Shares made a mixed
start to Wednesday, showing small gained in Tokyo but a 1.0% loss in Shanghai –
a performance which might be taken as a good sign for commodities, if it deters investors from switching assets.
"I don't doubt that there is plenty of truth to ideas that
the hedge fund community is focusing capital on equities at the expense of
commodities," Brian Henry at US-based grains broker Benson Quinn Commodities said.
"It fits the trend," with much of what money is left in
agricultural commodities being biased increasingly towards short positions,
which profit when prices fall.
"The fact that more and, in most cases, bigger participants
are willing to put more capital at risk on the short side has not gone away,"
Mr Henry said.
Still, they weren't in early deals, when grain futures
Of course, that might only have been a touch of
profit-taking in these short positions, after the tumbles of the last session,
when both corn and wheat prices lost some 3% in Chicago.
And certainly, investors had cause to withdraw a touch,
given the imminence of key crop data which could prove market moving
experiences either way.
Later on Thursday, Conab, Brazil's crop bureau, will release
fresh estimates on domestic corn and soybean
And on Friday, the US Department of Agriculture will unveil
its monthly Wasde report on world crop supply and demand, a highpoint of the
agricultural commodities calendar.
(The USDA is also booked to release weekly US export sales
data later today, although there is the potential for these to be delayed,
after snows earlier in the week hampered government operations.)
The betting, however, has been on the Wasde lifting slightly
estimates for domestic corn and wheat stocks as of the end of 2012-13, while
trimming them for soybeans – one factor in the divergent performance between
grains and soybeans this week.
"The report is expected to show a small uptick in old crop US
grain inventories because of slower-than-expected offshore demand," Luke
Mathews at Commonwealth Bank of Australia said.
"Tonight's US wheat export sales report is therefore highly
If it happens, the report is expected to show US wheat
export sales at 350,000-550,000 tonnes.
For corn, the forecast is for a figure in the range of 450,000-600,000
tonnes, and for soybeans 900,000-1.25m tonnes.
In fact for wheat, Thursday had already bought some positive
news for the US, in a purchase by Taiwan of 94,000 tonnes of American supplies.
However, that has to be weighed against the prospect later
in the day of India agreeing to permit the export of a stack of extra wheat,
potentially 5m tonnes, as it seeks to run down its huge inventories.
"The rising export potential of India for the end of the 2012-13
campaign leads to a re-evaluation of the competitive environment from the US or
Europe perspective, especially on Asian destinations," consultancy Agritel said.
At least wheat has some technical support in Chicago, with
Mr Mathews noting that "on a first contract basis, prices are now just holding
above Fibonacci support at $6.75 a bushel".
The March lot stood at $6.78 a bushel, up 0.3% on the day, with
the May contract gaining 0.8% to $6.89 ¼ a bushel.
Corn vs wheat
That was still enough for the May wheat lot to reduce a
touch its discount against May corn,
which added 0.6% to $6.92 ¾ a bushel.
But then, wheat's cheapness against corn, over which it usually
holds a premium, is beginning to attract extra attention, with ethanol group
Poet having confirmed that an Indiana plant was seeking soft red winter wheat
to use as a feedstock, replacing some corn.
That said, there are doubts as to how significantly wheat
can replace corn in US biofuel plants (interestingly, a reverse of the UK situation,
where the poor wheat crop has prompted the Ensus wheat ethanol facility to try
"We do not foresee a wheat-ethanol phenomenon becoming
widespread," Joyce Liu at Phillip Futures said.
Chicago's March corn has begun moving in an orbit of its
own, moved largely by the need of holders of short positions to cover before
expiry next week, at a time of thin supplies of the grain.
The lot rebounded 0.7%, reaching $7.13 a bushel.
retained a steadier trajectory, underpinned by the export demand being
transferred to US by weak Brazilian logistics, and added 0.2% to $14.88 a
bushel for March delivery, and 0.3% to $14.69 ¾ a bushel for May.
"Soybeans have seen the strongest demand among all three
grains," Ms Liu said.
Whites vs raws
Among soft commodities, New York raw sugar managed minimal gains, of 0.01 cents to 18.21 cents a
pound for May delivery, helped by growing ideas that strength in London white
sugar might imply some users being caught short.
being already refined, rather than raw sugar is viewed as a quick fix for any
gap in supplies.
"The white raw spread, May basis, is quoted around $117 a tonne,
a result well above average and up from around $92 a tonne in January," CBA's
Luke Mathews said.
London white sugar for May was, however, $0.20 lower at $518.00
But New York cotton
fell 0.5% to 86.79 cents a pound for May on profit-taking, after closing the
last session at a 10-month high.
Mr Mathews said: "Tonight's
US weekly cotton export sales report will be closely scrutinised. Traders are expecting
another solid result, of between 125,000-175,000 bales, on the back of further