If Valentine's Day could not bring love for corn futures,
Chicago's benchmark March lot in the last session notched up
its 10th successive negative close, matching its longest losing
streak since 1965.
Indeed, it has yet to record a positive close in February,
undermined by a turn for the better in South American weather, which has
prompted the removal of some risk premium, besides by the growing focus on the
US 2013 crop, and expectations for a huge one.
This focus is to get even sharper next week, when the US
Department of Agriculture, at its annual Outlook conference, unveils its first
formal estimates for the crop, widely expected to show a record harvest of well
over 14bn bushels.
'Sharp plunge may be
But on financial markets, of course, a collapse in investor
confidence can prove a strong bullish signal – if timed right.
"Bulls are starting to give up hope - probably time to buy,"
Mike Mawdsley at Iowa-based broker Market 1 said.
And actually there was more than contrarian thinking
supporting the case to buy up the grain.
On Thursday "futures did trade an inside day", meaning that
its high and low were within the boundaries of the previous session, "and the rate
of decent has slowed", Mr Mawdsley said.
"One thing March corn did on Thursday, was to fail to take
out the previous day's low for the first time in two weeks.
"Don't get the party hats out yet, but at least the sharp
plunge may be over for a tad."
Another reason to get hopeful for a positive performance, on
Friday at least, is the long weekend ahead in the US, which is on holiday on Monday
for President's Day.
The prospect of three days without being able to trade often
sparks profit-taking and position closing, maybe especially so when the turn in
South American weather forecast is so important for prices.
"A supportive tone heading into the three-day weekend would
not surprise," Ben Bradbury at Benson Quinn Commodities said.
Furthermore, not all the newsflow on corn fundamentals, with
US ethanol plants continuing to restart as margins recover.
Southwest Georgia Ethanol was the latest to say it was
taking an ethanol site out of mothballs, bringing to five the confirmed plant
being brought back on line.
Indeed, some analysts have been cautioning that the drop in
corn prices is not justified fundamentally, including Standard Chartered's Abah
Ofon who warned on Friday that the sell-off had been "overdone".
"Weather risks remain, and a repeat of last year's US drought
this summer could reverse the current bearish price direction, "he said.
While cutting forecasts for corn futures, to $6.80 a bushel in
the last two quarters of 2013, "we remain more bullish than the futures curve,
particularly for corn for the second half of the year.
"Any further price declines would present a buying
In fact, unusually, the March contract did not present any
price declines on Friday, at least as of 09:40 UK time (03:40 Chicago time), when
it stood 0.9% higher at $7.00 ¾ a bushel.
Its low for the day matched its close of the last session.
And that recovery allowed other crops to make a brighter
start too, including fellow grain wheat
which added 0.9% to $7.38 ¼ a bushel.
There is some feeling that wheat has been restrained not
just by the direct effect of corn's decline, but by an indirect force of
investors hedging long corn bets with wheat shorts, so hastening wheat's
'High profile trades
Furthermore, US wheat exports have perked up, hitting
706,000 tonnes last week, the best result bar one in seven months.
OK, not all observers were impressed, with Benson Quinn Commodities
saying that "the prospect of reaching the US Department of Agriculture export
estimate for 2012-13 are dim", even while acknowledging that the latest data
were ahead of the weekly pace of 550,000 tonnes needed to hit that goal.
"The demand for US wheat has gotten better, but high profile
trades remain elusive as global traders continue to source supplies from other
originations," the broker said.
Still, with Australian wheat exports hardly priced to go, raising
doubts over the country's official shipment estimate, might the US gain from
In Australia itself, Commonwealth Bank of Australia analyst
Luke Mathews said that "the improvement in export sales will encourage the
bulls in the wheat market", also flagging the dispute over the size of China's
wheat harvest, as highlighted by Agrimoney.com earlier in the week.
The laggard among the major Chicago crops was soybeans
which, besides facing reviving hopes for South American crops, saw
disappointing weekly US export sales numbers.
Indeed, for 2012-13, the number was a negative 109,200
tonnes, as buyers cancelled orders, largely either in favour of South American
supplies, or delaying purchases until later in the year, when the futures curve
shows far cheaper prices.
"Further softness in US soybean export sales is likely over
the coming weeks as importers switch purchase to South American origin," Mr
Earlier in the week, USDA analyst Mark Ash cautioned that "it
appears that export demand for US soybeans may be tapering off sooner and
faster than domestic demand.
"Supporting that conclusion is a steady narrowing of the
cash price spread between Gulf ports and inland processors in January."
Chicago soybeans for March were 0.1% higher at $14.19 ¼ a
US weekly export sales were better for cotton, reaching 357,000 running bales, three times the figure of
the previous week, and encouragingly for bulls, led by purchases by China.
There have been concerns that China's huge existing inventories
might reduce its appetite for US fibre, but the relative cheapness of foreign
supplies is stoking the appetite for imports.
Still, investors displayed a little "buy the rumour, sell the
fact" thinking, letting New York March cotton fall 0.4% to 80.71 cents a pound.
Rebound from two-year
New York raw sugar,
meanwhile, recovered from its close of 17.94 cents a pound in the last session,
for March delivery, the lowest finish for a spot contract since August 2010.
"In that year, the sugar market dropped to a low 13 cents, a
reminder to the current market that much lower prices are still possible," Mr
Mathews said, flagging the expectations of a large Brazilian crop, which have
been highlighted by Macquarie.
Still, with some forecasters believing sugar prices are so
low that cane will increasingly be used to make ethanol instead, the contract
rebounded 0.8% to 18.08 cents a pound.