It is month-end. But if crops are to succumb to month-end
selling, which often happens by repute as funds tidy-up positions (before
injecting fresh cash at month beginnings), well, it was not too evident in early
Broadly positive general market sentiment helped, with shares, for instance, taking heart in Federal
Reserve boss Ben Bernanke's reassurances over continued easy US monetary policy,
and some decent US economic data too.
A gauge of US business plans spending rose by its most in
more than a year in January, while contracts to buy previously-owned American
homes approached a near three-year high.
Meanwhile, a well-received Italian debt auction eased
concerns, for now, of Italy's apparent political impasse upsetting the apple
Shares soared 2.7% in Tokyo, rising for a seventh successive
month, while gaining 2.3% in China, after a 1.3% rise in Wall Street's Dow
Jones Industrial Average overnight.
Agricultural commodities could not match that.
But they did start positively – and not just corn, which has become the centre for
attention for now given a squeeze on short positions in the March contract
which today begins the expiry process, meaning futures take on physical crop
"There is a surge in short-covering as investors seek to
cover their short positions before the first notice day for delivery today,"
Joyce Liu at Phillip Futures said.
"Traders are willing to pay significant risk premium for
old-corn crop for immediate delivery, which is getting rarer by the day. We
expect this to continue until the expiry of March futures," on March 14.
"Similar to soybeans,
markets expects no deliveries for corn today as farmers hold on to their
precious corn stocks or sell them in cash markets," which are offering higher
Still, corn this time was not the star of Chicago, in adding
a modest 0.3% to $7.11 ¼ a bushel for March delivery as of 09:45 UK time (03:45
Chicago time), and with the May contract struggling for gains at all, up 0.1%
at $6.95 ¾ a bushel.
It was wheat
which got out of the starting blocks best, adding 1.2% to $7.12 ½ a bushel for
March, so regaining its premium over corn, which it closed below for the first
time in, apparently, eight months.
The better-traded May lot gained 0.6% to $7.16 ½ a bushel.
And this was despite ideas that March wheat contracts might
see some deliveries against them.
"Expectations for deliveries are: corn, soybeans and soymeal
- zero. Wheat 0 -500-1,000?" Mike Mawdsley at Market 1 said.
Corn vs wheat
Of course, end-of-month position closing, meaning short covering in wheat given speculators' huge net short in the grain in Chicago, may be playing a part.
Nonetheless, the demand picture for US wheat is looking up, thanks
to its cheapness against fellow grains in the domestic, besides against wheat
in other countries.
"Increasing demand for wheat in place of corn is weighing on
the corn market," Benson Quinn Commodities said.
At FCStone, Rory Deverell said: "We note the wheat/corn
spread collapsing from over $1.00 a bushel to near flat these last three
months, ensuring greater volume of wheat use in the feed chain.
"Hard red winter wheat in south west Kansas is currently
indicated at $283.50 a tonne, a $26 tonne-plus discount to corn."
French vs US
Abroad, buyers seem to have their cheque books out at prices
down, in Chicago, more than one-quarter from July highs.
OK, not all the business is with the US, with Germany making
confirmed sales of 780,000 tonnes to Iran.
But French wheat "continues to hold a $33-a--tonne premium
to US soft red winter wheat," the type traded in Chicago, Mr Deverell said.
Egypt to return?
"Japan has picked up US soft red winter wheat for its feed
wheat, an indication of the cheap nature of current US offers."
With ideas of Argentina capping wheat exports after a
disappointing harvest, "Brazil will now source from the US".
And Egypt, which has been talking down its import needs, may
be back soon too, given stocks of 2.3m tonnes, less than half the norm of 5m-6m
"There are rumours they might ramp up their buying programme
on flat price break," Mr Deverell said.
Soybean prices, meanwhile, remained largely on hold,
awaiting news on Brazil's squeezed logistics, which appear to have taken over
from weather as the main market mover, in signalling the country's ability to
meet import demand, and so wean buyers off US supplies.
"Daily perception of Brazilian flow of grain from country,
into ports and into boats is the final dictator of price action," Benson Quinn Commodities
"Line-ups are seen expanding to near 11.5m tonnes of
capacity from 7m tonnes, and vessel delays are nearing 60 days from 45 days."
Chicago soybeans for March were 0.2% higher at 14.60 ¼ a
bushel, with the May lot up 0.2% at $14.41 ¾ a bushel.
As for movements later, weekly US export sales data may have
a large say, with the soybean figure expected at 750,000-1.0m tonnes, old crop
and new, up from a negative 60,000 tonnes or so last time.
(China has come back into the market, after its lunar new
Corn export sales are expected at 350,000-450,000 tonnes,
compared with some 380,000 tonnes the previous week.
And wheat's are expected at 400,000-600,000 tonnes, compared
with 755,000 tonnes.
'Supplies are in
US export sales may also have a bearing on cotton, whose newly-regained strength
has been predicated in part on ideas of firm Chinese demand.
New York's May contract added 0.1% to 84.44 cents a pound
for now, with the December lot up 0.1% at 84.81 cents a pound, after setting a
nine-month high of 84.90 cents a pound earlier on.
And New York raw
sugar managed a positive start, adding 0.2% to 17.87 cents a pound for
March and 0.3% to 18.14 cents a pound for the better-traded May lot.
Still, enthusiasm for the sweetener certainly does know
"Supplies, not just in Brazil but, around the world are in
abundance with no production problems at hand," Phillip Futures' Ms Liu said.
"We foresee the March sugar contract to remain below 18 cents
a pound today."