The last trading session of the month is, by repute, a
tricky one in agricultural commodities.
"Friday is month end, and anything goes," Benson Quinn Commodities
It is often seen as a time when funds close positions and
withdraw funds to pay off clients, or bonuses.
But in early deals, at least, markets did not provide too
much to upset ag investors, although stock markets were under the weather, with
Tokyo shares closing down 0.6% to take its losses for the month to 8.5%.
That is exactly the loss that Chicago wheat futures are looking at for January too, despite the grain
setting course for a second successive day of gains by nudging 0.1% higher to
$5.54 a bushel as of 09:30 UK time (03:30 Chicago time) for March delivery.
The grain has actually attracted some, apparently, bullish news
of late, with cold weather in the US, a threat to winter wheat seedlings, and
signs of strong demand at these lower price levels.
US wheat export sales last week, at 795,000 tonnes, were the
best since September and well above expectations.
Cold weather has also boosted short-term prices by hampering
logistics, with CHS Hedging flagging "firm" US milling wheat cash markets, "driven
by poor railroad performance".
(That said, it is oats
which have really benefited from the logistical hiccups, which have prevented
Canada's surplus of the grain filling a US void, and are up 16% for the month,
even after factoring in a 0.1% slip to $4.11 ¾ a bushel in Chicago's March
contract on Friday.)
However, wheat continues to face pressure from ideas of
ample supplies, thinking which was given a boost by International Grains Council
data raising by 9m tonnes to a record 707m tonnes the estimate for world production
The estimate for carryover inventories was lifted by 7m
tonnes to 188m tonnes.
Signally, the estimate for stocks held by major exporters, a
particularly price-sensitive number since it gives the amount of the grain
actually available for sale, was upgraded by 5m tonnes to 56m tonnes, up 17%
year on year.
Furthermore pressing on prices may be the use of wheat as
the fall guy in spread bets.
"I wouldn't be surprised to find out that new ownership in
the row crop markets is putting a short in the wheat markets," Brian Henry at
Benson Quinn Commodities said.
Best performance in
And among row crops, corn
of course has been notably firm this month, up some 3%, its best performance in
nine months, defying ideas that last year's huge US harvest would continue to
press prices lower.
US Department of Agriculture data on January 10 downgrading
the harvest (albeit still to a record-high figure) and signalling a switch in
demand from wheat to corn changed thinking, with a reluctance by US growers to
sell helping too.
Corn, also supported by strong US export sales data on Thursday,
saw some profit taking on Friday, but not much, leaving the March contract down
0.2% at $4.32 ¾ a bushel.
The IGC actually offered some support to corn, raising its
estimate for world production in 2013-14 by 9m tonnes to 959m tonnes but
cutting its forecast for stocks held by major exporters by 8m tonnes to 53m
'Very good yields'
As for soybeans,
they sowed small gains, adding 0.2% to $12.77 ¾ a bushel for March, despite the
start on Friday of the lunar new year holiday in China, which will sideline the
biggest importer of the oilseed.
"Will buying by China slow for a few weeks?" CHS Hedging
Furthermore, there is the ongoing Brazilian harvest, for
which early yields are said to be promising.
"Harvest in Brazil, which is seeing very good yields, is
experiencing good harvest weather with few interruptions," CHS said.
"Soybeans are arriving in port allowing vessels to load."
Furthermore, as an extra challenge to bulls, Cargill late on
Thursday revealed it was to temporarily close a North Carolina soybean
processing plant this spring, citing reduced demand for US soymeal given the large soy harvests expected in South America.
"In recent years, demand for US soybean processing has
become more variable and seasonally driven," the group said.
Argentina is the world's top soymeal exporter.
Soymeal itself took the news in its stride, adding 0.5% to
$427.20 a short ton in Chicago for March delivery.
'Trying to carve out
Soft commodities began this session largely where they left
off the last one, although cotton, buoyed
on Thursday by strong US export sales data, did encounter some profit-taking,
falling 0.1% to 85.96 cents a pound in New York for March delivery.
extended its recovery, adding 0.2% to 15.02 cents a pound for March delivery, after
a 1.7% rally in the last session, fuelled by delay on a decision on an Indian
Indeed, Thursday marked "the fourth straight session in
which prices have traded in a range greater than 0.20 cents but finished with
an opposing close to the previous session," Luke Mathews at Commonwealth Bank
of Australia said.
"This bipolar activity is perhaps an indication that the
sugar market is trying to carve out a base, and possibly look for a bounce higher," after losing 15.9% in 2013, and a further 8.5% this month.
"However, it would take a brave trader to bet against the
three-year bear market."
continued its recovery too, gaining 1.3% to 121.50 cents a pound, taking its
gains in January nearly to 10%.