a lift from fellow grain corn too, which added 0.5% to $6.94 a bushel for March delivery, boosted by a report that China bought 240,000 tonnes of new crop US corn this week.

The price was less than $300 a tonne, compared with the $400 a tonne or so the grain is selling for in Shenzhen, a port city in the south of China.

Also, the expiry of March options is seen providing a technical pull on corn, with many strike prices grouped around the $7.00-a-bushel mark.

Empty vessels

But it was soybeans which fared best, again, adding 1.7% to $15.13 a bushel, crossing with ease through the psychologically $15-a-bushel mark which presented such an obstacle to upward movement earlier this month.

The May contract rose 1.6% to $14.93 ½ a bushel.

The strong demand, largely from China too, for soybeans is seen as a big support to prices, given the difficulty for buyers in sourcing the Brazilian supplies which should have been back onstream in earnest by now.

Besides a rain-delayed early harvest, road and port bottlenecks are slowing up exports (as in sugar two years ago).

The number of ships waiting to load at the port of Santos reached 59 as of Thursday, twice the number a year ago, while at Paranagua the increase was even larger – to 82, from 31.

'Precariously low levels'

"Logistical backlog in Brazilian grain ports has already seen sales being redirected back to the US," said Joyce Liu at Phillip Futures, noting that China is said to have bought nine cargoes of US soybeans, some switched from Brazilian origin.

"US soybean stocks are now at precariously low levels and soybean prices are likely to be very sensitive to exports."

With weather in Argentina "showing no sign of improvement, we continue to expect bullishness in soybeans towards $15-a-bushel levels", she said.

More will be known on US exports later, when the USDA is expected to unveil weekly sales of 300,000-600,000 tonnes to buyers abroad, a notable volume given the thinness of supplies.

The USDA will also, on the second day of its much-watched annual Outlook conference, unveil its first full balance sheet estimates for domestic crops in 2013-14 - with the end-of-season inventory estimates likely to garner particular attention, after Thursday's harvest and price forecasts.

Corn stocks are seen by many analysts tripling over the season to some 2bn bushels.

'Watch point'

Among soft commodities, New York cotton staged some recovery too, adding 0.1% to 83.70 cents a pound for May delivery, helped by thoughts that the fibre, like corn, soybeans and wheat earlier this week, is enjoying Chinese buying.

And New York raw sugar staged a bit of a bounce, adding 0.6% to 18.22 cents a pound for March delivery, and 0.8% to 18.04 cents a pound for better-traded May lot.

Arabica coffee, which Ms Liu termed "the watch point in soft commodities", for May delivery added 1.0% to 143.10 cents a pound.

"On the fundamental side, investors struggle to balance potential ramifications of wide spread la roya leaf rust in Central America with large global surplus and weak demand," she said.

However, the "downtrend seems to remain intact as the large excess from Brazil continues to overweigh as we wait for more news and clearer news of the extent of damages, if any, from Central America".