Could Chicago grain and oilseed futures stage one of their
noted Turnaround Tuesdays?
Yes, at least in early deals, with soybeans, the biggest loser of late, leading, rebounding from a
three-month closing low.
Upward movement was in line with the direction being taken
on external markets, where concerns over China were trumped for now by a boost
from stronger-than-expected US retail sales data and Citigroup earnings which
Shares rose in
Asian, by a hefty 1.4% in Tokyo, while the dollar
eased 0.2% against a basket of currencies, a sign of a more risk-on feel
besides boosting the competitiveness of dollar-denominated exports such as many
However, there was more to Chicago's recovery than that.
Sure, there may, in corn and especially soybeans, still be
more selling pressure on the way from funds which still have unusually large bet
long positions in futures and options.
At RJ O'Brien, Richard Feltes said: "It would appear that
fund managers thinking long term are more concerned with an upcoming supply
surge than old crop tightness," with South American harvests on their way early
A backdrop of the "US fiscal cliff, slowing economic growth
globally and an equity market than may be stalling out" may only be encouraging
'Unwilling to sell'
However, have prices fallen enough to stimulate demand and
revive the market?
"Conviction" in further downward movement in crop futures is
being "undermined by traders unwilling to sell after a $3.00-a-bushel break in soybeans
and a $1.00-a-bushel break in corn, against a backdrop of robust US soy export
sales, and concern that the US is not rationing enough corn domestically," Mr
Historical analysis suggested that the US will need to cut
feed use in the September-to-November quarter by 144m bushels, or 9.3%, to
1.4bn bushels to meet official targets for the full year.
"We are hard pressed to identify any livestock sectors that
have cut back by 9%," he said.
'Cannot afford additional
OK, for corn, US exports are coming in slow, with talk
remaining of a large purchase bby US livestock feeders of Argentine grain in
replacement for higher-priced domestic supplies.
And news of the closure of an ethanol plant in Vicksburg
Mississippi, thanks to high grain prices, spoke of some demand rationing in
that sector too.
However, are corn supplies too less generous than factored
into official data?
"Many still believe corn harvested acres are overstated and
the current 619m-bushel carryout projected is too high" in US Department of
Agriculture estimates updated last week, Benson Quinn Commodities said.
"Therefore, we cannot afford to invite additional demand
into this market."
Furthermore, data overnight, showing the US corn harvest at 79%
complete (fast, but no longer a record pace, and lagging 2010) and 71% of the soybean
crop in the barn added to the idea that pressure on prices from the once-a-year
boost to supplies might be easing too.
And November soybeans had a technical boost too from – just –
holding over the $15.04-a-bushel level, previously the October low, whose
failure in the last session was seen as a big driver of fund selling.
The contract stood 0.8% higher at $15.04 ½ a bushel as of
08:40 UK time (02:40 Chicago time).
December corn was up 0.5% at $7.41 ¾ a bushel.
That was in line with wheat,
which added 0.6% to $8.53 ¼ a bushel for December delivery, gaining some
support from USDA data overnight showing the continued slow emergence of the
country's dryness-tested winter wheat crop.
While seedings were back on track, at 71% completed exactly
in line with the typical pace, emergence remained behind the 44% average by now,
standing at 36%.
"This may create some concern about establishment leading
into winter, particularly in the northern plains were significant moisture
deficits persist," Luke Mathews at Commonwealth Bank of Australia said.
The firmness was felt in New York too, where cotton for December added 1.2% to 73.20
cents a pound, extending a strong finish to the last session, and a rebound
which has puzzled many traders, given huge world supplies of the fibre.
Raw sugar added
0.6% to 19.96 cents a pound too, despite the fundamental news appearing to turn
against it, with Somar, the Brazilian weather consultants, forecasting dry
weather for Brazil's main Centre South cane growing region to boost harvesting
Still, both crops were underpinned by firm performances by
Chinese futures overnight.
Even Kuala Lumpur palm
oil, the agricultural commodity market's worst performer of late, managed a
1.2% gain to 2,500 ringgit a tonne.