What goes down must go up, eventually.
After six sessions of decline, soybeans rediscovered forward gears, helped by reminders that supplies
of the oilseed remain tight.
Oil World took a sceptical view of signals from China, the top
soybean importer, of waning demand.
"The Chinese know very well how to influence the market," the
influential consultancy said.
"They made announcements about cancellations of soybean
purchases as well as of deteriorating profitability in the domestic pork
industry, which may slow down soybean crushings and thus soybean import
The latest cancellations, revealed on Tuesday, amounted to
nearly 2m tonnes ditched by Sunrise Group, China's leading soybean trader, of
Brazilian origin, with the move blamed on the hefty delays at the South
American country's ports.
Chinese supplies not
In fact, China's inventories may be running low.
"Chinese stocks of imported soybeans declined pronouncedly
during the past three-to-five months and are continuing at undesirably low
levels also in March and April owing to the ongoing shipment delays in South
America, at least for the time being," Oil World said.
"Combined US and South American soybean shipments in March
will again be below the Chinese requirements. In other words, at the moment
Chinese importers cannot get what they purchased."
China's supplies "would be more comfortable" if stocks "could
be replenished sufficiently" up to May, so offering a hedge against any weather
problems in the US, the German-based group said.
Meanwhile, in the US, Jerry Gidel, at Chicago-based broker
Rice Dairy, issued a reminder of the implications of US Department of
Agriculture estimates for the domestic soybean balance sheet – after 68% of
forecast 2012-13 demand was consumed in the first half of the season.
While demand is typically front-loaded, on average users
would have 41% of the drop left to play with rather than 32%.
The implications are that the US soybean crush "will need to
retrench 26% to 688m bushels", while exports in the second half "will be
limited to 180m bushels or only 15.5% of this protein's first half demand".
"To make this jigsaw puzzle fit, some price rationing likely
seems required as the world sources its spot needs," Mr Gidel said,
recommending that because of the "extreme tightness", users should buy on the current
Soybean prices extended a shallow recovery in China itself,
rising 0.2% to 4,736 yuan a tonne, adding to ideas that supplies may not be so
1.3% to 3,523 yuan a tonne, although soyoil
ended 0.1% weaker at 3,523 yuan a tonne, all for September contracts on the
In Chicago, May soybeans added 0.6% to $14.15 a bushel as of
09:15 UK time (04:15 Chicago time), rebounding from their lowest close in two
Still, it was palm
oil which proved the leader of the oilseeds complex, gaining 1.0% to 2,438
ringgit a tonne in Kuala Lumpur, helped by data showing a marked pick-up in
Malaysian exports of the vegetable oil.
Intertek put the rise in shipments so far in March at 11%,
month on month, with rival cargo surveyor Societe Generale de Surveillance
estimating the increase at 13.7%.
'Wants to rally'
Wheat rose too,
adding 1.0% to $7.29 ¼ a bushel in Chicago for May delivery, gaining further
support from ideas of firm demand at prices remaining some $0.50 a bushel down
so far this year.
Besides a string of export tenders this week, from the likes
of Algeria, Jordan and Tunisia, there are growing ideas of US livestock
producers switching grains, especially in the poultry sector.
"Wheat is acting like it wants to rally," Mike Mawdsley
said, gains which appear to be being encouraged by short covering.
Richard Feltes at broker RJ O'Brien said that speculators'
45,000 net short in Chicago wheat, as of last Tuesday, "suggests potential for
further wheat short-covering".
Corn from Canada
In fact, wheat's rise nearly closed its unusual discount to corn, which managed a gain of only 0.2%
to $7.29 ¾ a bushel in Chicago for May delivery.
That tallies with an observation by Joyce Liu, at broker
Phillip Futures, that wheat tends to reverse sharply from periods of discount
"Going forward, we expect wheat to trade closely to the
strength in corn, as narrow spreads keep the two commodities in tandem with
each other," she added on Wednesday.
Corn, however, felt some pressure from ideas of some users switching
to wheat, or to imported corn.
"US ethanol plants are reportedly procuring large volumes of
corn from Canada," Ms Liu noted.
Canadian farm officials overnight forecast corn exports
doubling to 1.0m tones, adding that "most of these exports will go to the US
north east region due to the small US crop".
Soft commodities got off to a bright start too, which was
just about reflective of the broader market mood, improved by Cyprus's
rejection of a tax on bank deposits to ease its financial problems, with the potential
for tapping its natural gas reserves instead.
New York raw sugar
for May added 0.5% to 18.40 cents a pound, recovering a little more of the 3%
slump on Monday.
"After taking a big blow, we expect more weight on sugar
prices now till April, but remain bullish on sugar prices after that, as
Brazilian ethanol policy changes is likely to provide large upside," Ms Liu
gains for old crop, with May fibre up 0.2% at 91.30 cents a pound, while the new
crop December lot eased 0.2% to 88.07 cents a pound, extending a trend flagged
by Agrimoney.com on Tuesday.