Food commodity markets got off to a soft start to Thursday, indeed beginning to set something of an on-off pattern giving weight to arguments that they will prove rangebound for now.
The theory is that many investors will be reluctant to stick their neck out too far for now, with the US Department of Agriculture's latest Wasde report on global crop supply and demand due on January 12.
All the monthly Wasde reports are critical to crop market thinking, particularly for the Chicago-traded food commodities, but January briefings can be particularly so.
As Tim Hannagan at PFGBest noted, "last year, funds began selling after the January USDA crop report", setting off a bear run that lasted until June.
This time, things appear different, with many analysts quoting the popular Chicago adage that "small crops get smaller" as reason to expect the Wasde to tighten further expectations for crop supplies.
"The market has been attempting to convince themselves that the January 12 report will be construed as bullish since we begin the mid-December surge in prices," Jon Michalscheck at Benson Quinn Commodities said.
Still, with such a Wasde not yet in the bag – and indeed, after several surprises in USDA reports last year – many analysts believe that market direction may be difficult to find for now.
"Continued volatility seems certain, with a market that easily reverses itself and has been tough to predict on a daily basis," Benson Quinn said.
At Market 1, Mike Mawdsley said: "Look for choppy trade to be with us awhile."
Hence the idea that crop prices may, for a few days at least, be unwilling to head too far in either direction.
Quality fears overdone?
Such a theory would propose a retreat from Wednesday's rally, which indeed occurred, notably in the big-three's top performer in the last session, wheat, which as of 08:45 GMT shed 6.25 cents, or 0.8%, to $8.02 a bushel for March delivery, with the $8 a bushel mark providing something of a resistance level to downward movement.
Furthermore, there are some ideas that Australia's rain-plagued crop may not have been quite as disastrous, in protein terms, as many had feared.
"Quality, whist certainly showing the impacts of harvest rain, is holding up better than expected in many areas," Luke Mathews at Commonwealth Bank of Australia, said.
That said, as Kerr Chung Yang at Phillip Futures in Singapore noted, "there are concerns on the cold weather hurting wheat in the US Plains, where crops are struggling from dryness".
'Breaks should find support'
In corn, the retreat was more modest, with the March contract down 0.5 cents at $6.18 ¾ a bushel, while soybeans, the weakest of the big three in the last session, recovered to positive territory, adding 0.2% to $13.89 ¼ a bushel for January.
The better-traded March contract gained 0.2% to $13.96 ¾ a bushel.
Prospects for these crops depend also largely on what La Nina holds for Argentina's weather, following an uncomfortably dry spell.
"There's always the chance we just saw the high for the year, but with tight stocks and uncertainty in South America production, breaks should find support," Mr Mawdsley said.
Still, as a further complication there are plenty of interpretations of what weather has occurred in Argentina, let alone what is to come.
Darrell Holaday at Country Futures, for instance, said that the "forecast remains warm and dry", while Benson Quinn noted "improving chances [of rain] in extended forecasts".
Wait and see
Besides weather arguments, another factor set to affect trading over the rest of the day is the US weekly export sales report.
The market is expecting weaker sales that last week for corn, at 500,000-700,000 tonnes, and soybeans, at 700,000-900,000 tonnes.
Wheat sales are forecast roughly in line, at 350,000-450,000 tonnes.
One reason for investors to expect weaker data is the idea that a new year may, for tax reasons, bring increased selling by growers, so supporting the supply side of the equation.
"Importers wait to see if heavier grain sales occur after January 1 as farmers delay sales to push tax liability into 2011," PFG Best's Tim Hannagan said.
Elsewhere, palm oil returned to the offensive in Kuala Lumpur, soaring 1.8% to 3,878 ringgit a tonne for the benchmark March contract.
The vegetable oil is receiving support from ideas of strong Asian demand, notably from China, at a time when heavy rains are setting back output in Indonesia and Malaysia, the top two producers, with Argentina's dryness raising concerns over rival soyoil.
Argentina is the top soyoil exporter.
Thailand on Thursday said it was to import 30,000 tonnes of palm oil to tackle a domestic shortfall in supplies.
Meanwhile, rubber set a fresh record of 437.50 yen a kilogramme in Tokyo, helped by oil's return above $90 a barrel.
And New York cotton jumped 2.1% to 148.17 cents a pound, following a comparable rise by the fibre on the Zhengzhou exchange in China, the top producer, consumer and importer of the commodity.