PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 09:30 GMT, Wednesday, 12th Feb 2014, by
Morning markets: shares revive. Will this rob cash from ags?

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's way of thinking, but early strength had faded by 09:20 UK time (03:20 Chicago time).

'Severe drought or worse'

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 University said.

"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 a bushel

'Bargain hunting popped in'

Corn, meanwhile, eased 0.4% to $4.39 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 expected.

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 breached".

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 per bushel".

'Better movement'

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.

Indeed, oats, 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

Soybeans gave back early headway to stand down 0.1% at $13.33 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 enough".

'Premium has to be high'

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."

'Mounting concern'

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 adversity.

"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 soybean supplies."

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.

'Grave concerns'

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 time.)

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".

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