Corn, which has
been making headway at closing it discount to wheat this month, gave back some of its progress in early deals.
In fact, wheat was trying to buck this month's losing trend in
Chicago, and head for what would be only its third positive close this month.
Of course this was only after the March lot, for a seventh
consecutive session, set a contract low, this time of $6.08 ¾ a bushel. That
was a fresh 18-month low for a spot contract too.
But corn fell even further, by 0.4% to $4.28 ¾ a bushel in
Chicago for March delivery as of 08:30 UK time (02:30 Chicago time) , giving back the 20-day moving average regained in
the last session, and which might have been expected to offer some technical
Not that there appeared much in the overnight news to
warrant a decline in corn futures.
Sure, China said it had rejected a total of 545,000 tonnes
in US corn cargoes as of December 19 on grounds of containing an unapproved genetically
modified variety of the grain, so-called MIR 162, a Syngenta trait.
That is equivalent to nearly 30% of expected imports in
November and December.
However, the market had earlier heard JC Intelligence peg
the reject figure at 600,000 tonnes.
And there is a hope of resolution, with US-China trade talks
Besides, South Korea appears to be buying a stack of the
One factor which was not so helpful was a 0.2% rise in the dollar, as investors react to the start
of easy monetary policy tapering as announced by the Federal Reserve this week.
A stronger dollar undermines prices of dollar-denominated
commodities by making them less affordable to buyers in other currencies.
However, there are also some fund moves going on involving
fund positioning, and seasonally low trading volumes, which make price moves
hard to predict.
"The grain and oilseed markets have clearly moved into the 'holiday
mode'," Darrell Holaday at Country Futures said.
One seasonal factor believed to be going on is fund closing
of short positions in corn, for profit-taking or otherwise.
"Fund rebalancing before the end of year may be behind a
portion of Thursday's corn price gains," broker CHS Hedging said.
"Funds are short corn and will need to buy corn to rebalance
fund positions and may want to book profits prior to the end of the calendar
In fact, the main index fund rebalancing is early in the
calendar year - meaning many other investors may be buying in anticipation of
index fund buying, besides taking healthy profits on short positions.
'Margins will be
If that stops, corn prices look vulnerable to falling back
on ideas of the huge US stocks left at the end of 2013-14, following a record
domestic harvest this year, and with decent South American harvests to come.
"You can come up with your own guess to next year's carryout
projection, but good luck finding a number remotely friendly," Mike Mawdsley at
Market 1 said.
"One firm I respect has their estimate near 2.6bn bushels
for corn and over 480m bushels for soybean carryout next fall.
"If you haven't done so yet, get your pencil out on 2014
crop breakevens. Margins will be razor thin."
OK, we get the message.
Wheat not in negative
at least managed to revert back to unchanged on the day, at $6.10 ¾ a bushel,
with its performance this year, now down more than 20% in Chicago on a front
contract basis, likely to mean some index fund buying here too.
OK, Germany revealed a 2.5% rise to 3.13m hectares in winter
But that was not too unexpected, and less than the European
Union average rise, although Strategie Grains on Thursday forecast that Germany's
actual wheat output will decline in 2014.
In fact, Toepfer earlier this week estimated Germany's
winter wheat area, the great majority of plantings, rising 3% to 3.22m
'Offers little hope'
Besides, there is nothing like a bit of capitulation to put
a market back on the front foot.
"At best, Thursday's price action offers a hint that a
legitimate correction is possible, but the trade needs more convincing that
wheat has value," Brian Henry at Benson Quinn Commodities said.
"The potential for a short covering rally exists. However, Thursday's
weak close did more chart damage, which offers little hope."
At Phillip Futures, Vanessa Tan said: "With lacklustre export
demand for US wheat, coupled with abundant global supplies, we remain bearish
on US wheat."
Furthermore, although Argentina has lifted by 500,000 tonnes
to 9.0m tonnes its forecast for the domestic wheat harvest, concerns over
strict curbs on exports remain.
too in Chicago, down 0.2% to $13.16 a bushel for March delivery, again a direction
that might be anticipated given the large long position that speculators hold
in the oilseed.
"Funds are long soybeans and we could continue to see some
profit taking before the end of the year," CHS Hedging said.
One big unknown is the weather in Argentina, with hotter and
drier conditions promoting talk of crop "stress".
However, many commentators remain sanguine over the risks.
Besides, Argentina's agriculture ministry increased its
estimate of Argentine soybean plantings to 20.8m hectares, from 20.7m hectares.
In New York, cotton
did better, adding 0.1% to 83.37 cents a pound for March, feeling a little more
support from US weekly export sales which, at 243,000 running bales, were up
39% week on week.
"Last week's result brings year to date sales to 70% of the
USDA's total marketing year estimate," with most of the year yet to go, Luke
Mathews at Commonwealth Bank of Australia said, "although
this lags the normal seasonal average of 73%".
Furthermore, stocks certified for delivery against New York futures continue to decline, dropping to 41,714 bales.
And Cotlook trimmed
its estimate for world cotton production in 2013-14 by 100,000 tonnes to 25.4m
Not a hugely significant downgrade in the scale of things, but
a downgrade nonetheless.