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Morning markets: sugar, wheat try firm finish to poor month

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 said.

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%.

Bullish factors

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 a bushel in Chicago's March contract on Friday.)

Supply upgrade

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 in 2013-14.

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 nine months

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 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 tonnes.

'Very good yields'

As for soybeans, they sowed small gains, adding 0.2% to $12.77 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 asked.

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."

Cargill closure

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 a base'

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.

Raw sugar 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 export subsidy.

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."

Arabica coffee continued its recovery too, gaining 1.3% to 121.50 cents a pound, taking its gains in January nearly to 10%.

Evening markets: export data underpin grain, soybean futures
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