Can Chicago crops, which managed such a poor close to 2012,
start the new year on a better footing?
Hopes of a rebound in corn and wheat futures from among
their lowest levels in six months, with soybeans within 4% of a similar feat,
received a fillip from agreement by US politicians to budget measures which will
avert the country falling off its so-called fiscal cliff.
The House of Representatives late on Tuesday passed, by 257
votes to 167, legislation lifting taxes on the wealthiest Americans, reflecting
a compromise reached earlier in the Senate.
The idea that the US has avoided triggering a package of
measures deemed likely to push the country back into recession boosted investor
Shares rose on Asian markets that were open, adding 2.9% in
Hong Kong, where stocks hit their highest level since June 2011, while gaining
1.2% in Sydney.
In Europe, London stocks
rose 1.4% on their first trading session of 2013, while Frankfurt and Paris
stocks soared 1.8%.
As an extra sign of improved risk appetite, the safe haven
of the dollar eased 0.5%, further
improving prospects for dollar-denominated assets such as many commodities by
making them more affordable to buyers in other currencies.
Indeed, London copper
soared more than 2%, on course for its biggest daily rise since mid-November.
However, the full extent on agricultural commodities was
somewhat masked by the fact that most major crop markets remained closed for
holidays, including those in Tokyo, the most-watched rubber market, and China.
Chicago trading will reopen later, at 15:30 UK time (09:30
One main market that was open was Kuala Lumpur, where palm oil for March added 2.5% to 2,500
ringgit a tonne as of 09:10 UK time (03:10 Chicago time).
The market is gaining extra support from hopes that a zero
rate of export duty on Malaysian palm oil this month will spur shipments and
erodes inventories which have reached a record high in the second-ranked
producing country, depressing prices to three-year low last month.
Indeed, palm oil prices lost 25% in 2012, recording their
worst annual performance since the world financial crisis year of 2008.
Values are also being underpinned by heavy seasonal rains in
major producing states such as Johor and Pahang, with precipitation lowering
oil content besides hampering logistics.
'Stricter import rule'
But ideas of strong Malaysian exports this month are being
undermined somewhat by concerns over quality controls being imposed by China, a
major importer of the vegetable oil.
"China's Inspection and Quarantine Bureau said it will not
accept imports of edible oils containing too much peroxide or stearic acid,"
Ker Chung Yang at Phillip Futures, in Singapore, noted.
"Traders are watching the impact of Malaysia's zero export
tax for crude palm oil in January and a stricter import rule for edible oil to
be enforced by China."
Already, the Chinese measures have been blamed for a drop in
Malaysian exports last month of 5.7%, according to Intertek, and 7.9%,
according to rival cargo surveyor Societe Generale de Surveillance.
Factors in the mix later for Chicago include a tender by
Syria for 100,000 tonnes of soft milling wheat.
Syria often buys from the Black Sea, although the dwindling
exportable supplies in Russia and Ukraine mean another origin might not be
ruled out this time.
On the price negative side for the grain, recent rain and
snow in US winter wheat areas has improved prospects for drought-pressed seedlings.
Weather is viewed generally benign for Argentina and Brazil,
supporting hopes for corn and soybean harvests which are now beginning in some
Indeed, Michael Cordonnier, at Soybean and Corn Advisor,
reported that in the major Brazilian producing state of Mato Grosso, "the
soybean yields are reported to be in the range of 2,500-3,000 kilogrammes per
hectare, or 36-43.5 bushels per acre, which is similar to the 2011-12 growing
"The early-maturing soybean yields were impacted somewhat by
drier-than-normal weather that occurred in October.
"The yields are expected to improve to 3,500 kilogrammes per
hectare, 50 bushels per acre, by January 15 when the medium-maturity soybeans
will start to be harvested."
Also concerning the soy complex is the continuing expiry
process of Chicago's January contracts, and the level of deliveries against
them which are seen as a measure of the attractions of selling through futures
rather than in the cash market.
First notice day on Monday saw 0 deliveries of soybeans, 9
contracts in soymeal and 5,268
contracts in soyoil.
"Deliveries in soymeal were a surprise, and soyoil
deliveries were about double those expected," Kim Rugel at Benson Quinn
As a recap, Monday's US export data, as measured by cargo
inspections, came in at 7.9m bushels for corn,
from 13.9m bushels the week before, well below the average of 25.5m bushels
they need to hit to make the US Department of Agriculture forecast of 1.15bn
bushels for 2012-13.
For soybeans, export inspections were 35.5m bushels, towards
the bottom of the range of market expectations, and for wheat were considered
soft at 7.76m bushels.
Wheat vs wheat
And other forces to look out for include beginning of month,
and year, buying. New months are typically seen as bringing extra cash into the
However, investors will be on the look out for signs of
impact too from fund rebalancing, the process by which funds rejig their
portfolio weights back to those of the index they follow, meaning sales of 2012's
top performers, and purchases of laggards.
Chicago wheat, for instance, is seen being sold down by
index funds, after a gain of 19% in 2012, although Kansas wheat may do better,
being included in some indices for the first time.
"Expectations are the index fund rebalancing will favour
Kansas wheat over Minneapolis and Chicago in 2013," Benson Quinn said.