It hasn't taken long for 2013 also to become associated with
It has brought no break in the pattern of dryness in parts
of the US, notably in hard red winter wheat country.
The latest official US drought monitor shows 100% of Oklahoma
and 91% of Texas rated "abnormally dry", or worse, plus 95% of the High Plains
(including 100% of Kansas, the top wheat-producing state).
Luke Mathews at Commonwealth Bank of Australia highlighted
the role of "speculation the US drought will result in tight global [grain] supplies
for a second year running" in supporting crop prices.
Meanwhile, there remain concerns over dryness in parts of
Russia too, which the country's Grain Union warned last week had hampered
autumn-planted seedlings, and over damage caused by cold weather on crops not
protected by a snow blanket.
And South America, which entered the year with a good and
improving weather scorecard, as Argentina dried out, is seeing this dryness
become of growing concern, and in some areas of southern and northern Brazil
Central Brazil rains are turning more severe.
Even if these rains do not damage crops, they will slow harvest,
delaying the onset of the supply onto the world market of the soybeans that
many buyers are relying on, after disappointing South American and US
production last year depleted supplies.
'Super wet pattern'
"The weather model data continues to show tremendous amount
of rain coming for large portions of east central central and west central
Brazil over the next five days," WxRisk.com said, talking of 3-5 inches of rain
for areas including most of major growing state Mato Grosso.
"On the other hand most of south western and south east
Brazil into Paraguay and all of central northern and western Argentina remains
essentially dry over the next five days.
"This pattern looks like it's going to continue non-stop
right through the 11-to-15 day outlook, which will take it into early February,"
the weather service added.
"The super wet pattern continues with no break whatsoever"
in central areas, with Mato Grosso, and parts of Goias, set for a "tremendous
amount of rain - again 75% coverage or higher of 2-5 inches.
"And once again, to the south, all of south eastern Brazil
including Mato Grosso do Sul in south west Brazil, Paraguay and most of central
northern and eastern Argentina stays completely dry."
'Time for Tums'
Mike Mawdsley at Market 1 said that it was "time to get the
Tums out again", a reference to heartburn tablets.
"Know what you will do if the market spikes higher on a
And as an extra support, a broadly risk-on atmosphere was
evident in markets overall, on the Bank of Japan's latest move to ease monetary
policy in an effort to counter deflation and boost economic growth.
Shares rose in many Asian markets, adding 0.3% in Hong Kong and
0.1% in Sydney, if easing 0.4% in Tokyo itself, a move considered down to "buy
the rumour, sell the fact thinking".
Price rises ahead?
On agricultural commodity markets, Joyce Liu at Phillip
Futures said that "the focus for grains today is likely to remain on weather,
particularly in Brazil and Argentina".
"Unless relief rain comes by this week" to the dry areas, "we
expect corn and soybeans prices to test $7.50 a bushel and $14.50 a bushel
respectively by weekend."
In fact, corn for March added 0.8% to $7.33 a bushel as of
09:20 UK time (03:20 Chicago time), signally breaking through its 75-day moving
average, above which it has not closed since October, despite a few attempts.
"The March contract stumbled at the 75-day moving average
multiple times" last week, Brian Henry at Benson Quinn Commodities said.
Soybeans for March rose 1.3% to $14.45 ½ a bushel, a little
short of their own 75-day moving average, at just under $14.52 a bushel.
'Concerns of an
March wheat, meanwhile, added 0.7% to $7.96 ¾ a bushel in Chicago,
a one-month high, and representing a recovery of more than 8% from a January 11
"US exports have finally picked up its pace after the
commodity fell 17% from its high in early November to price levels that make it
more competitive than European wheat exports," Ms Liu said.
"We see further upside to at least $8.10-a-bushel levels
before importers seek alternatives.
"The limited supply in world market, together with concerns
of an expanding drought in the US wheat belt, underpins prices."
Among soft commodities, cotton
extended its winning spree on ideas of stronger-than-thought US exports and
ideas of weak sowings this year because of the lower prices in 2012-13.
New York's March contract added 0.5% to 78.90 cents a pound,
a three-month high.
But raw sugar for
March dropped 0.4% to 18.30 cents a pound, weakened by the Brazil rains which,
while poor news for the soybean harvest, are improving prospects for cane production,
when the crush starts later this year.
However, CBA's Luke Mathews took an upbeat view of Chinese
sugar import data on Monday which, while showing buy-ins falling year on year
last month, represented a sharp pick-up from the November figure.
"We have long argued that strong Chinese sugar demand
remains supportive for medium term prices," he said.