Wheat. Who wants
Seriously. In some parts of the US physical market, at
least, the grain is not proving as popular as it is on Chicago's futures
CHS Hedging noted that, with the cold winter still making
itself felt, "it could be tough for elevators to get it moved with the current
"There is talk of going to no bid for nearby wheat as
elevator space is getting pretty tight."
'Still short wheat'
But that did not stop the grain extending gains in futures
markets, as funds continued to reverse their net short position in Chicago
contracts which persisted until at least last week. (Updated information will
be released tomorrow.)
In fact, funds were "still short wheat" as of Wednesday
morning, according to CHS.
And the two main fundamental drivers of the rally, as in the
Ukraine crisis and the concerns over dryness hampering US winter wheat
seedlings, remain intact, even if there remain doubts as to how much support
these really offer.
"The market continues to talk about the Ukraine situation
and less than ideal crop conditions in the US, but neither of these factors are
new," Luke Mathews at Commonwealth Bank of Australia said.
"And importantly, the pace of grain exports from both the
Ukraine and Russia continues at breakneck speed. "
CHS noted reports that Ukraine's farmers had managed a
creditable 4% of spring sowings so far, "and that they have been a recent
exporter of wheat".
Traders at a major European commodities house flagged that Crimea,
at the centre of the Ukraine crisis, "accounts for a tiny proportion of the
Ukraine's grain production, 1.2% in 2013".
"But psychologically, the conflict is supportive," they
Besides, wheat's chart appeal has improved massively as it
has broken above it 200-day moving average, with further support potentially on
the cards as its 10-day and 20-day moving averages move up through the
Chicago's wheat May contract, up by roughly one-quarter in
six weeks, added 1.8% to $6.96 1/4 a bushel as of 08:25 UK time (03:25 Chicago
time), hitting a fresh four-month high.
'Sold in a big way'
What was impressive this time was that the gain was
accompanied by some headway in soybeans
The latest leg up in wheat has been driven in part by the
unwinding of "long soybean, short spreads" which proved popular, and
profitable, late last year and early in 2014.
"Funds sold soybeans and bought wheat on Wednesday in a big
way," Mike Mawdsley at Market 1 said.
CHS said: "As much as 3% of the hike in wheat prices was
said to be from unwinding soybean/wheat spreads that were put on recently."
'Shift in sentiment'
But soybeans for May, looking for their first positive
session this week, were 0.6% higher at $13.95 1/4 a bushel too.
And this despite continued worries over Chinese
cancellations of import orders.
"Fears of a slowdown in the pace of Chinese oilseed
imports/use is currently spooking the market," CBA's Luke Mathews said.
One US broker said that the soybean basis in the Brazilian
port of Paranagua "is down about 30 cents in only three days," because of
Chinese buyers ditching orders.
"This has caused a shift in sentiment in Chicago."
'Anything but seamless'
At Benson Quinn Commodities, Brian Henry said that margins
for Chinese soybean crushers "based on prices paid for vessels being unloaded,
have gone from bad to worse".
Indeed, "there is talk that Chinese crushers are offering soymeal to potential Pacific Rim
customers," given the soft state of the domestic market.
"Meanwhile, their process of getting out of [soybean] purchases
is anything but seamless as markets interested in buying Chinese soybean offers
don't appear to be deep."
And there was further cause for unease over China with the
release of official data showing that the country's industrial output rose 8.6%
in January and February, while retail sales increased 11.8% from the year before,
both coming in below market expectations, if decent figures by Western
Still, there was some reassurance for soybean bulls in that
Chinese soybean prices overnight failed to drop significantly, settling down
0.6% at 4,354 yuan a tonne for September delivery.
And the May contract did manage a late recovery in the last
session, enough to reclaim its 20-day moving average.
Furthermore, the market may be finding some delayed support from
Conab's downgrade in its estimate for the Brazilian soybean crop to 85.4m
tonnes, from 90.0m tonnes.
Elsewhere in the oilseeds complex, palm oil regained poise too, gaining 1.0% to 2,849 ringgit a tonne
in Kuala Lumpur, as a 3% sell-off in the previous two sessions was deemed an
Rival vegetable oil soyoil
for May gained 0.6% to 43.66 cents a pound in Chicago.
'Producer selling muted'
Back among grains, corn
also rose, gaining 0.9% to $4.93 a bushel for May delivery, getting a tow from
wheat and concerns over Ukraine, the third-ranked corn exporter.
Further a drop in US ethanol stocks to a modest 15.9m
barrels, down 700,000 barrels last week, was seen as a potentially bullish
"There could be further effort to process more corn into
ethanol so as to replenish US ethanol supplies. This would point towards an
increase in demand for US corn," Vanessa Tan at Phillip Futures said.
Benson Quinn Commodities also noted less pressure from the
US cash market, saying that "the pace of producer selling remains muted after
good volumes were moved over the course of the past two weeks".
Cash markets were on Wednesday "steady to higher along the
But of course, movement later in grains and soybeans may
depend much on weekly US export sales data, expected for corn at 650,000-900,000
tonnes for old crop, and 100,000-250,000 tonnes for new.
For wheat the expectations are 350,000-550,000 tonnes for
old crop and 0-200,000 tonnes for new, and for soybeans 125,000-400,000 tonnes
and 175,000-350,000 tonnes respectively.