It was understandable wheat
being uninspired on Thursday, after the huge upgrade by Canada to its crop
But other agricultural commodities struggled too in early
deals, with the optimism evident 24 hours ago replaced by a less enthusiastic
Still, it can be tricky in the last month of the year to
find the market's pulse, as Richard Feltes at RJ O'Brien noted, quoting a veteran
trader who said: "During December, it is difficult to know if funds are
rebalancing positions or simply trading short-term chart behaviour."
As an extra uncertainty, the next US Department of Agriculture
benchmark Wasde crop report, on Tuesday, is hoving into view.
The Wasde is expected to cut the all-important estimates for
US crop inventories at the close of 2013-14 by 25m bushels to 540m bushels for wheat, by 17m bushels to a snug 153m
bushels for soybeans, and by 16m bushels
to a still-ample 1.871bn bushels for corn.
But will it?
And will investors take the data with caution anyway?
In five of the last six years, for instance, the USDA has
raised its soybean production figure between November Wasde and the January
report meant to give final estimates.
That said, the soybean demand estimate has risen too between
December Wasdes to the final number, in five of the last six years.
And before the Wasde, we have the weekly US export sales
data to negotiate later, expected to come in little muted in covering Thanksgiving.
For wheat, export sales are expected to 450,000-550,000
tonnes, compared with 562,200 tonne last week, and for corn 850,000-950,000
tonnes, down from 1.01m tonnes.
For soybeans, the figure is seen at 900,000-1.2m tonnes, below
the 1.41m tonnes last time.
And all this, of course, against a background of concerns
over Chinese rejections of cargoes of imported US corn, on grounds of them
containing an unapproved genetically modified variety, and fears that this may
spread to soybeans too.
'Prices may be
"Corn prices may be pressured going forward due to China
rejecting cargoes of US corn," Vanessa Tan at Phillip Futures said.
"We may see imports by China being discouraged especially
when China is expecting a record corn harvest which would boost domestic
Of course there are doubts about whether this is anything to
do with GMO at all, with one conspiracy theory that China is attempting to
curtail purchases after a decent domestic crop, which the country's CNGOIC
bureau pegged on Thursday at 217.51m tonnes, up 4.6% year on year.
"The agenda behind [the cargo rejections] is unknown and
therefore it is difficult to determine what price implications will come from
it," one broker said.
"Are they really concerned about the GMO variety or is there
an ulterior motive? Either way we don't
see this as a bullish factor for corn."
'Fresh Chinese demand'
As for the contagion to soybean markets, the market has
actually also been alive with speculation of fresh Chinese demand.
Benson Quinn Commodities noted "talk of fresh Chinese demand
with rumours that China bought several cargoes of US soybeans for February/March".
But will it show up in the weekly export sales data?
"Chinese soybean interest has been the main driving factor
for this recent bull rally," another US broker said.
"If that continues we could see even higher soybean prices.
"If sales don't meet expectations there is a lot of air
under the market for beans to fall, especially considering a record amount of
South American acres planted and good weather to start their year."
'Talk of rebalancing
Benson Quinn Commodities said that "key" to interpreting the
export sales data would indeed be any signs of cancellations by Chinese buyers.
For now, soybeans were as of 09:25 UK time (03:25 Chicago time)
unchanged, with the January contract at $13.29 ½ a bushel.
Corn for March was in negative territory, down 0.6% at $4.33
¾ a bushel, although signally remaining above its 10-day and 20-day moving
averages, and not too far below its 50-day moving average, at $4.43 a bushel,
which bulls see as a key technical target.
There is increasing notice being taken of a price positive
factor for corn too, in the index fund rebalancing to take place early in 2014,
in which funds adjust portfolios back to base weightings – meaning selling 2013's
commodity winners, and buying the losers.
"Talk of rebalancing portfolios was mentioned again on
Wednesday as index funds look to buy more corn next year," Mike Mawdsley at
broker Market 1 said.
Canada upgrade weighs
As for wheat, it
dropped 0.3% to $6.59 ¾ a bushel for March delivery in Chicago, continuing to
feel pressure from Canada's huge upgrade, to a record 37.5m tonnes, in its
estimate for its wheat harvest this year.
Minneapolis spring wheat actually made ground, adding 0.1%
to $6.93 ½ a bushel for March delivery – but this was only after a collapse to
contract lows in the last session.
Most of Canada's wheat crop is spring seeded.
"With plenty of producer selling left to be done, expect
modest upward corrections in the spring wheat market to be met with producer
selling," Benson Quinn said.
"Additional US imports of Canadian wheat should also be
expected, which has the potential to offer resistance to basis levels."
Among soft commodities, Thursday bought a further retreat in
robusta coffee, which dropped 0.7%
to $1,686 a tonne in London for January delivery, as concerns ease over the
ability of Vietnam to withhold supplies, given its record harvest.
continued a decline on profit taking, falling 0.4% to $2,757 a tonne in New
York for March delivery, although some investors see a decline as only
temporary, given the deficit highlighted by the International Cocoa
Organization earlier this week.
"We remain bullish on cocoa given the current fundamentals
on the cocoa market such as strong cocoa demand and expectations of a continued
global deficit," Phillip Futures' Vanessa Tan said.
But New York raw
sugar managed a bounce, up 0.1% to 16.70 cents a pound for March, if only
thanks to profit-taking on short positions.
The sweetener is looking to end a losing streak which has lasted
11 sessions so far, on ideas that supplies remain ample.