PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 09:38 GMT, Thursday, 5th Dec 2013, by Agrimoney.com
Morning markets: grain futures stall as Wasde report looms

It was understandable wheat being uninspired on Thursday, after the huge upgrade by Canada to its crop estimate.

But other agricultural commodities struggled too in early deals, with the optimism evident 24 hours ago replaced by a less enthusiastic mood.

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."

Wasde ahoy

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.

Data later

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 pressured'

"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 surplus."

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 portfolios'

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 a bushel.

Corn for March was in negative territory, down 0.6% at $4.33 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 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 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."

Cooler coffee

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.

And cocoa 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.

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