It is equities
which look best placed to steal the limelight on Friday.
The S&P 500, the US benchmark share index, just needs to
add two points to close at its highest ever level, beating the 1,565 recorded
in October 2007 (and up from the March 2009 low of 666).
Many foreign markets were doing their bit to help, with
Tokyo stocks closing up 1.5%, and Shanghai stocks up 0.4%, although European
stocks opened mixed.
"New highs in equity markets remind everyone that stocks are
the darling of asset class managers - not commodities and especially not the
grains until or unless a legitimate weather threat emerges," Richard Feltes at
RJ O'Brien said.
For those investors still left in agricultural commodities,
who haven't turned tail and fuelled shares' relentless rise of 2013, the questions
were slightly more mundane
Like, could wheat
manage a seventh successive day of headway, cotton build on its first close above 90 cents a pound since April,
or soybeans manage their first
headway since Monday?
In fact, there was a bit of a theme of "the last shall be
first" on agricultural commodity markets, with the laggards finding buyers, and
the leaders sellers, as often happens on a Friday, as investors book profits before
Brian Henry at Benson Quinn Commodities said, thinking of
wheat: "I wouldn't be surprised to see some profit-taking on a Friday after a
nice move higher this week."
(… if only profit-taking to raise cash for moving into
equities, of course.)
'Lack of good alternatives'
That temptation overpowered the underlying theme that,
according to Mr Feltes, "ag markets continue to be responsive to demand, and on
that front wheat is leading the pack".
The strong weekly US wheat export data on Thursday, the best
for two years, are one factor in that equation.
At Commonwealth Bank of Australia, Luke Mathews said: "Traders
are encouraged that the 10-15% slide in US wheat prices during February, which
resulted in US wheat becoming the cheapest in the world, has uncovered strong
Benson Quinn's Mr Henry said that there was also "talk that
Brazil has purchased some cargos of US hard red winter wheat and Iran may
secure a couple of cargos of hard red winter wheat".
At Phillip Futures, Joyce Liu flagged a "lack of good or
potential alternatives" to US supplies, with Russia revealing plans to buy some
6m tonnes from the domestic market this summer, "greatly reducing the wheat
available for exports".
"India, although now willing to sell wheat in the
international market, has refused to lower its prices to levels compatible and
competitive with the international market," Ms Liu said.
'$20 a tonne under
Furthermore, in the US itself, there appear continuing signs
of wheat replacing corn, given its relative cheapness.
There was the late cancellation of 545 soft red winter wheat
receipts in Toledo, continued talk of livestock feeders ditching Argentine corn
imports in place of domestic wheat.
RJ O'Brien's Mr Feltes said: "We look for ongoing pressure
to substitute wheat for feed grains in coming months - especially if an
initially cool spring weather pattern triggers even minor corn planting delays."
A contact "reports wheat delivered into the Texas Panhandle
is trading $20 a tonne under corn amid reports that some feedyards are moving
toward a 50:50 corn:wheat ration", he added.
Still, long-term, of course, "the bigger picture still
remains bearish as improving crop weather in the US remain the biggest factor",
Ms Liu said.
And with investors in the mood to book profits, May wheat,
on its first day in the spot position, following the expiry of the March lot,
fell 0.8% to $7.18 ¾ a bushel as of 09:30 UK time (04:30 Chicago time).
And that was little help to corn either, although the grain does continue to gain support from
the 100m-bushel upgrade a week ago by the US Department of Agriculture to
estimates for domestic livestock feeding.
The May contract shed a modest 0.3% to $7.14 ¼ a bushel,
nearly regaining a premium over wheat, although Ms Liu urged investors to watch
In 2011-12, "when wheat traded at a discount to corn for
almost a year, the spread narrowed very quickly each time it turned negative,"
"Hence, even if wheat prices were to trade below corn for
another one-to-two months, as is the case suggested by fundamental factors,
there may be ample opportunity for spread trading," and exploiting sharp
reversals, as indeed happened in the last session.
Argentine barn doors
It was soybeans
which fared best this time in Chicago, adding 0.3% to $14.39 ¾ a bushel for
May, managing to stay above a confluence of moving averages just below,
including the 75-day, 100-day and 200-day lines.
While there is talk about China moving orders from Brazil,
whose exports are shrouded in logistical hiccups, to Argentina, that may not
offer more than a temporary solution, and potentially shift buying pressure
back to the US.
Argentina's economic problems, notably rising inflation and
the threat of devaluation, is encouraging its growers to stockpile crops,
meaning potential supply issues here to.
"The Argentine soybean harvest is proceeding at a decent clip,
but the exporter may have an issue with ownership," Kim Rugel at Benson Quinn
"Producers have been reluctant sellers as sales are heavily
taxed and ownership can be loosely viewed as a hedge against inflation.
"The trade estimates that 10 to 15% of Argentina's new crop production
has been marketed by producers. Ordinarily, this figure would be closer to 30
Firm in Asia
As an extra support too, soy in China, the top soybean
importing country, gained ground, adding 1.3% to 4,768 yuan a tonne for the
bean itself on the Dalian exchange, for September delivery.
gained 0.2% to 3,288 yuan a tonne, and soyoil
1.4% to 8,136 yuan a tonne.
Elsewhere in the oilseeds complex even Kuala Lumpur palm oil managed a better day rising
1.7% from the last session's two-month low to stand at 2,404 ringgit a tonne.
Data from cargo surveyor showing a small rise, of 0.2%, in
Malaysian palm exports so far this month steadied nerves and encouraged bargain
Oilseeds may later on move to the tune of monthly data on
the US soybean crush from the National Oilseed Processors Association, expected
to come in at about 140m bushels.
Among soft commodities, the reversal theme sent New York cotton for May 0.2% lower to 90.68 cent
And this despite talk that China is to issue extra cotton
import quotas for mills who are having trouble finding the fibre domestically
at reasonable rates, and so losing competitiveness to foreign rivals.
While China has oodles of cotton in store, it has been
bought at higher prices, and is unavailable at current world prices.
Still, there is some sense of vertigo over New York futures
up more than 20% already in 2013, at their highest levels since April.