Is the selling in
grains over for now?
Chicago corn for March, the best-traded lot, is
now in its sixth session without posting a contract low, and set course in
early deals a Monday for a fourth successive close above its 20-day moving average,
something that has not happened since August.
And Chicago wheat for
March gained even more markedly, recovering from a contract low close to the
As to how convincing
these rises are, well, the suspicion is that much is down not to any marked
changed in sentiment, but the prospect of a US Department of Agriculture Wasde
crop report on Tuesday.
have a habit of moving markets, and the December edition is seen as likely to
cut prospects for US stocks of both grains, a little, giving some support to
And when investors have
a stack of short positions which are showing healthy gains, there is always
temptation to close up and book some profits.
For corn, hedge
funds in fact have already closed a stack of such positions, reducing their net
short by more than 22,000 contacts in the week to December 3, regulatory data
released late on Friday showed.
Still, that left
them with a net short of more than 118,000 contracts, a historically high
figure, and one which would until four months ago have been a record.
The Wasde is
expected to cut to 1.871bn bushels, from 1.887bn bushels, the estimate for US
inventories at the close of 2013-14 (both figures indicating very comfortable
supplies, it has to be said).
'Imports by China discouraged'
Also hanging over
corn is the worry over Chinese imports of US supplies provoked by the rejection
of some cargoes for containing a Syngenta variety unapproved by Beijing.
"It is likely that China would come down hard on US cargoes
of corn after unapproved genetically modified strain was found, unless the
authorities decide to approve the strain," Vanessa Tan at Phillip Futures said.
"As such, we may see imports by China being discouraged
especially when China is expecting a record corn harvest which would boost
'Could shift demand
to the US'
However, on the plus side for the grain is a South American
reluctance to grow it in the face of weak prices compared with soybeans, which are anyway the default
choice for Brazilian farmers.
Brazil's growers are, for their second. safrinha crop sown
early in the calendar year, "considering planting a second crop of soybeans
after the main harvest of soybeans, rather than corn, due to current low prices
of corn as well as leftover supplies," Ms Tan said.
"Such a decision could shift demand to US corn instead,
significantly supporting prices."
As an extra fillip,
Brazil is, in its strained logistics, reportedly to prioritise soybeans too.
It was enough to
help corn for March edge 0.4% higher to $4.35 ¾ a bushel as of 09:30 UK time
(03:30 Chicago time).
'Looking very cheap'
Wheat did even better, gaining 0.6% to $6.54 ¾ a bushel in Chicago for March delivery.
But then, hedge
funds have a large net short there too, of 64,000 lots as of December 3, down
2,000 week on week – but the previous figure was the all-time high.
And the net short "has
likely grown substantially since then", given the weak performance of wheat futures
late last week, Jonathan Watters at Benson Quinn Commodities said.
of soft red winter wheat, the type traded in Chicago, are "looking very cheap
on the world market", Mr Watters added.
Australia, Luke Mathews at Commonwealth Bank of Australia noted that domestic
prices "remain strong from both an outright and relative perspective",
standing some $30 a tonne above Chicago prices even after an Aus$2 a tonne fall
to Aus$296 a tonne in Sydney, for January delivery.
Cold weather in the
US, where temperatures in Montana have been 30 degrees Fahrenheit below zeio,
is a worry too, in potentially threatening US winter wheat seedlings.
"The next five days
look to be pretty dry and fairly cold," weather service WxRisk.com said.
It will not be "as
extremely cold as this past weekend, but certainly seasonally cold to below
normal especially from Interstate 70 northward," the weather service said, a reference
to a US highway which runs from Maryland to Utah though Indiana, Illinois and
Iowa in the Midwest.
"The central Plains
looks to be seasonally cold because of the shape and the pattern the jet stream,"
but, further south, "none of the cold penetrates into Oklahoma and/or Texas or
across the Gulf coast states".
As to what damage
this might cause, it is largely down to the degree of snow cover that the crops
receive before the cold.
Services reported "spotty winterkill damage" in parts of Kansas and Nebraska.
'Farmer selling stepped
up a gear'
Soybeans lacked many of the credentials that the grains had for support.
Hedge funds have a large
net long holding in the oilseed, of more than 150,000 contracts, meaning that position
closing ahead of the Wasde would likely drive prices lower.
decent South American sowing conditions are encouraging soybean sowings, for
first and potentially second crop in Brazil, as noted above.
And the oilseed is
feeling a little pressure from elsewhere in the oilseeds complex too, with canola dropping 1.9% in the last
session in Winnipeg, after the huge upgrade last week to the official estimate
for Canada's output
farmer selling reportedly stepped up a gear on Friday," CBA's Luke Mathews
said, adding that "the market finally appears to recognise the importance of
the current record large Canadian canola crop".
While Winnipeg canola for January edged 0.4 higher to
Can$473.70 a tonne in early deals on Monday, it remains near three-year lows
for a spot contract.
Still, soybeans have support from the fact that the Wasde is expected to cut the forecast for US
soybean inventories, by 17m bushels to 153m bushels, making it less appealing
for holders of long positions to cash in
is still some "scepticism about just how much product Brazil will
logistically be able to ship next spring", CHS Hedging noted.
Brazil's infrastructure bottlenecks have been a major hurdle
to trade this year.
Meanwhile, China, the top importer, "is still expected to
keep up a pretty decent appetite for soybeans next year," the broker added.
And indeed, the soy complex traded higher on the Dalian
exchange overnight, with soymeal particularly
strong, adding 0.7% to 3,369 yuan a tonne for May delivery.
Chicago soybeans for January gained 0.6% to $13.34 a bushel.
commodities, New York cotton, which
performed strongly in the last session on broad economic hopes, retreated 0.3%
to 80.21 cents a pound this time, for March delivery.
But coffee maintained its recovery, adding
0.8% to $1,734 a tonne in London for January delivery, for robusta beans, while
New York arabicas added 0.2% to 106.65 cents a pound for March.