PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 09:45 GMT, Tuesday, 14th Jan 2014, by
Morning markets: grains ease. But soy, sugar post some gains

Have investors been taking comments by Matt Roberts to heart?

The Ohio State University economist caused a bit of a stir on Monday by warning US farmers, who have enjoyed six "extraordinary years" in profitability terms to brace for dramatically less lucrative conditions for the next five years or so.

"We already see lower prices, and unless US or South American acreage declines, those prices are likely to continue to move lower," Mr Roberts believes.

"Prices reflect that we have moved from an era of scarcity to one of adequate inventories, and prices have responded by moving lower."

He told US farmers: "I've been saying we're one good year's yield away from $4-a-bushel corn.

"I'm not sure I'd call 2013 a good year but here we are. Ask yourself - what would our yield have been if April and May had been normal," and row crop sowings been completed in time?

'Weakness will still persist'

Whatever, investors appeared reluctant to put any oomph into extending corn's rally, and the revival in wheat prices in the last session.

For wheat investors, "after getting run over about a dozen times, it isn't worth trying to pick a bottom", Benson Quinn Commodities said.

After all, many observers remain unconvinced at signs of apparent revival in US wheat export hopes offered by victory at an Egyptian tender at the weekend, and by some decent weekly shipment data.

"We believe that the weakness in US wheat will still persist due to the same bearish fundamentals plaguing the market," Vanessa Tan at Phillip Futures said, flagging the "large global surplus of wheat supplies".

'Continue losing competitiveness'

After all, with Argentina on Monday allowing 1.5m tonnes of wheat exports, "it clearly shows how US wheat will continue losing its competitiveness," Ms Tan said.

"This is because Argentina's previous restriction on wheat exports resulted in Brazil having to import more from the US instead."

At Commonwealth Bank of Australia Luke Mathews added that Argentina's announcement "will likely curtail US wheat exports to Brazil in the immediate term", although with the main impact on hard red winter wheat, as traded in Kansas City, rather than Chicago-traded soft red winter wheat.

In fact, hard red winter wheat for March, after underperforming in the last session, was just 0.25 cents lower at $6.19 a bushel as of 09:40 UK time (03:40 Chicago time), if still within an ace of a 19-month low.

Chicago soft red winter wheat for March eased 0.1% to $5.73 a bushel.

Argentina outlook

Argentina played a role in corn markets too, with a return to hot weather helping extend the revival in futures in the last session.

"Some of the southern areas in Argentina still need moisture," CHS Hedging said.

"While there is rain in the forecast for this weekend, temperatures are headed over 100 degrees Fahrenheit before then."

But with the rain expected, many investors were unwilling to get too downbeat on row crop prospects.

Support from hot weather "was likely to be only temporary as favourable wetter conditions were expected after such harsh conditions", Phillip Futures' Vanessa Tan said.

'Farmer selling'

Furthermore, there is persistent talk of US farmers increasing selling so far in 2014, whether encouraged by Matt Roberts, or by the onset of a new tax year, and widespread expectations of, at best, stable prices, despite the US inventory downgrade which sent prices soaring on Friday.

"I'd anticipate the corn market to continue to trade in a choppy manner" in the early stages of the session, Ben Bradbury at Benson Quinn Commodities said.

"Some additional short-covering and the potential for crop stress in Argentina offers underlying support but farmer selling should keep rallies in check."

In fact, Mike Mawdsley at Iowa-based Market 1 advised farmers to "watch local basis in your area

"Some cash corn prices are $0.20-a-bushel or more lower in a couple months. The best cash prices might be in the next few weeks."

Corn for March was 0.4% lower at $4.34 a bushel, technically intriguingly placed in a narrow gap between its 50-day moving average to the downside and 75-day to the upside.

'Weather has been phenomenal'

Soybeans did best among Chicago's big three, adding 0.2% to $12.97 a bushel for March delivery.

In fact, soybeans and corn appear to be having something of a negative correlation going on, with soybean-corn spreading, and the unwinding of spread, a factor.

Traders are also having to balance positive data on US exports for now with the prospect of a rapid fall-off as South America's harvest ramps up.

"The main thing to take away from this is soybean market focus shifts away from the US numbers and back to South American production," one broker advised.

"So far South American weather has been phenomenal and we should expect a bumper crop to replenish world supply."

Soy products rise

It helped on Tuesday that soymeal nudged higher, by 0.2% to $422.90 a short ton for March delivery, helped by a decent performance on China's Dalian exchange, where the benchmark May lot added 0.9% to 3,326 yuan a tonne.

China soybean crush margins remain positive, if well below levels above 150 yuan a tonne seen in the autumn, according to Morgan Stanley data.

Chicago soyoil managed headway too, up 0.3% at 37.96 cents a pound, in the absence of a, closed, Kuala Lumpur palm oil market which has yet to see any positive sessions in 2014.

Softs harden

Among soft commodities, cotton for March edged 0.3% higher to 83.89 cents a pound, helped by data showing China's turnover inventory continuing to decline in December, to 252,000 tonnes, down 15,000 tonnes month on month, and by 48,000 tonnes year on year.

And raw sugar extended its recovery too, adding 0.1% to 15.62 cents a pound for March, encouraged by data showing cane output in Maharashtra, India's top producing state, falling to 28m tonnes in the year to January 12, from 34.2m tonnes a year before, according to the Maharashtra State Cooperative Sugar Factories.

The state's sugar output has fallen 19% to 2.92m tonnes, and its forecast potentially for 2013-14 falling below the 7.8m tonnes expected by the Indian Sugar Mills Association.

The sweetener is also getting some lift from anti-government protests in Thailand, the second-largest sugar exporter.

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