Wheat futures found a couple of important price supports to keep their head just above water in early deals, despite what looked a big blow from an upgrade to Australia's estimate for its harvest.
Analysts in Australia, the southern hemisphere's top wheat producer and exporter, have been on a slight downward trend in their crop estimates, with the US Department of Agriculture attaché in Canberra last month forecasting the harvest at 23.5m tonnes.
However, Australia's official Abares commodities bureau on Tuesday raised its forecast for the crop, by 1.75m tonnes to 26.213m tonnes.
"In Western Australia and Victoria, generally favourable conditions and timely rainfall during spring increased prospective yields, particularly in southern and central Western Australia," Abares said.
That might have been expected to put a downward slant to Chicago wheat prices.
"With an increase in wheat output from other wheat exporting countries, U.S. wheat supplies could face competition going forward," Vanessa Tan at broker Phillip Futures noted.
But futures received support from a fresh tender by grain officials at the Gasc authority in Egypt, the top wheat importing country, the fifth tender in the last month, and a sign of resilient demand.
There is also an idea that strong Chinese needs will soak up much of Australia's export availability.
Certainly, wheat prices in Australia itself seemed little perturbed by the Abares number, with Sydney's January contract for east coast wheat adding 0.7% to Aus$297 a tonne, matching the contract's highest close in more than a year.
The March lot edged 0.1% higher to Aus$296.80 a tonne, a three-month closing high.
Bearish hedge funds
And, on the technical side, data overnight from the Commodity Futures Trading Commission, the US regulator, showed hedge funds raising their short position in Chicago wheat futures to a record high, of 66,000 contracts.
That actually can be interpreted as a bullish signal, in that it raises questions over the degree of hedge fund selling pressure left unspent.
"There's some question as to whether or not the trade is going to be willing to press the wheat markets in the face of the net short fund position in Chicago continuing to grow," Benson Quinn Commodities said.
Egypt's tender, combined with the size of the fund position in Chicago, "could offer support" to prices overnight.
Not that all technical factors were in wheat's favour, with the best-traded March contract signally bouncing back below its 100-day moving average in the last session, suggesting this line could continue to provide a headwind to upward price movement.
Furthermore, official Canadian data due later this week are expected to show the country's wheat crop at a record 33.8m tonnes, even higher than the 33.2m tonnes that the USDA has already factored in.
And, as Benson Quinn Commodities noted, "the trade hasn't warmed up to ideas" that Argentina's wheat crop will come in at a lowly 8.5m tonnes, as the country's farm ministry said last week.
"Most continue to believe a 10m-10.5m-tonne figure is more accurate."
Still, wheat futures managed a 0.2% gain to $6.63 a bushel in Chicago for March delivery as of 09:50 UK time (03:50 Chicago time).
Even so, that wasn't enough to wrestle back much of the premium over corn lost in the last session, with the yellow grain adding 0.2% to $4.25 ¼ a bushel for March delivery.
Corn too is receiving some support from a hefty hedge fund net short position, of 141,000 contracts, if one short of the record 180,000 lots set in October.
But it has another technical support too, in a seasonal trend.
Richard Feltes at RJ O'Brien, quoting Moore Research, highlighted a "strong tendency" for March wheat futures to lose ground against March corn futures "through December 10 and from early January through March".
In fact, March corn futures have gained on March wheat futures "from February 2 to March 1 in seven of last 10 years and in 65% of last 20 years", he said.
'Shut the bin doors'
And the idea of resilient corn prices, for now, is gaining support from a lack of producer selling, even against Chicago's expiring December contract.
"Producers have shut the bin doors, hoping to help rally the market and this has been seen in strong basis levels," US Commodities said.
This has provided some counterbalance to the caution injected by further rejections by China of US corn cargoes.
"This has caused uncertainty among cash traders as they scramble to resource these unaccepted shipments," one US broker said.
"As we move forward the trade will be closely monitoring any new rejections and also possible cancellations that could show up in this week's export sales report."
'Favourable South American weather'
Soybeans rose too, by 0.3% to $13.24 ¾ a bushel, and without any help from Commodity Futures Trading Commission data, with hedge funds actually raising their net long position in Chicago futures and options in the week to last Tuesday by nearly 17,000 contracts.
And there is plenty of talk around of a bumper South American harvest ahead, with the USDA attaché in Buenos Aires raising hopes for the Argentine harvest, pegging it at 57.5m tonnes, 4.0m tonnes above the department's official guess, and ideas of the Brazilian crop approaching 90m tonnes.
"Mostly favourable South American weather weighs on the market with Brazil receiving beneficial rains over most of country this weekend and Argentina to experience dry week to get aid planting pace," Benson Quinn Commodities said.
'Bearish background talk'
Anne Frick at Jefferies Back said that "concerns about China overbooking US soybeans, making cancellations a possibility and a favourable weather outlook for the South American crops are combining to dampen the usage-led rally.
"There is also talk about the weakening price outlook for commodities in general providing some bearish background talk," she added, also flagging a weak technical point in that futures in the last session recorded "an outside range reversal lower", meaning that they traded beyond the range of the previous session but closed weaker.
This shows "that the post-harvest high may be in place".
Still, while US export data on Monday were disappointing, if not poor, it appears too early yet to write off the impact of tight US supplies.
"China soybean imports in November and December are expected to be record large," Benson Quinn Commodities said, adding that the market is treading "fine line balancing between a tightening US outlook and record availability expected with South American harvest".
'Fundamentals remain soft'
Among soft commodities, one of the big questions is whether sugar will continue its downswing, which is now getting within sight of taking New York's March lot to its contract low, at 16.70 cents a pound, and potentially beyond.
In fact, the lot shed a further 0.2% to 16.93 cents a pound
"Fundamentals remain soft," Luke Mathews at Commonwealth Bank of Australia said, noting the prospect of a 10% rise to 11.0m tonnes in output from Thailand, the second ranked exporting country, with hopes revived for India too after the resolution of a dispute between mills and producers.
"The National Federation of Sugar Factories indicates that output will still reach a very comfortable 25m tonnes, meaning India continues to export," Mr Mathews said.
White sugar no help
He also clocked the loss in white sugar futures, down 0.2% to $454.10 a tonne in London, and setting a contract low of $435.50 a tonne earlier.
"The implication is that a white-led recovery in the global sugar market appears unlikely, at least in the near term."
And profit-taking weighted on cocoa in early deals, with the March contract, which in the last session hit two-year highs for a nearest-but-one contract, down 0.1% at $2,811 a tonne.