PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 09:31 GMT, Monday, 16th Sept 2013, by Agrimoney.com
Morning markets: Summers' exit lifts some markets - not ags

Commodities started with one factor in their favour an easing dollar, weakened by Larry Summer's withdrawal as a candidate to head the Federal Reserve.

The move leaves Janet Yellen, deemed a more dovish candidate, as the favourite to succeed Ben Bernanke in the post, so implying a greater willingness to use easier monetary policy to boost the economy, and in turn a less support for the dollar.

And a weaker dollar boosts prices of dollar-denominated commodities by making them more affordable to buyers in other currencies.

Sugar declines

Many markets took succour in the prospect of a less tough hand on the monetary tiller, with shares expected to open higher on Wall Street, having added 0.1% in Tokyo and 1.5% in Hong Kong.

Nonetheless, strength was hard to find among agricultural commodities in early deals, with raw sugar easing 0.6% to 16.99 cents a pound as of 09:15 UK time (04:15 New York time, 03:15 Chicago time) after regulatory data showed a huge drop in hedge funds' net short position in the sweetener.

Managed money, a proxy for speculators, slashed by more than 49,000 contracts its net short in New York raw sugar futures and options, the biggest positive shift in sentiment on records going back to 2006.

While on the surface a positive move, the short covering, fuelled by ideas from Czarnikow that demand is much stronger than it appears to be, also clears space for investors to take a negative stance with less risk of being wrong-footed by a price spike caused by short-covering.

Besides, some other commentators, including Marex and Kingsman, have taken a more robust view than Czarnikow on sugar inventories, a negative for prices.

Furthermore, the Indian Sugar Mills Association on Monday lifted to 25m tonnes, from 23.7m tonnes, its forecast for Indian production.

'Significant rain event'

And in Chicago, the default direction was downward too.

Selling was encouraged by a turn wetter in the US weather outlook, a factor which, while potentially meaning some delays to the corn harvest, might allow some late recovery in yields of dryness-hit Midwest soybeans.

Last week "there was a lot of concern and uncertainty" how hurricane Ingrid might affect US rain prospects, WxRisk.com said.

The way the hurricane is unfolding means weather models "show a significant rain event likely over the next five days across the central Plains into the heart of the western Corn Belt and into the northern eastern Corn Belt".

"The European, Canadian and GFS models all show a large area of 1-2.5 inches of rain covering the Texas panhandle, with 75% coverage or better over most of Oklahoma, central and eastern Kansas, into far south east Nebraska, the northern half of Missouri, all of Iowa, the northern half of Illinois, the northern third of Indiana and far southern Wisconsin."

'Might arrive too late'

The rain will certainly not do as much good as it would have done a couple of weeks ago, with many soybeans now mature.

"The cooler temperatures and rainfall might arrive too late to benefit the soybeans crop significantly," Joyce Liu at Phillip Futures said.

And there is still talk of a further downgrade ahead for the US crop, given the methodology used by the US Department of Agriculture for its latest estimate, in last week's Wasde report.

"Soybean pod weights are still very high which leads us to believe that the national average yield could come down," one broker said.

Furthermore, the USDA is expected later on Monday to reveal, in its weekly crop progress report, a further deterioration in the condition of the US crop.

Still soybeans for November, in their first day as the spot contract, eased 1.3% to $13.63 a bushel, falling below its 10-day moving average.

Corn eases

And, with soybeans the market leader of late, that put a negative twist on trading in grains too.

Sure, the condition of the US corn crop is expected to be marked down too this evening, by one or two points in terms of the proportion of the crop rated "good" or "excellent".

But that is small beer compared with the pressure from the ongoing harvest, which is producing better results than initially expected.

Corn for December, also in its first day as the spot contract, eased 0.3% to $4.57 a bushel.

Timely rains

Wheat also spent much of the early hours of trading in Chicago in negative territory, but staged some revival to stand up 0.3% at $6.43 a bushel for December delivery, now the spot contract too.

The US rain is negative for the grain too, in boosting prospects for winter sowings.

"The rainfall will be very welcome ahead of the upcoming winter wheat planting programme," Luke Mathews at Commonwealth Bank of Australia said.

In Australia itself, there has been rain relief too for drought-hit crops.

East coast wheat closed in Sydney at a five-month low of Aus$264.00 a tonne on Monday, down 2.6% on the day.

"Floor under offers'

Still, the expectations for the Black Sea harvest, a key price setter on export markets, continues to decline.

"Production in the Black Sea region isn't grading out as well as the exceptional quality found in this region last year," Brian Henry at Benson Quinn Commodities said, flagging reports that 14m tonnes of the harvest will come in at class 3 milling wheat, compared to 19m tonnes last year.

"This in itself has the potential to put a floor under Black Sea offers in the export market and, combined with interior demand, probably has."

Furthermore, the large net short position that hedge funds already have in Chicago wheat futures and options, of 47,000 lots, may reduce the appetite for taking out more.

"The size of the fund short in Chicago has grown to levels that could limit the offer," Mr Henry said.

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