For many assets, Thursday brought a somewhat negative note,
blamed on one of those market paradoxes, that good news can be bad for prices.
The good news is the agreement between Democrat and
Republican negotiators over a US budget deal, to be taken to the House of
Representatives as soon as today, followed by the Senate, cutting the chance of
yet another fiscal cliff fiasco.
The bad news, from a market perspective, is that such accord
is seen as boosting the prospect of an imminent deceleration by the US Federal
Reserve of its monetary stimulus programme.
And that depressed shares
in Asia, which fell 1.1% in Tokyo, 0.5% in Hong Kong and 0.8% in Sydney, with
stocks opening down 0.5% in Frankfurt London too.
Cotton falls back
which have recovered in part on better US economic prospects, took a negative
turn too, falling 0.3% to 82.25 cents a pound in New York for March delivery as
of 10:00 UK time (04:00 Chicago time, 05:00 New York time), although still
among its highest levels of the last couple of months, and up more than 7% from
a late November low.
The fibre, as an industrial commodity, tends to move more in
line with broader economic sentiment than food commodities, for which demand
tends to be less volatile.
At least rubber, another
industrial ag, had signs of buoyancy in crude to help it, with oil the base of
synthetic alternatives to the tyre ingredient.
Crude is being underpinned at about $110 a barrel, up from a
November low of just under $103 a barrel, by scepticism of a resumption in
Libyan oil exports.
Rubber for May stood unchanged at 284.10 yen a kilogramme in
Tokyo, and amongst its highest levels of the last six months.
There were different reasons cited for a retreat in corn, although the grain itself has
gained an industrial dimension with the growth of the ethanol industry, and
ethanol prices tanked in the last session after data showed US production last
week at the highest since December last year.
It was also the third strongest week ever for ethanol
Still, ethanol margins are reckoned to be high, at some
$0.70-$1 a gallon.
"Strong profit margins for ethanol came about as there is
high demand for the biofuel and prices of US corn are still near three-year
lows," Vanessa Tan at Phillip Futures noted.
Corn is also getting some support from ideas of funds
closing some of their huge net short position, taking profit ahead of year end,
while the index fund rebalancing exercise early in 2014 is looming too.
In this exercise, early in the calendar year, funds adjust
weightings to return individual commodities to the levels stipulated by the
index they follow – meaning buying 2013's poorest performers, eg corn, and
selling the winners.
As an extra fillip for the grain, there have been no
deliveries against the expiring December contract, which goes off the board
Deliveries against expiring contracts imply better prices
for sellers in futures than on the cash markets, and question whether futures
values are a touch high.
But not all the technical factors are quite so gung ho for
corn, with charts leaving many investors a little nervous.
The March contract has, in a positive price sign, managed to
close above its 10-day and 20-day moving averages for six successive session, a
feat not achieved since August.
But that has bought it close to its 50-day moving average,
at a little under $4.41 a bushel which it has not touched for more than three
Furthermore, for followers of Fibonacci analysis, it is
close to the 23.6% retracement level, at a bit over $4.42 a bushel, of the move
from the August high to early-December low in the price of the March contract.
Has the corn rally got the power to break through these
Investors have reason to doubt, given the record US harvest,
which has rebuilt inventories and reduced the need to compete hard for
supplies, and the ongoing concern over Chinese rejection of imported US
supplies on grounds of containing an unapproved genetically modified variety.
"There is continued speculation that more US corn cargoes
have/will be rejected by the Chinese because of unapproved GMO strains," Luke
Mathews at Commonwealth Bank of Australia said.
In fact, the corn refused entry to China is still finding
"Asian importers are snatching up rejected corn out of China,
with South Korea taking the lion's share," CHS Hedging said.
"Some is on contract with early delivery while some is sold
with a discount."
Nonetheless, corn for March eased 0.5% to $4.37 a bushel.
'On the back foot'
That weighed on fellow grain wheat too, which had been trying something of a revival, after
setting contract lows in Chicago, Kansas and Minneapolis earlier this week.
Sure, the grain remains somewhat under pressure, after the US
Department of Agriculture in Tuesday's Wasde report raised estimates for both
domestic and world inventories as of the close of 2013-14
"US wheat markets are on the back foot given weak chart
signals and a bearish global supply outlook," Mr Mathews said.
"However, concern about potential winterkill in the US
Plains" are offering some support to prices, as cold weather continues to beset
major growing areas.
Furthermore, US supplies appear to be competitively priced
against world supplies, although the failure to tender American wheat to this
week's tender by Gasc, the Egyptian grain authority, meant a chance for
transparency on this point was missed.
And, technically "'oversold' doesn't even begin to describe
the Minneapolis chart", Benson Quinn Commodities said.
In fact, Minneapolis spring wheat for March added 0.2% to
$6.70 a bushel, while Kansas City hard red winter wheat for March edged 0.25
cents higher to $6.85 a bushel.
Chicago soft red winter wheat for March was 0.1% lower at
$6.40 ¼ a bushel.
'Good job of covering
And soybeans weakened
too, down 0.6% at $13.36 ¼ a bushel for January delivery, undermined by a
softening US cash market, besides continued benign conditions for the South American
crops to be harvested early in 2014.
"There's talk that US crushers have done a good job of
covering needs through January and have placed more focus on selling production,"
Brian Henry at Benson Quinn Commodities said
values have hinted at weakening in many locations, while interior soybean
values have been mixed."
Furthermore, Chinese soy prices overnight were not too
inspiring, with soymeal for May closing down 0.3% at 3,361 yuan a tonne on the
Dalian, where May soyoil eased 0.2%
to 7,226 yuan a tonne.
In Chicago, soymeal for January shed 0.6% to $436.10 a
tonne, while soyoil for January dropped 0.3% to 40.29 cents a pound.
Elsewhere, Kuala Lumpur palm
oil was weak too, down 0.5% at 2,618 a tonne, weakened by softness in rival
vegetable oil soyoil but also by data showing a fall of some 8,200 tonnes, to
774,207 tonnes, month on month in imports by India, the top buyer, the first
decline since August.
Movement in grain markets later may depend on the results of
US export sales data for last week, expected to come in at 300,000-500,000
tonnes for wheat and 600,000-750,000 tonnes for corn.
For soybeans, sales are expected at 750,000-950,000 tonnes.