It was a not unreasonable expectation that corn might fare
better on Monday, after its drubbing last week.
After all, hedge funds are a frame of mind to close short
positions, on which they are holding gains, as indicated by Chicago futures'
fall back below all major moving average lines.
(For investors who have held corn shorts for 200 days, the
profit looks like a healthy $0.80 per bushel or so.)
That time of year
Data late on Friday showed hedge funds cutting their net
short in Chicago corn futures and options by more than 26,000 contracts in the
week to last Tuesday, driven by a cut in short positions (rather than an
increase in long holdings).
Year ends tend to be a time which encourage funds to take
profits, an extra stimulus being the approach of the index fund rebalancing
exercise, which will give, temporary, support to 2013's commodity losers such
as corn as portfolio weights are readjusted to mandated levels.
Ben Bradbury at Benson Quinn Commodities said ahead of
trading: "There's nothing fundamentally supportive in the corn market right now.
"But I'll vote for sideways to lower trade as a slow
producer sell rate and the likelihood of additional short covering by the funds
heading into year-end should offer some minor support."
However, China fears kept headway off the agenda in early
These jitters, in agricultural commodity markets, concern
the rejection of cargoes of US corn over contamination with an unapproved (by
Beijing) genetically modified variety.
Ideas that China will "continue rejecting US cargoes of corn
after the unapproved strain was discovered" should "continue pressuring US corn
prices for the week ahead", Vanessa Tan at Phillip Futures said.
"The strict checks that China will implement on incoming US cargoes
of corn could result in further rejections or discourage US corn imports."
There are growing fears too that the curbs may spread to
distillers' grains, or DDGs, a feed ingredient produced as a byproduct of
As an extra China concern too, HSBC's "flash" manufacturing
survey - a preliminary look at monthly sentiment in the sector - fell to a
three-month low of 50.5, down 0.3 points from the November reading.
Although the figure was still above 50.0, indicating growth,
the decline was felt in stock markets, with Shanghai stocks losing 1.6%, and Hong
Jong ones 0.6%.
While there is support to corn prices from decent US ethanol
margins, and the slow pace of farmer selling, futures for March fell 0.7% to
$4.22 ¾ a bushel as of 09:55 UK time (03:55 Chicago time).
That weighed on wheat
too, which had the extra pressure, from an Iraq tender, of confirmation of the
difficulty US supplies face competing on the world market.
"Ample supplies of exportable wheat throughout the world
keep the wheat market under pressure, as Australia and Argentina harvest", CHS
The cheapest offer Iraq received was from Australia, at
$339.70 a tonne c&f.
US wheat, liner out, was priced at $358.87 a tonne, nearly
$20 a tonne more expensive, although it was at least more than $2 a tonne
cheaper than Canadian supplies, at $361.05 a tonne.
'Continuing to lose competitiveness'
Not that Phillip Futures'
Ms Tan was convinced that US wheat prices will recover for now.
"For the week ahead, we are bearish on wheat as we may see
further pressure from US wheat continuing to lose its competitiveness to strong
competitors such as Canadian and Australian wheat," he said.
Benson Quinn Commodities said that "it is hard to recommend
being short wheat with the market so oversold", and hedge funds nearly 70,000
lots net short as of last Tuesday – a record, questioning how much unfulfilled
selling pressure there remains out there.
"But there really isn't anything to indicate we are done
Especially when Russia raised to 95m tonnes, from 90m
tonnes, its target for next year's domestic grains harvest (mainly wheat).
Wheat for March was 0.6% lower at $6.25 a bushel in Chicago.
'Could be overbought'
dropped too, down 0.3% at $13.23 a bushel for January delivery, amid concerns over
China imports here too, although more of the prospect of strong South American
crops prompting buyers to cancel orders and switch to lower priced Brazilian
"Many traders continue to fear that China may be close
switching substantial purchases from US to South America for February forward
positions," CHS Hedging said.
"There is also some talk that nearby needs could be
That said, prices in China itself traded firmer, with Dalian
soybeans for May adding 6.3% to 4.492 yuan a tonne, and soymeal for May 0.8% to 3,351 yuan a tonne, although soyoil, the other main soybean-processing
product, dropped 0.8% to 7,036 yuan a tonne.
Indeed, there was some life elsewhere in the oilseeds sector
too, with Winnipeg canola for January
adding 0.7% to Can$443.00 a tonne, recovering from its lowest close in three
The rapeseed variant has been pressed by Canada's upgrade of
its domestic crop to a record 18m tonnes, besides concerns that it too may fall
foul of Chinese import hiccups, as it has done in the past.
In Kuala Lumpur, palm
oil for March gained 0.5% to 2,582 ringgit a tonne.
This despite concerns that the narrowing discount to rival
vegetable oil soyoil will depress demand, especially at a time when northern
hemisphere biodiesel consumption is limited by winter.
(Biodiesel made from palm oil solidifies at a relatively
'Prices will reverse
Among soft commodities, robusta
coffee was weak in early deals, amid continued doubts over the staying
power of a market price which revived prices last week to three-month highs.
With Vietnam heading towards the close of a record harvest, "supply
of robusta coffee is there, and therefore we expect prices to reverse down
anytime", Phillip Futures' Vanessa Ta said.
London's March contract was 1.1% lower at $1,780 a tonne.
Cotton for May dropped
too, undermined by an industry report that Chinese cotton imports fell 43% to
173,100 tonnes last month, encouraging profit taking after a three-week rally
Cotton for March stood down 0.6% at 82.74 cents a pound in New