Agricultural commodity bears, having scored victory in the
first trading day of 2014, proved reluctant to press home their advantage in
the second session – in early deals at least.
In wheat, this
meant that, having closed below $6 a bushel on Thursday for the first time for
a spot contract since May 2012, Chicago's March lot regained 0.5% to retake the
$6.00 a bushel mark as of 08:40 UK time (02:40 Chicago time).
There was some fundamental cause for a recovery, given the
extent of demand around, with Egypt, the world's biggest wheat importer, joining
the likes of Algeria and Taiwan in tendering for the grain.
"Global interest for wheat is picking up with Algeria,
Jordan, Syria and Iraq expected to tender over the course of the next week," said
Brian Henry at Benson Quinn Commodities.
Indeed, he flagged a "firm tone" to US basis levels, which he
also linked to "logistics in the northern plains and Canada on spring wheat",
with heavy snow and cold temperatures hampering efforts to get crop to market –
even if the weather is not seen as an issue for winter wheat.
"The potential effects of damaging temperatures on the US
hard red winter wheat crop aren't offering much traction," Mr Henry said
"The small percentage of HRW grown in the northern states
typically has plenty of snow cover, while there are a few areas where snow
cover isn't quite satisfactory.
"The trade shows little concern, as potential damage and
proving there has been damage are two different things this time of the year."
Hard red winter wheat for March stood 0.7% higher at $6.35 ¾
Corn gained too,
although less so, gaining 0.4% to $4.22 ¼ a bushel in Chicago for March
In part this was down to strength in its fellow grain wheat.
But a technical factor may also be playing a role, with the
annual index fund rebalancing period imminent, when funds rejig portfolio
weights to return them to mandated levels.
This means selling 2013's winners, and buying the losers, which
include corn, after its 40% loss over the year.
"Talk of index fund rebalancing providing a bid in the corn
market continues to draw some interest," US Commodities said.
"This process is about a week out, but could trigger some
short covering as it approaches."
China import 'glitch'
Hedge funds do after all still have a large short position
in corn Chicago futures and options, as well as in wheat.
And these could yet still pay off, given the lingering
problem over China rejecting imports from the US on grounds of containing an
unapproved (in Beijing) genetically modified variety, Syngenta's MIR 162.
"There are no sign of resolving the China GMO corn import
glitch," Richard Feltes at RJ O'Brien said.
"It feels like worst of the China corn import glitch still
lies ahead with China, operating in a buyer's market, in no hurry to expedite
approval of MIR 162."
there are concerns over Chinese imports too, with the prospect of a South
American harvest, now in its nursery stages in Brazil, bringing fresh and
cheaper supplies online
Still, a rise in soybean futures on China's Dalian exchange
overnight, if by only 0.3% to 4,451 yuan a tonne for May delivery, eased some
of the concerns, extending a recovery from a Monday level which was the lowest
since August last year.
Chicago soybeans for March added 0.5% to $12.76 ¼ a bushel.