Will sugar and wheat pull out of their declines, and bounce
from multi-year lows?
There was hope in early deals on Thursday, when both were
firmly in positive territory – although investors don't need to look far to
find examples where strong starts have fizzled out by the close.
Still, at least there was some fundamental hook for bulls to
hang some buying on in sugar with Indonesia issuing permits for 800,000 tonnes
of imports of the sweetener.
Furthermore, its state food company, Bulog, is to stockpile
up to 300,000 tonnes of sugar next year, both domestically and from abroad, to
use in stabilising prices.
Indonesia is anyway one of the world's top sugar importers,
with purchases for 2013-14 forecast at 3.12m tonnes by the International Sugar
Not that all investors are convinced that a major recovery
in sugar prices is on the way, especially after Unica on Tuesday nudged higher
its forecast for the Brazil Centre South cane harvest.
"Brazil is approaching the end of its bumper harvest. Both
India and Thailand are expecting large harvests," Vanessa Tan at Phillip
"Going forward, the current oversupply would continue to
pressure the raw sugar market."
Furthermore, India's government is mulling a boost to its
sugar mills through interest free loans.
Still, raw sugar – which closed the last session at a
three-month low, down 21% from its October high – regained 0.6% to stand at
15.99 cents a pound in New York for March delivery as of 09:45 UK time (04:45
New York time, 03:45 Chicago time).
Some brokers have viewed 16.00 cents a pound as a level
below which buyers may be lured into stocking up.
As for wheat, it
rose 0.2% in Chicago from an 18-month closing low to stand at $6.13 ¾ a bushel for
And this despite some bearish news, with Iraq opting for
Australia for a 350,000-tonne wheat order, although this had been broadly
expected, at prices between $339.80-346.90 a tonne, c&f.
Furthermore, CBH Group, which handles the great majority of
grains in Western Australia, raised to 15.2m tonnes, from 13.8m tonnes, its
forecast for its overall grain receipts this season.
While the Abares commodities bureau has forecast the Western
Australian crop at 15.1m tonnes, that includes considerable volumes not passing
Last year, CBH handled 9.1m tonnes, compared with an overall
Western Australia harvest pegged at some 11m tonnes by Abares.
However, there is some bullish news in the sector, with
revived concerns over curbs on Argentine exports.
Merchants are still awaiting clearance to export 1.6m tonnes
of Argentine wheat for 2013-14, with Brazil, a major customer of its South American
neighbour, turning again further north for supplies, and said to have purchased
50,000 tonnes of US wheat.
"There is capacity at the Texas Gulf and the Argentine
government has given no indications that they are going to lift the export ban
anytime soon," Jonathan Watters at Benson Quinn Commodities said, with the
capacity factor being a major factor.
While on world export markets "prices for nearby delivery
continue to rise, as seen in Gasc's recent purchases, the US/Canada can't
participate due to capacity issues".
Argentina has been a concern for row crops too, from a
weather perspective, with a turn hotter and drier in conditions remaining on
the radar, if not bleeping quite as loudly as earlier in the week.
"Argentine weather remains a wild card with crop in
excellent condition ahead of heat," Benson Quinn Commodities said.
"If rains and normal temperatures return in the New Year, the
soybean crop still has potential to
be record large."
At Phillip Futures, Vanessa Tan said: "Argentina is
experiencing hot and dry conditions which could have an adverse impact on
"This could take away some of the pressure that expectations
of large South American crops have on the soybeans market."
Whatever, there still looks enough uncertainty around about
South America's harvest prospects to prevent China fulfilling market fears and swapping
orders from the US to Argentina and Brazil.
At broker Market 1, Mike Mawdsley noted that while the US
Department of Agriculture did not on Wednesday unveil fresh soybean export
sales, "no overnight cancellations were reported either.
"Remember, many expect cancellations to start soon for soybeans
and business head to South America.
"I won't argue that, but it is interesting that China's soybean
futures price is a tad north of $20.00 a bushel. They may want all we raise!"
Soybeans for March added 0.3% to $13.17 ¼ a bushel.
And corn was
higher too, up 0.2% to $4.26 a bushel for March, helped by strength in fellow
grain wheat, but also without any fresh news of cancellations by China of
orders of US supplies, as talks between Beijing and Washington officials loom.
Furthermore, South Korea has agreed to accept early delivery
of US corn, enabling a market for cargos rejected by China.
And while ethanol production data on Wednesday showed a
substantial drop, of 16,000 barrels a day, to 928,000 barrels a day in US
output last week, that remains above the level of about 909,000 barrels a day
needed to meet the USDA forecast for corn consumption in 2013-14.
The USDA estimates that 4.95bn bushels of corn will head
into US ethanol plants.
"This weekly production rate is the equivalent of an annualised
corn grind of 5.15bn bushels, and at a pace greater than current USDA
projections," broker CHS said.
Elsewhere, in Kuala Lumpur, palm oil rose 0.9% to 2,574 ringgit a tonne, amid hopes that a slight
firming in US monetary policy will lead to a rising dollar and a depreciation
of emerging market currencies.
"After the Fed's announcement on tapering, the Malaysian ringgit
plunged to a two and a half month low," Phillip Futures said.
"The weakening of the ringgit will benefit the
ringgit-denominated palm oil as it means cheaper prices for overseas buyers and
refiners," while a stronger dollar makes soyoil, denominated in dollars, that
much less competitive.
"As such, [the US move] may help to reverse the recent
strong substitution, garnering more external demand for palm oil."