New month, new money?
Trader lore has it that the start of the month brings fresh
money into agricultural commodities, just as month ends see positioning closing
as funds tidy up positions.
And it seemed to be, kind of, working in early deals, with
the main contracts rising despite some weak data from China which put a bit of
a dampener on broader market mood.
'Bleak export data'
The buying had trouble stretching as far as Kuala Lumpur, where
palm oil stood 0.3% lower at 2,391
ringgit a tonne as of 09:30 UK time (03:30 Chicago time), threatening an eighth
successive close lower.
The vegetable oil has suffered what Phillip Futures analyst Ker
Chung Yang termed "bleak export data", with cargo surveyors pegging Malaysia's
palm exports down by 8.8% last month, according to Societe Generale de
Surveillance, or 9.1%, according to Intertek Testing Services.
That has lowered the prospect of shipments chipping away at Malaysia's
near-record palm inventories, even during a seasonally weak production period.
Furthermore, a trade survey revealed that palm oil inventory
held at ports in China, the second-biggest importing country, hit a record 1.4m
tonnes last month, lifted by slow growth in demand and record purchases in
December, ahead of a tightening on quality standards.
That said, there is hope for bulls, with a recovery in rival
vegetable oil soyoil (see below).
Soyoil suffered in Chicago in the last session after the delivery
of more than 2,900 contracts against the expiring March contract, an indication
of loose supplies (unlike those of fellow soy crush product soymeal, and indeed of soybeans themselves).
And Mr Ker did highlight a boost from a postponement, at
least, in a decision by India on whether to raise taxes on palm oil imports.
"India, the world's largest vegetable oil buyer, did not
raise its import tax imposed in January to cut rising purchases from Malaysia
and Indonesia," he noted.
'Rain hopes in
In Chicago, it was wheat
which once again led the big three crops, adding 0.8% to $7.13 ¼ a bushel for
March delivery, and 0.6% to $7.19 a bushel for the better-traded May lot.
Ideas are easing over further moisture to refresh US Plains
winter wheat which, even after the latest round of snow, faces drought
All of Kansas, the top wheat producing state was still in
drought as of Tuesday, the US Drought Monitor said.
And looking ahead, "all that talk about a wetter-than-normal
March in the Plains and Midwest is in trouble", weather service WxRisk.com
Weather models are in disagreement over a moisture band
forecast in the 11-to-15 day outlook.
"This feature over the south western states has the
potential to bring some decent rain to portions of the central and lower Plains,
as well as the Delta, but the weather models are not in good agreement with how
this feature develops," WxRisk.com said.
"Some of the weather models of developing a significant rain
over the Delta and extending up into the Midwest, bypassing most of the central
and lower Plains."
'More positive stance'
Technically, things are looking up for wheat too – a bit.
"Daily momentum studies continue to firm, and weekly studies
are slowly shifting to a more positive stance", Benson Quinn Commodities said.
"But it hasn't broken the downward. I would not be surprised
to see the current correction continue for a couple more days.
"But, in the absence of fresh fundamental support, the bulls
are going to have a difficult time sustaining a rally."
Some fundamental support could come later if the result
expected of a Saudi Arabia tender goes the right way, as far as the US is
Still, while wheat caught up a little on fellow grain corn, it could not regain its
accustomed premium, with Chicago corn for March adding 0.5% to $7.22 ¾ a
bushel, and the May contract this time keeping up, in gaining 0.5% to $7.07 ¼ a
The grain, like soybeans, is gaining support from continued
talk of port hold-ups in rival exporter Brazil, where ships are said to be
waiting 60 days to fill up.
Which was one explanation for solid US weekly export sales
released on Thursday of more than 500,000 tonnes, old crop and new, and with rumours
of Chinese buyers interested in more 2013-14 shipments.
Domestic demand hopes, meanwhile, have gained a fillip from
the strong price of ethanol Rins – paper credits which blenders can use instead
of the biofuel itself to meet mandates – and which, in relating to producers,
give an extra boost to production margins.
Technically, the May lot, having regained its 20-day moving
average in this session, next faces the potential resistance at the 50-day
moving average, at about $7.08 ½ a bushel.
It was soybeans which
lagged in early deals, with a suspicion of profit-taking as the beans
themselves and soymeal, which have
been the strongest of late, fell, while soyoil
for March gained 0.9% to 49.27 cents a pound.
The complex is prone to internal spreading which can produce
unexpected movements as it is unwound.
Speculators signally, in the first three weeks of February
(the latest data available) lifted a net short position in soyoil, which
raising net longs in soymeal and soybeans themselves.
Trader talk on soybeans remains upbeat, especially after
export sales data on Thursday which showed a revival in interest in 2012-13
crop, of which there is little left.
Indeed, total actual shipments have reached 1.1bn bushels
half way through 2012-13, for which the USDA is predicting 1.345bn bushels for the
Counting in forward sales there is even less elbow room
"Export sales percentages for the complex for the marketing
year as of today, with six months to go, stand at 94.5% for soybeans, compared
with an average of 82.5%, soymeal at 92.1%, average 63.1%, and soyoil at 77.8%,
average 57.2%," Mike Mawdsley at Market 1 said.
"The complex is at a record pace."
A key technical point is seen at $15 a bushel, which has
represented a ceiling for the March contract for some three months, although
the lot remained well short in early deals, standing at $14.74 ¼ a bushel,
unchanged on the day.
The May contract, which has not seen $15 a bushel for four
months, stood down 0.75 cents at $14.51 ½ a bushel.
March soymeal was 0.1% lower at $434.50 a short ton.