With the Wasde report just hours away, would caution kick in
Not a bit of it.
There was a notable losing contract in Chicago, December
corn, which shed 0.4% to $5.11 a bushel as of 10:00 UK time (04:00 Chicago
But that was attributed to a hangover from the last session,
when the CME Group's Globex electronic trading system fouled up for many
agricultural commodity contracts, forcing deals through the open outcry
Settlement was handled by the pits too for affected
contracts, which included wheat (both soft red winter and hard red winter) and
corn, and came in with a surprising result for December corn.
As one broker noted there was "a large 4-cents-a-bushel swing
in the May-December corn spread between the time electronic markets froze and
the settlement of the pit.
"Even though December corn settled at $5.13 a bushel, it
never traded there as far as the pit quotes are reporting. The price was only a
product of a spread sale on the final minutes in the pit."
Removing the 4 cents means that the December contract was
actually trading positively in this session, if underperforming the best-traded
May contract, which was up 0.4% at $5.08 ¾ a bushel.
In fact, bull spreading, in which investors spread long bets
in near-term contracts against short holdings in far-ahead lots, has been a
feature of markets of late, as ideas of near-term supplies tighten, for soybeans and corn especially.
As to putting a figure on this, the US Department of
Agriculture's Wasde crop report will factor that in later.
For wheat, this
has been following suit a bit too as the concerns over the drought-hit US hard
red winter wheat crop drive demand forward.
Indeed, on Tuesday, "word from the floor had Goldman Sachs
putting spread orders in the pit late in the session, but it doesn't sound like
they were able to trade anywhere near as much as they wanted to," Brian Henry
at Benson Quinn Commodities said.
'Largest drop on
Wheat for May added 0.7% to $6.85 ¾ a bushel in Chicago,
while the December contract gained 0.5% to $7.15 ¾ a bushel.
Of course, a main driver in wheat too was the USDA condition
rating revealed overnight which showed just 35% of the winter crop in "good" or
"excellent" health, down only 1 point year on year but still an unusually low
"It is the worst rating in 12 years" for the time of year,
according to Agritel.
It was also well down on the 62% good or excellent at which
the crop entered dormancy, in late November.
"The 27% drop is the largest ever seen over winter, spurred
by both severe dryness in the Great Plains and periodic bouts of winter freeze
damage," said Luke Mathews at Commonwealth Bank of Australia.
And as for rain relief ahead, "there are thoughts on both
sides of the fence, as to whether or not the rains forecast for the US Plains hard
red winter wheat area will actually materialise, or be enough to benefit the
crop", CHS Hedging said.
'Soil temperatures too
For corn, there
are weather concerns too, in the cold soils, in part a reflection of a cold
winter, which have put paid to hopes of a timely start to Midwest sowings,
although it is still early days to be getting worried about late planting.
Sure "weather conditions in the Midwest should be favourable
this week, being warm and dry, allowing farmers to work on the fields", Vanessa
Tan at Phillip Futures said.
"But soil temperatures in certain parts of the crop belt are
too low to begin planting."
Midwest temperatures are expected to "range from 40-50 Fahrenheit"
for now, said Gail Martell at Martell Crop Projections.
"Corn seeds germinate at 50 Fahrenheit. Freezing
temperatures at night would continue on most Midwest farms."
There is also a USDA Wasde report to factor in which is
expected to cut ideas for stocks at the close of 2013-14 by 53m bushels to
But there is some prospect of a bigger cut, with Rice Dairy
foreseeing a drop to 1.306bn bushels, a reflection of an extra 50m bushels on export
demand and 100m bushels for feed.
On the downside, Ms Tan noted that "China has started allowing
corn imports from Brazil", a factor which "would shift demand from US corn to
Brazilian corn, especially when US corn cargoes have been rejected due to the
presence of an unapproved genetically modified strain".
Still, when Chinese imports have been underwhelming anyway, downgraded
by USDA staff in Beijing, corn for May nonetheless managed its rise, to keep
ahead of the December contract.
'Cash markets steady'
The Wasde is expected to cut the estimate for soybean futures too, although not by
much, by 6m bushels to 139m bushels.
Still, this would represent thin supplies, somewhere around
pipeline, and kept buyers interested, with firm basis helping too.
"Cash markets are steady with producers mostly sold out of
old crop stocks and Gulf values are under or near delivery equivalents," Benson
Quinn Commodities said.
The broker added: "It is the steep inverses in the market
and how the market gets to fresh supplies either in late August on US new crop
harvest or when it sees bigger imports that is the fear of the market."
In fact, May soybeans were 0.7% higher at $14.93 ½ a bushel,
while the new crop November contract added a modest 0.2% to $12.19 ½ a bushel.
It was also a help in oilseeds that palm oil managed to recover from two-month lows, adding 1.1% to 2,605
ringgit a tonne in Kuala Lumpur.
The vegetable oil was sunk in the last session as far as 2,573
ringgit a tonne by talk that the Malaysian Palm Oil Association producers'
group had estimated growth in Malaysian output last month at 17.8%, well above
the 11% rise expected by analysts.
The Malaysian Palm Oil Board regulator will unveil data
tomorrow, expected to show stocks falling 3.6% to 1.6m tonnes, according to a
Cargo surveyors Intertek and SGS will also release Malaysian
palm export data for the first 10 days of April.
Among soft commodities, cotton
added 0.4% to 92.13 cents a pound, boosted by expectations that the Wasde will
cut the forecast for US production by 200,000 bales to 13.0m bales, following
recent ginnings data, with a knock-on effect on stocks.
"Analysts expect the USDA [estimate] for ending stocks to be
cut from 2.8m bales to a very tight 2.5m bales," CBA's Luke Mathews said.
Raw sugar too managed
headway, by 0.6% to 17.26 cents a pound for May, helped by expectations of
dryness in Brazil's cane belt, and by some upbeat talk from the International
Sugar Organization, which has talked of rising consumption, notably in China.
"The ISO forecast that 60% of world sugar demand growth
through to 2020 will come from Asia, and that the long term price outlook is
more bullish than the current situation because of expected increases in
Chinese imports," Mr Mathews noted, if also highlighting that "the ISO expects
no significant price increases for 2014".