Did wheat futures
shoot their bolt in the last session, in soaring almost 4% in Chicago, their best
performance in 10 months?
Or was this the start of a more permanent recovery?
Mike Mawdsley at Market 1 offered two, unfortunately
Wheat's close higher for four successive sessions "usually
suggests a trend change", Mr Mawdsley said - good news for bulls, and farmers.
"Thus buy breaks," he said, if cautioning that investors as
a precaution should put "sell stops below the lows of course".
However, there is also the concern that the last session's
rally was fuelled, ultimately, by panic covering by speculators of their hefty
net short positions, a process which has its limits.
"Wheat finally seems to have enough news to get funds to
cover shorts," Mr Mawdsley said
"Remember, short-covering rallies can be impressive, but
And it is the more technical factors that investors are
looking too, given a dearth of fresh wheat news.
(And some of what fundamental talk there was was
price-negative, with Richard Feltes at Chicago-based RJ O'Brien, for instance, clocking
talk that "domestic wheat mills are well covered into late spring".)
After all, more on the US wheat crop deterioration which
spurred the last session's rally will not really be evident until it at least
breaks dormancy, while the smaller-than-expected, if still huge, Canada stocks
figure was a one-off.
"It remains to be seen how significant the damage is to the US
wheat crop before we start worrying that the US production might take a beating,"
Vanessa Tan at Phillip Futures said.
"Dry conditions would become a larger threat when the wheat
crop eventually emerges from dormancy and needs more moisture."
'Plenty of room left to the upside'
"With a lack of wheat related news, the market is going to
need to sustain enough momentum to keep the funds engaged on the buy side,"
Brian Henry at Benson Quinn Commodities said.
There is hope of this, with futures in US markets regaining
their 20-day moving averages, while "technical studies in have firmed
considerably", Mr Henry said.
"More traditional methods of measuring overbought conditions
indicate there is plenty of room left to the upside. Daily momentum studies are
However, "on a very short term basis", wheat markets may nonetheless
be rated overbought by other methodology, and could attract some profit-taking".
Which was what happened as of 09:45 UK time (03:45 Chicago time),
with soft red winter wheat for March falling 0.3% to $5.82 ¾ a bushel in Chicago.
Still, hard red winter wheat, the source of the poor
condition scare, added some premium in easing only 0.1% to $6.45 ¾ a bushel for
March corn, which
closed the last session at the highest for a spot contract since October, struggled
for direction altogether.
Sure, there are some fundamental factors in its favour, with
Ukraine, a growing competitor in export markets, seeing a 40% slump in its overall
grain shipments last month, which has mainly been attributed to poor weather,
but with some ideas of political unrest scaring buyers too.
"Ukraine has been an aggressive exporter of corn to date,
however they too are battling weather related logistical constraints and with
the current political instability there we could see some additional demand
shift to US shores," Benson Quinn Commodities said.
In fact, CHS Hedging noted that "traders speculate that
increased US exports may decrease the old crop carryout" figure when the US Department of Agriculture unveils
revised crop estimates on Monday in its next Wasde supply and demand report.
Also, "many farmers in the southern US will be switching
back to cotton from corn for
economic reasons this spring," the broker said, with prices of the fibre
holding up well, supported by continued stockpiling by China, for 2013-14 at
And then there are the concerns over Brazilian dryness which
have sent arabica coffee and raw sugar futures higher too, the
country being the top producer and exporter of both.
Informa Economics crystallised concerns on Tuesday by
cutting its forecast for Brazil's corn crop by 1m tonnes, while also cutting
its estimate for production in Argentina, which suffered dry weather earlier
on, by 2.4m tonnes to 22.6m tonnes.
And of course the dryness is a concern for soybeans too, of which Brazil is
already in the teeth of harvesting in some areas, and for which Michael
Cordonnier has said that 3m-5m tonnes could be at risk if the dearth of rain
continues, largely in the south, where the crop is still flowering.
'Weather does not
However, in Brazil, ag consultant Kory Melby, a "Minnesota
Farmer living in Goiânia", took a more cautious view of potential damage.
"At this time, the hot dry weather does not concern me much.
It makes for great harvest weather," he said.
"We need to keep in mind that Mato Grosso is understated when
it comes to [soybean] crop size this year. Mato Grosso can offset some losses
in other [areas].
"If this pattern lasts another 10 days, I would consider
cutting the size of the Brazil soybean crop a bit."
'Stubborn resistance overcome'
Still, whatever the fundamentals, corn had some technical
support to cling to in its breach of the $4.40-a-bushel level in the last
session which many had seen as a key chart point.
"Stubborn resistance at $4.40 in the March was finally
overcome on Tuesday," CHS said.
Furthermore, the contract also closed above its 100-day
moving average for the first time since June (when it was more than $1 a bushel
March corn stood unchanged at $4.41 ¾ a bushel.
'Increased demand for
Soybeans gained extra support from the standoff by farmers
in Argentina against selling soybeans – the country being the top exporter of soymeal and soyoil, besides being a big seller of the oilseed itself too.
Argentine farmers have withheld crop as a, dollar
denominated, hedge against peso depreciation and domestic inflation – in the
process gaining threats of fines from the Argentine government.
"As a result, we saw increased demand for US soymeal,"
Phillip Futures' Ms Tan said.
"Overseas buyers scrambled to get available supplies in
light of Argentina cutting back on soymeal output."
Soymeal was actually unchanged this session at $447.00 a
short ton for March delivery, with soyoil edging 0.2% higher to 37.80 cents a
Soybeans for March were 0.4% higher at $13.18 ½ a bushel, have gained technical kudos by closing above $13.00 a bushel in the last session.
As for the coffee
and raw sugar, the main focus of
Brazil weather concerns, arabica beans for March opened firm, adding 0.7% to
137.20 cents a pound, if failing yet to set a fresh eight-month high.
New York raw sugar for March gained 0.7% to 16.17 cents a pound,
getting back above its 50-day moving average, which it has not closed over in