Grain futures traded on a weaker note, as might be expected
given that the Ukraine crisis continues to go off the boil.
US Secretary of State John Kerry and Russian Foreign
Minister Sergei Lavrov are to hold talks to try to ease tensions over the
turmoil surrounding Russia's deployment of troops to Crimea, in southern
But that doesn't mean that the retreat in corn and wheat
prices was severe.
Indeed, there is some thinking that, with agricultural
commodities now back firmly in funds' bullish books, there is something of a
change in pricing thinking going on, bringing in factors such as fears for delays
to US spring plantings too, after the cold winter.
There are long-range forecasts, from the likes of Commodity
Weather Group, for a cold spring and a warmer and drier summer than normal too.
"The corn rally is based on a number of factors one of which
has been the fears of late planting," one US broker said, if sceptical over
"While we won't rule anything out, one week of 70 degree Fahrenheit
weather can change this very quickly.
"And as we have learned in the last five years when that
planting window opens we can get a lot done in a short amount of time with the
'Heaviest since harvest'
Market 1's Mike Mawdsley said that "for now buyers are
willing to plough into commodities with both fists," recommending investors
seek guidance from, improving, technical signals and "keep the charts before
you and target the next upside objectives".
And at RJ O'Brien, Richard Feltes highlighted that
agricultural commodities are attracting fresh money despite some big bearish
factors, such as the upbeat official expectations for US crops this year, as
unveiled last month, and stories of large Chinese stocks of corn and soybeans.
(Chinese is the biggest importer of soybeans, and its far smaller
corn purchases are particularly market sensitive, given the country's status as
the second-ranked consumer giving huge potential for these volumes.)
He also noted "stepped-up farmer selling", a factor flagged
too by CHS Hedging, which said there had been "good producer selling for both
old and new crop.
"Some areas reported that farmer selling on yesterday's
rally was the heaviest they have seen since harvest," CHS said.
Still, Mr O'Brien said that it looks like "managed fund,
index longs are feeling good about positive year-to-date ag sector longs", as
evidenced by speculators' most bullish positioning in the ag futures and
options since September 2012, when prices were being supported by the US
"I suspect the erratic US weather pattern in recent years,
optimism over modest economic recovery, richly priced equity markets are
collectively attracting institutional buying," he said.
He also noted the boost to prices from an "awareness that 2014-15
global grain and soybean stocks-to-use
ratios will not advance appreciably even with normal yields".
It is also signal, in terms of the appetite for agricultural
commodities, that oat futures remain
near record high, albeit for Chicago's March contract falling back 0.7% to
$5.38 ½ a bushel on Wednesday, as of 09:30 UK time (03:30 Chicago time).
And lean hog
futures are at record tops too, despite the weaker temptation to raise herds,
and increased impetus for herd reductions, implied by higher grain prices.
However, pork prices have hit an all-time high. "High beef
prices appear to have lit a fire under pork prices," Paragon Economics and
Steiner Consulting said.
This before factoring in the revival in coffee and sugar prices
too on Brazil dryness concerns, besides the longer-standing cocoa rally on
expectations of a second successive world production deficit in 2013-14.
'Severe drought or
Whatever, wheat futures for May, while losing ground, were
down only 0.4% at $6.41 ¼ a bushel, recovering most ground lost in early deals,
and also gaining technical help from the lot's return over its 100-day moving
Furthermore, there remain concerns over the condition of the
US winter wheat crop, after further declines in its health rating revealed on
Monday night, and potential for further declines.
"Much of the southern and western winter wheat growing
regions are in severe drought or worse," said Mark Welch at Texas A&M University.
Indeed, Kansas City-traded hard red winter wheat, the main
type in these dry areas, was down only 0.1% at $7.08 ¾ a bushel for the May
contract, which in the last session came within an ace of closing above its
200-day moving average for the first time in more than a year.
Chicago corn futures for May eased 0.2% to $4.83 ½ a bushel,
but that was enough to leave them over their 200-day moving average, regained in
the last session for the first time in 14 months.
Another factor on the market's horizon is the prospect on
Monday of the latest monthly US Department of Agriculture Wasde crop report
which, while not one of the big ones, does present the potential for showing strains
in the US soybean balance sheet.
"The soybean story is particularly compelling," RJ O'Brien's
Richard Feltes said, noting the "likelihood" that 95% of US soybean export
sales for 2013-14 (ending in August) "will be executed by the end of March".
This will leave "merchandisers and processors aggressively
competing for the remaining 15-20% of unsold farmer soy stocks during the five
remaining months of 2013-14 marketing year".
He added: "I cannot rule out $15-a-bushel soybeans [May
futures] by mid-April, which suggests another $0.20-30 rally in corn and wheat."
For now, May soybeans were up 0.2% at $14.25 ½ a bushel,
after in the last session recording their best close in seven months.
'Buy oil, sell meal'
They were also helped by some headway in soyoil, which appears to be taking over
from soymeal for now as bulls' soy product
Market 1's Mike Mawdsley said: "Soyoil continues to benefit
from spreading - buy oil, sell soymeal."
There is some fundamental cause behind this, with talk of a
potential reinstatement by the US of a tax credit for biodiesel, made in the
country mainly from soyoil.
Soyoil for May was 0.1% higher at 43.74 cents a pound, while
May soymeal eased 0.2% to $448.90 a short ton.
Furthermore, rival vegetable palm oil has been in demand, hitting 17-month high of 2,868 ringgit
a tonne in Kuala Lumpur on Wednesday, before easing back to of 2,835 ringgit a
tonne, a gain of 1.2%.
Dry weather is raising production concerns, with respected
analyst Dorab Mistry foreseeing higher prices yet if a full-blown El Nino
"If rains come as normal and the high-cycle [for production]
kicks in from July onwards, prices can trade in a range between 2,900 and 2,600
ringgit from July until October," Mr Mistry said.
"In the event that an El Nino develops, I believe crude
palm oil futures will cling to 3,000 ringgit beyond June.
"Production is likely to be affected from late 2014 onwards
and we may be staring at 3,500 ringgit."