It isn't just agricultural
commodities which are struggling so far this year.
broadly have had a weak start to 2014, down more than 3% so far, as measured by
the CRB index, to its lowest close to the last session since June 2012.
And they had some
excuse for further losses on Friday after Chinese trade data showed the pace of
growth in exports from the world's second-largest economy slowing to 4.3% last
month, below forecasts of a 5% figure and the 12.7% recorded for November.
It was enough to
unsettle stock markets a little, with Shanghai stocks falling 0.7%, and Sydney
shares by 0.2%, although the Nikkei index recovered to close up 0.2%.
Palm oil had the extra headwind of some bearish data on the vegetable oil from
Malaysian palm oil
stocks rose month on month in December by 0.3% to a nine-month high of 1.99m
tonnes, defying expectations of a small fall to 1.96m tonnes.
tumbled 10.4% to 1.67m tonnes more steeply than investors had expected, exports
fell too, by 1.4% to 1.53m tonnes, the Malaysian Palm Oil Board data showed.
And there was some
more negative news on exports too from cargo surveyor ITS, which said that
shipments so far this month have tumbled by 21.5%.
Palm oil for March
fell 1.0% to 2,513 ringgit a tonne in Kuala Lumpur as of 08:40 UK time (02:40
Chicago time), meaning the front contract has lost 5.5% so far in 2014, in
which it has yet to record a positive session.
'Second most important'
But the main data
barrage for agricultural commodity investors comes later, when the US
Department of Agriculture releases not only its monthly Wasde crop report, but data
on US winter wheat seedings and grain
One broker termed
it the "second most important" report day of the year (without clarifying what
the most important is. Suggestions to firstname.lastname@example.org).
Richard Feltes, at
broker RJ O'Brien, said that the data slew was "arguably the most important
until the March 31 planted acreage/quarterly stocks report".
And often the
stocks report alone sparks considerable volatility, being notoriously difficult
to predict, with Bill Tierney at AgResource estimating the average different between
the actual corn stocks number and forecasts at a significant 240m bushels.
"Tonight's USDA reports will likely result in significant
market volatility, particularly given the trade currently has extremely bearish
expectations," Luke Mathews at Commonwealth Bank of Australia said.
Mr Feltes added: "Brace
yourself for much larger than normal daily price moves tomorrow in both corn
But can the reports
inspire much volatility when willingness to buy may be muffled by growing hopes
for the rebuild in world crop inventories, while on the bearish side, investors
appear to have got their revenge in early, in the falls so far this week?
"Nothing on Friday's
reports alters the long term bearish bias for December corn, November soybean
and December wheat futures," Mr Feltes said.
Still, there was
some evidence in early deals of investors with short positions, who have been
on something of a roll so far this year, opting for the safe option and banking
profits, helping wheat add 0.1% to
$5.84 ¾ a bushel in Chicago for March delivery.
Buying by index
funds during their annual portfolio reweighting progress may be "no match for
the current downward trend", Benson Quinn Commodities said, with prices down
more than 3% so far this year.
But the potential
for a spike in prices remains, given speculators' near-record net long position
in Chicago wheat futures and options, which needs buying to resolve and take
profits on, and some weather threats.
Besides the US cold
snap, believed to have caused some damage to more southerly crops, the low
levels of snow cover in Russia and Ukraine could yet prove costly if more
typical winter weather returns.
In fact, hard red
winter wheat, grown largely in the southern US Plains, maintained its outperformance,
adding 0.6% to $6.42 ½ a bushel in Kansas City.
Soybeans gained too, up 0.3% at $12.78 a bushel for March delivery, regaining
their 200-day moving average, despite some negative pull from palm oil.
vegetable oil soyoil fell 0.1% to
37.92 cents a pound in Chicago for March delivery.
But soymeal, the other main product of
soybean processing, gained 0.6% to $416.90 a short ton for March, helped by the
stability in the price of rival feed ingredient distillers' grains, as ideas waned of heavy Chinese rejections of
US cargoes (as per corn, from which distillers' grains are made).
will continue to inspect distillers' grains (DDGs) for MIR 162," the Beijing-unapproved
corn variety behind the corn cargo rejections, "but there has been a
willingness to consider the argument that the concerns raised with MIR 162 in
grain are not relevant to DDGs", the US Grains Council said.
"This has led to
some apparent new flexibility in the testing protocols, which may facilitate
Still, corn itself
still remains surrounded in the MIR 162 debate, besides facing downward pressure
from a growing willingness by US farmers, in the new tax year, to sell, and
with plenty more potential supplies to come.
"Corn carryout will
still be very abundant in the US and we have 4-6 months until we can get to the
next potential weather market," one US broker said.
"The large amount
of unpriced corn in the bin will likely come to market in spring/summer.
"In our opinion
this will continue to be a heavy burden on corn that will severely limit the
chances for rallies," the broker said, adding that "the last time we were
looking at near 2bn bushels for a carryout was 2009 and prices averaged much
lower than they are currently".
Corn for March
stood 0.2% lower at $4.11 ¼ a bushel.