Is wheat's longest
winning streak since November a sign of a change of attitude on the grain?
Monday may only have been a third successive positive
session, but that could look quite something for a contract which in January
overall added losses of 8.2% to the 22% it lost in 2013.
Furthermore, Chicago's benchmark March contract closed above
its 10-day moving average in the last session for the first time in two months
(if still remaining below its other major moving averages).
And even though weekly US export data released on Monday
were poor, at 11.7m bushels as measured by cargo inspections, well below the
17m bushels or so needed to meet US Department of Agriculture targets for the
full year, foul weather may have had something to do with that.
"It was reported that [government] inspectors in New Orleans
were unable to inspect barges for a couple of days to due ice along the river,"
Benson Quinn Commodities said, with soft data for corn and soybeans too
consistent with such talk.
As an extra bullish factor, data overnight showed a sharp deterioration
in the condition of the crop in Kansas, the top US wheat producing state, where
the proportion of winter wheat rated "good" or "excellent" tumbled to 35%, from
58% at the end of December.
However, this reflected largely dryness concerns, in a lack
of snow cover to protect seedlings against cold, a void which looks like being
resolved in coming days, in time to blanket crop ahead of the next freezes.
To repeat MDA's forecast, "snow cover has begun to build
across the north central and southern Plains and Midwest, and should build
further across the central Plains and central Midwest this week," MDA said.
"The increase in snow cover will continue to build
winterkill protection for wheat as temperatures remain cold."
Wheat vs corn
Furthermore, there are technical reasons for caution too,
with Richard Feltes at broker RJ O'Brien noting a "strong seasonal tendency for
wheat futures to erode versus corn", to the end of April according to Moore Research.
This trend may gain support from a "more upbeat assessment
of US corn export prospects in coming weeks", with Brazilian corn exports in
February-March expected to fall short of those last year, and an "outlook for
continuation of attractive US ethanol crush margin".
Indeed, there are those rumours, after all, of the
Environmental Protection Agency postponing to the summer a decision on reducing
the US ethanol mandate, while US exports of the biofuel are proving resilient,
to the chagrin of European Union producers, who believe they may be entering
the bloc through the back door of Norway.
Besides, there is some important data later on wheat, and many
other crops, in Statistics Canada data on Canadian inventories as of the end of
"Wheat bulls are understandably cautious about Tuesday's
StatsCan update on wheat stocks," Mr Feltes said, noting that the figure could
turn out to be "possibly a 22-year high".
The consensus (depending on which poll you believe) is for a
figure of 28m tonnes, up 36% year on year.
Chicago soft red winter wheat, the world benchmark, for
March stood 0.2% lower at $5.62 ¾ a bushel as of 09:30 UK time (03:30 Chicago time),
with hard red spring wheat, of which Canada is a huge producer, down 0.2% at
$6.09 ¾ a bushel for March.
Hard red winter wheat, as grown largely in Kansas state and
traded in Kansas City, managed a gain of 0.25 cents to $6.24 ½ a bushel.
Oilseeds markets will get some direction from the StatsCan
data too, which are expected to show Canadian
canola inventories ending 2013 at 13.1m tonnes, up from 7.3m tonnes a year
Also on the bearish side is talk of Argentina's government
taking action to force producers to sell soybeans
they have been hoarding, wisely, as a hedge against currency depreciation and domestic
inflation pegged, unofficially, at 25% or so.
Soybean sales would hand Argentina valuable dollars at a
time when its dwindling reserves of foreign currency are attracting
And Brazil's exports seem to be proceeding relatively
smoothly this year, in part thanks to the lower volume of competing corn
"Vessel line-ups at Brazilian ports continue to build, and
early shipment execution appears improved," CHS Hedging said.
However, South America is emerging increasingly as a source
of bullish information too, in part because it is not clear that Argentina will
succeed in forcing its farmers to let go of soybeans – except by creating the
conditions for peso stability which it is not obvious the government is capable
Furthermore, Argentine rains, having initially been welcomed
as resolving dryness, may now be proving a little too intense.
CHS noted "rumours of excessive moisture in Argentina",
while MDA warned that "heavy rains across central areas over the next 10 days
will increase wetness concerns and also result in some flooding".
Soybeans, while proving somewhat resilient to drought, "do
not like getting their feet wet", as traders say.
'Dry weather expected
Still, the dry weather in parts of Brazil is gaining more
attention in soybean markets too, although in the main proving an issue for coffee and sugar markets.
"Dry weather conditions are expected to worsen in Brazil,
top producer of soybeans, and this could provide stress to soybeans crops that
are developing late," Vanessa Tan at Phillip Futures said.
"Brazilian harvest pressure is hanging over the oilseed
market, however, the recent dry spell has raised some yield concerns for those
crops which are still immature," Luke Mathews at Commonwealth Bank of Australia
Soybeans for March added 0.1% to $12.94 ½ a bushel.
'Crop most impacted'
Corn sided more
with fellow grain wheat, despite the seasons favouring corn (see above), and
the grain also being affected by Brazil's dry weather - in fact, probably more so.
"As far as row crops are concerned, the full-season corn has
probably been the crop most impacted by the hot and dry conditions," influential
crop scout Michael Cordonnier said.
"The state of Minas Gerais has the most full-season corn
acreage in Brazil and there have been numerous reports of significant moisture
stress impacting the corn crop in the state."
'Willing seller on
Still, one factor against corn is that US farmers, having
been withholding crop sales so far in 2013-14, are being tempted by values now
well above three-year lows below $4.10 a bushel seen last month.
"Firm cash markets remain a supportive factor in corn, but
as we have seen, the producer is a willing seller on strength," Benson Quinn
"Positive price action did result in additional farmer
selling on Monday," CHS said, adding that the US "farmer continues to be
undersold on old crop production relative to history".
Does that mean sustained selling pressure ahead?
Chicago corn for March edged 0.1% lower to $4.35 ¼ a bushel.
Back on the topic of Brazilian heat, and arabica coffee, which soared 8% in the
last session largely on Brazil crop concerns, managed a further gain of 0.6% to
137.20 cents a pound in New York for March delivery, hitting a fresh
In fact, London robusta
coffee for March was doing better, adding 1.6% to $1,896 a tonne, clawing
back some of the ground against its rival bean that it lost in the last
Raw sugar, also
potentially affected by the dryness, was flat at 15.74 cents a pound for March.
"A recent drying trend in Brazil, and forecasts that dryness
will continue for at least another week, has supported the improved sentiment
within the sugar market," CBA's Mr Mathews noted.
However, on the bearish side, while the Indian Sugar Mills
Association has reported that sugar production at the end of January was
running 17% lower year on year, "the year-on-year deficit is closing".