Grains started the week on the front foot, for a change,
amid ideas that values may have fallen enough for now to account for huge US,
and world, harvests.
It is not that the US crop picture has deteriorated, remaining
pretty near ideal.
MDA said that weekend US Midwest rainfall was "near
expectations", while in the outlook saying that "cool temperatures will support
soybean growth and late corn pollination".
The centre of what concerns there remains the south west of
the Midwest, where "moisture will decline".
However, there are a few factors to make investors think
twice about extending short positions – one being the extent they have put in
Data late on Friday showed hedge funds cutting to 70,000 contracts
their net long in Chicago corn futures
and options, down from more than 260,000 lots in early May.
In Chicago wheat,
they extended their net short close to 55,000 contracts, getting back close to
the peak net short of 73,000 lots reached six months ago.
In soybeans, they
lifted their net short above 18,000 contracts, the highest for the oilseed
Extreme net short or net long positions raise questions over
the appetite for speculators for raising such bets further.
'We have seen
Besides, there are growing signs of demand at these levels,
with last week bringing a spate of announcements by the US of large export
Friday, for instance, brought export sales of 269,084 tonnes
of corn to Mexico, which bought 134,700 tonnes of soymeal too, plus 360,000 tonnes of soybeans sold to China.
"We have seen business pick-up at these price levels," Mike
Mawdsley at broker Market 1 said, if cautioning that a rally may have trouble
finding legs unless supported by revived production concerns too.
Still, those are growing in wheat, in terms of European
Union production, and the increasing concerns over rain damage to crops in some
countries such as Romania, a big supplier to Egypt, and France, the bloc's top
producer and exporter of the grain.
Jean-Xavier Mullie, the chief executive of French grain co-operative
Agora, wrote that "panic in the market is growing" over the extent of quality
downgrades to the country's wheat from late rainfall.
One major concern is the Hagberg falling number, a key
quality measure, which is below the typical 220 for most of the crop.
Major North African markets such as Morocco and Algeria
demand a figure of at least 230.
"Most wheat in France is running between 180 and 200 falling
numbers," CHS Hedging said.
Technical factors are also offering some deterrent to
sellers, with grains widely deemed to have been oversold, and with many
contract moving back above some of their moving averages.
December corn, for instance, touched its 10-day moving
average, at $3.76 ¼ bushel, for only the second time this month before easing
back to $3.75 ¾ a bushel as of 09:20 UK time (03:20 Chicago time), up 1.1% on
November soybeans gapped higher – with its low so far today,
of $10.90 ¼ a bushel, above the high of the last session of $10.87 ¼ a bushel –
and the kind of factor to excite chartists, especially if the gap is not filled
later in the day.
The contract, at the other end of today's trading range,
came 0.25 cents from regaining $11.00 a bushel, before easing back to $10.96 a
bushel, up 1.2% on the day.
Wheat lagged a bit, adding 0.4% to $5.40 a bushel in Chicago
for September delivery, and by 0.4% to $6.33 ¾ a bushel in Kansas City for
But then, fundamentals are not going all its way, with
analysis Ikar upgrading, again, its forecast for the Russian wheat harvest,
this time by 1.2m tonnes to 57.5m tonnes.
'A little less
Among soft commodities, cotton
got off to a decent start, adding 0.6% to 65.77 cents a pound in New York for
December delivery – recovering from the contract low set in the last session.
Friday's low was also the lowest for cotton, on a
nearest-but-one-contract basis, since October 2009, raising hopes for demand
One reason for hope for cotton bulls is that the December
contract is now comfortably below future lots, John Robinson, cotton marketing
specialist at Texas A&M University, said.
"While the forward spreads don't cover the cost of storing
cotton, at least it is a move back towards normal economic relationships," Dr
"And that move suggests things might be a little less
bearish for the future."