Shares have begun
performing better, now that Janet Yellen, the head of the Federal Reserve,
passed her first testimony to Congress without incident.
Does that mean that commodities
will fall from favour?
Ms Yellen reassured investors by saying that there would be
"a great deal of continuity" in US monetary policy, despite her taking over
from Ben Bernanke.
And as for the emerging market wobbles of late, "our sense
is that at this stage these developments do not pose a substantial risk to the
US economic outlook," she said.
Shares, having risen 1.2% on Wall Street last night, gained
in Asia too on Wednesday, adding 0.6% in Tokyo, 0.3% in Shanghai, 1.5% in Hong
Kong and 1.1% in Sydney.
'Turned a corner'
However, while there has been some idea of equity market
jitters pushing fund money back to agricultural commodities, there was no sense
in early deals of a major reversal now that shares are doing better.
That said, ags were hardly thriving, although wheat managed to extend its recovery a little.
The grain "seems to have turned a corner", according
to CHS Hedging.
Soybeans showed some sprightliness earlier , as more investors come round to Agrimoney.com's way of thinking, but early strength had faded by 09:20 UK time (03:20
'Severe drought or
There are some fundamental issues behind the continued
recovery in wheat, with US weather, for instance, still providing causes for concern even if it looks like the
really severe low temperatures have passed.
Sure, the "prospects of additional damage to both US hard
red winter wheat and soft red winter wheat are fading" as temperatures rise, but
focus will turn to other factors, "mainly moisture levels and temps, as the
wheat approaches breaking dormancy", Benson Quinn Commodities said.
In fact, "much of the southern and western winter wheat
growing regions remain in severe drought or worse," Mark Welch at Texas A&M
"The precipitation forecast for the next 5-7 days does not
offer much hope of relief."
'Another leg higher?'
There is still some demand around too, with Jordan buying
100,000 tonnes, although it has to be said that high profile buyers' appetites
seem to have faded notably with the recovery in prices this month.
Still, chart factors look more supportive, with Benson Quinn
Commodities noting that "technical momentum in the wheat markets remains firm,
which could allow for another leg higher".
Furthermore, Chicago's March contract closed the last
session above its 40-day moving average for the first time since October.
And it remained above it, in adding 0.1% to $5.91 a bushel,
although signally the contract has still failed to break above last week's high
of 5.92 ¾ a bushel
eased 0.4% to $4.39 ¾ a bushel for March delivery, returning just below its
10-day moving average, with concerns over levels of unsold crop offsetting the
bullish outcome of Monday's US Department of Agriculture Wasde report, which
cut the forecast for US stocks of the grain far more than investors had
In fact, "grower selling has subsided as many have sold what
they want at these levels", CHS Hedging said.
"They will now bide their time until/if $4.50 a bushel is
Furthermore, there is some technical appeal, with the broker
noting that in the last session "bargain hunting popped in when corn peeked
under the 100-day moving average at $4.38 ½ per bushel".
However, the warmer US temperatures are a negative for
prices in boding better for logistics, which have been fouled up in North
America by snow and ice, so meaning less need for buyers to pay up for supplies.
"More seasonable temperatures which should help to free up
some better movement," Ben Bradbury at Benson Quinn Commodities said.
which have been drive to record highs by the foul weather, eased too, by 0.1%
to 4.37 a bushel.
Furthermore, there are decent ideas for foreign crops, with
Brazil pegging its harvest at 75.5m tonnes, well above the USDA figure of 70.0m
tonnes, and Ukraine's farm ministry foreseeing a rise in domestic sowings of
the grain this year of 6%, taking them potentially to 5.2m hectares.
"The increased acreage could lead to additional output of up
to 2m tonnes," Mr Bradbury said
On the hook
back early headway to stand down 0.1% at $13.33 ¼ a bushel, despite decreasing
confidence in the idea of a huge Chinese exodus from orders of US soybeans, and
switching demand to Brazil, where the harvest is refilling silos.
Such ideas, backed by a resounding silence on announcements
of US order cancellations, are gaining credibility on grounds of process rather
than desire, in that it may not be quite so easy for Chinese buyers to wriggle
out of their purchases.
"The latest talk is that China is looking to cancel upwards
of 10-12 cargoes but it seems they may have waited too long now as boats appear
to be lined up and the US exporter is not letting them out of sale," Benson
Quinn Commodities said.
At RJ O'Brien, Richard Feltes noted a "widespread floor rumour
that exporters are denying Chinese requests to cancel soy cargos, as some have
freight booked while others suggest that the wash-out price is not attractive
'Premium has to be
Another broker said that while "there were rumours that
Chinese crushers are in the process of trying to cancel up to 750,000 tonnes of
US soybean orders", it may be "difficult to just straight cancel these orders.
"That maybe where the futures strength is derived. If China
is unable to cancel, or if the orders get resold to another destination, then
we will likely need to import more soybeans or soymeal to cover our own crush needs.
"The premium in the US over Brazil has to be high for this
arbitrage to happen."
Mr Feltes also highlighted that the USDA has a record, in
its February Wasde reports, of underestimating full-season soybean demand. It
has done so five in the last six years, in fact.
"Meanwhile, there is mounting concern that nearly 90% of US
soybean export programme will be executed by early March".
This would leave "the remaining six months of old crop
soybean marketing year to ration tightening old crop stocks which producers
will be unwilling to sell at the slightest hint of 2014 growing season
"The take-home points are that soy and meal spreads should be
well supported on breaks, that farmers will be cautious sellers of new crop soybeans
with a Chicago price below $12.00 a bushel, and that each passing day without
Chinese order cancellations elevates angst about over-committing 2013-14 US
Soymeal for March stood 0.1% higher at $449.60 a short ton,
earlier hitting $452.90 a short ton, a two month high for a spot contract.
Among soft commodities, raw
sugar opened on the back foot, standing down 0.1% at 15.45 cents a pound,
despite the continued deferral by India to agree on a sugar export subsidy.
(The move was on Tuesday kicked down the road for a third
And in fact Unica, issued "grave concerns" over the potential
support, which the Brazilian cane industry group termed "harmful" in "distorting"
the world market and "artificially" forcing down prices.
Still, as Luke Mathews at Commonwealth Bank of Australia
noted, "traders have refocused on the bearish global sugar balance sheet - supplies
are expected to outpace demand for a fifth straight year in 2014-15 - following
last week's short covering bounce".