Agricultural commodity futures got a bit of revenge on
Thursday, by rising – even corn, which made an effort at breaking its losing streak,
after nine successive sessions of negative closes.
After all that talk of money moving from commodities to
equities, shares had a sluggish
start, showing small falls on European exchanges, and expected later to open a
little weaker in Wall Street too, after a reversal in the positive flow of
Preliminary data for the fourth quarter of 2012 showed that
the French economy shrank by 0.3%., more than economists had expected, with the
German economy shrinking more than forecast too, by 0.6%.
This followed Wednesday's US retail data which disappointed
some analysts too, in showing growth of 0.1% for January, down from 0.5% for
'About done selling'
However, crops managed positive starts in both Chicago and
New York, despite dollar strength,
fuelled by euro weakness on the economic data, making dollar-denominated assets
The greenback added 0.3% against a basket of currencies.
A big factor in ag commodity gains was the idea that a wave
of fund liquidation, whether or not spurred by a switch to shares, was waning.
At RJ O'Brien, Richard Feltes said that recoveries in the
last session "are suggesting that the row crop liquidation under way since late
January – at least for now."
"Technical targets mean little at this point, it's about
money flow - and it's been flowing out," Mike Mawdsley at Market 1 said.
"But futures appear to be trying to find a bottom here."
'Maybe funds are
about done selling'
In wheat, for instance, did a late recovery in the last
session, and the net purchase by funds of an estimated 1,000 Chicago wheat
contracts, mean that this tide is at least slowing?
"Maybe funds are about done selling wheat and ready for a
little short-covering like we witnessed on Wednesday."
At Benson Quinn Commodities, Brian Henry said: "The little bit
of buying being credited to the funds is a sign that the recent pattern of fund
selling is coming to an end.
"For the time being, making easy money being short the wheat
market may be over."
Indeed, "the speculative seller may shift more of his focus
towards covering shorts if a corn
market that has been down nine days in a row can find some traction".
'On the side of the
OK, bullish sentiment was hardly rampant, with Mr Henry
saying that fund buying in wheat "probably had more to do with the oversold
nature of the market" than anything fundamental.
"Daily and weekly charts continue to show momentum on the side
of the bears," he said.
Mr Mawdsley said that, in Chicago in general, "rallies are
to be sold", echoing not uncommon advice from brokers for producers to sell
into price strength.
However, there were some more concrete ideas behind price
'Weather fears discounted'
One was that short-covering was being encouraged by the
prospect of a US long weekend (with markets closed on Monday for President's
Day) and with it an extra day to see a change in the South American weather
outlook but not be able to trade it.
Indeed, with prices already factoring in significant
improvement in Argentine and Brazilian conditions, any real market-moving change
in the forecast is likely to be from it turning for the worse, from a farmer's
"Relatively stable price action on Wednesday suggests that
row crop markets have largely discounted mounting evidence that South American
February weather conditions will be largely favourable," RJ O'Brien's Mr Feltes
'Crop concerns will
But technical factors offered more hope for bears, with
markets not only oversold, but appearing, after all, to gain some support from Fibonacci
levels discussed on Wednesday.
Luke Mathews at Commonwealth Bank of Australia said that "prices
rallied after dropping to technical support" at the 76% Fibonacci support level
at $7.22 a bushel.
And investors may have overreacted too to talk of rainfall
on the US Plains, where drought has sapped winter wheat seedlings.
"The latest weather reports suggest rainfall in the US
Plains may have disappointed expectations, meaning existing crop concerns will
continue," Mr Mathews said.'
Furthermore, in the oilseeds complex, there has been
continued comment about an Oil World upgrade to 3.0m tonnes, from 2.75m tonnes,
in its forecast for European Union rapeseed imports, accompanied by a warning
that supplies are so tight that crushers may have to settle for rationing
"It remains to be seen, however, whether sufficient
quantities can be purchased from Australia and the Commonwealth of Independent
States countries to reach our estimate," Oil World said, in comments credited
with spurring a Can$6.60-a-tonne gain, to Can$628.60 a tonne, in Canadian canola prices in the last session.
Paris rapeseed for
May bounced 0.7% to E462.50 a tonne too.
That said, in Chicago it was the oilseed, soybeans, which continued to find it
difficult to establish a firm footing, easing 0.1% to $14.22 a bushel for March
delivery as of 09:50 UK time (03:50 Chicago time).
Wheat for March
was up 0.6% at $7.40 a bushel, extending a recovery from a seven-month low hit
in the last session, while corn for
March added 0.5% to $6.99 a bushel (bouncing from its close of the last session
exactly on a Fibonacci point).
A positive session for Chicago corn would represent its
first in February.
That said, whether it manages to hang on to gains may well
depend on US weekly export data due later, expected to show corn sales of 150,000-350,000
tonnes, at least matching the previous week's results, and soybean sales at
700,000-1.10m tonnes, down from 1.67m tonnes last time.
Wheat's sales are pegged at 275,000-400,000 tonnes, compared
with 300,800 tonnes the previous week.
"Wheat prices could continue rebound higher given a sound US
wheat export sales result tonight," Mr Mathews said.
'Only a matter of
In New York, raw
sugar for March added 0.2% to 18.26 cents a pound, helped by ideas of
growing demand for ethanol in Brazil, encouraged by policy changes, sending
more cane to making biofuel rather than the sweetener.
That said, FO Licht, the German-based merchant, said that,
with weather boosting prospects for Brazilian cane yields, it is "only a matter
of time" before prices fall below 18 cents a pound.
And New York cotton
for March added 0.4% to 81.12 cents a pound, if below an earlier high of 81.43
cents a pound, just above to its 20-day moving average, which it had trouble