PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 09:35 GMT, Friday, 17th Jan 2014, by Agrimoney.com
Morning markets: grind data cools cocoa. Grains fall too

Have investors gone on holiday already?

Grain markets were hardly alive with volatility in early deals on Friday, which some have predicted will be a quiet day, coming ahead of a long weekend for the US, which celebrates Martin Luther King day on Monday.

And what movement there was was broadly downward.

The day "may bring some more profit-taking ahead of the long US holiday weekend", Benson Quinn Commodities said, referring in particular to soybeans.

And the oilseed indeed eased 0.3% to $13.10 a bushel in Chicago for March delivery as of 09:30 UK time (03:30 Chicago time).

Chinese prices

This despite another firm performance overnight by futures on the Dalian exchange in China, the world's top soybean importing country.

The best-traded May contract edged 0.3% higher to 4,681 yuan a tonne, its highest settlement in nearly eight months.

That said, soymeal's winning run ran out of steam, with the bet-traded May contract easing 1 yuan to 3,379 yuan a tonne.

And it was easy to take a price-negative view of the South American weather outlook which has been a big prop to soybeans' firmness.

'Better chance of rain'

"Argentina's forecast for next week has a better chance of rain in it," CHS Hedging said.

Another broker said that "dryness in Argentina may affect yield potential before rain relief comes next week".

But overall, "the rain amounts are expected to be large enough to replenish moisture levels and help yields.

"We do not see a significant reduction of yield potential in Argentina at this time."

'Accelerated crush rates'

Longer term too, the outlook has improved, with less risk of an El Nino event (although these can actually improve yield prospects for some parts of South America in bringing extra rain).

"Sea surface temperature anomalies in the eastern equatorial Pacific reverted to 0.1 degree Celsius above normal in the first half of January, after averaging 0.6 degrees Celsius above normal in December," Anne Frick at Jefferies Bache said.

Sure, demand side signals remain supportive to prices, with US exports staying and the domestic crush strong too, as data earlier this week showed.

"For old crop soybeans, which we consider through March, we see no change in narrative that US is using too many beans too fast, on the heels of accelerated US crush rates and brisk soybean inspections and sales," Richard Feltes at Chicago-based broker RJ O'Brien said.

'More likely to advance'

And although there remain plentiful concerns that China is poised to cancel a slew of purchases of US soybeans, there are other reasons than potential, nay traditional, Brazilian logistical hiccups to think that these might not occur.

"We would note that 2013 US soy quality is excellent, which reduces the incentive for China and other soy buyers to switch out to typically higher quality South American soybeans," Mr Feltes said.

"In the short term, the soy market is more likely to advance than retreat."

'Exacerbates the situation'

Where actual Chinese import cancellations are impacting investor sentiment is in corn, after the rejections of some US cargoes on grounds of containing an unapproved GMO variety.

The US Department of Agriculture on Thursday noted 170,000 tonnes of Chinese cancellations last week and a further 126,000 tonnes which had been booked to "unknown destinations", assumed to be China, through the daily reporting system.

"This exacerbates the situation," said Vanessa Tan at Phillip Futures, adding that the rumpus "is likely to be extended further and could lead to even more rejections.

China vs foreign prices

Comments from Ren Zhengxiao, chief of China's State Grain Administration, did little to raise hopes of any curtailment of the cancellations soon.

"The impact (from cheap imports) on domestic grain production and market stability should not be underestimated," Mr Ren said, noting that China's efforts to support farmers by raising domestic prices had created premiums of some 300-500 yuan ($50-$83) per tonne compared with foreign values of the likes of corn, rice and wheat.

Chicago corn for March made moves to enhance its discount by easing 0.4% to $4.26 a bushel, still remaining just ahead of its 10-day moving average, having given up the 50-day and 20-day lines gained a week ago.

'Buyers holding the cards'

And wheat was hardly on top form either, as India's MMTC state-run grain trader tendered for 120,000 tonnes of milling wheat, issuing a reminder of the country's growing place in world export markets with a potential 100m-tonne crop to harvest this year.

Benson Quinn Commodities noted that, while US soft red winter wheat was priced for an Egyptian tender this week at a cheap $265 a tonne, Indian supplies are not too far away.

"Indian offers have traded between the low $270s a tonne to mid $280s, with allowances to offer supplies as low as $260," the broker said.

"This simply indicates that global buyers of soft wheat are still holding the cards."

'Potential for winterkill'

Still, there remains talk of additional sales of US hard red winter wheat to Brazil.

And Mr Feltes flagged the "potential for winterkill" among US winter wheat seedlings "on the next Arctic blast converging late month over the Plains and the Midwest".

Wheat for March stood unchanged at $5.72 a bushel, looking for its first week of gains in seven weeks.

That may depend in part, however, on Informa Economics estimates due later on US acreage, although these will be more closely watched for statistics on corn and soybeans.

The revival in corn prices a week ago had implied corn returning to greater prominence in farmers' growing plans, but as the Federal Reserve said this week, "Current prices for corn will not cover expected costs for 2014 production, whereas soybean prices would.

"This may lead to increased soybean planting in the spring."

'Pace production increasing'

Among soft commodities, cocoa dropped 0.8% to $2,732 a tonne in New York for March delivery after data overnight showed the North American grind rising by 4.4% in the last quarter of 2013, below expectations for a first of at least 5%.

Raw sugar eased 0.01 cent to 15.44 cents a pound as traders reassessed the Indian production data, showing a 21% drop to 8.55m tonnes in output so far this season, which bolstered prices in the last session.

"The pace of the production is rapidly increasing, evidenced by the fact that the year-to-date shortfall has narrowed from 29% to 21% in just half a month," Luke Mathews at Commonwealth Bank of Australia said.

"Furthermore, the Indian government has approved plans to subsidise 4m tonnes to raw sugar exports, a move which compounds the comfortable global supply situation."

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