PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 08:45 GMT, Friday, 10th Jan 2014, by Agrimoney.com
Morning markets: corn, soy stabilise as slew of data nears

It isn't just agricultural commodities which are struggling so far this year.

Raw materials 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 data

Palm oil had the extra headwind of some bearish data on the vegetable oil from Malaysia.

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.

While production 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 stocks too.

One broker termed it the "second most important" report day of the year (without clarifying what the most important is. Suggestions to inquiries@agrimoney.com).

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.

'Brace yourself'

"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 and soybeans."

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.

Wheat revives

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 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 a bushel in Kansas City.

DDGs debate

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.

Indeed, rival 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).

"Chinese authorities 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 DDGs approvals."

'Heavy burden'

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 a bushel.

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