New week, same agricultural commodity market dynamics.
Investors punished many crops, notably palm oil which plunged
nearly 7% at one point, but indulged wheat,
which continued to feel a boost from Friday's announcement by Russia's economy
minister that the country may yet ban exports.
Not that many analysts believe there will be too much
impact, now, on international markets whether Russia does or does not curb,
given the volume of the poor 2012 harvest it has already sold, leaving little
of the exportable surplus left.
"Irrespective of any official trade ban, our view is that
declining local supplies and rising domestic prices means Russia will soon
price itself out of the global marketplace anyway," Luke Mathews at
Commonwealth Bank of Australia said.
'Window closing quickly'
However, there are concerns that the Russian stance might be
contagious, and spread to neighbour Ukraine, which has agreed with merchants
informal restrictions on exports.
"There are talks of Ukrainian government reviewing its
position on control over wheat exports this season, following Russian economy
minister's comments," Lynette Tan at Phillip Futures said.
And the grain also received a continued boost from the dry
weather in parts of Australia, where even though there is some rain forecast
this week, its potential for refreshing drought-hit crops is fading fast.
"The window to receive beneficial rainfall for much of the
Aussie wheat crop is closing quickly," Benson Quinn Commodities said.
Furthermore, there are some worries over the Argentine crop
too, with yield results from the first cuts said to be poor, and with some
flood damage sustained to sowings in Buenos Aires province.
And technically, Chicago's December wheat lot had the added
advantage of climbing back over its 50-day moving average in the last session,
just, sending a positive signal to funds – which anyway have not got such a
huge position in the grain potentially to sell as in corn and soybeans.
Speculators had a net long of some 60,000 contracts in
Chicago wheat as of last Tuesday, regulatory data last on Friday showed.
The contract added a further 0.8% as of 09:25 UK time (03:25
Chicago time) to reach $9.04 ¼ a bushel.
However, prices of row crops continued to come under pressure
from a US harvest which is progressing rapidly, proving a ramp up in supplies,
and so a swing in market power towards buyers, if only potentially temporarily.
It appears likely to have continued its rapid pace over the weekend,
with Saturday bringing some light rains to parts of the Midwest, but Sunday
And for now, the forecast looks "pretty quiet across the
Plains, the Midwest with a large high moving to the East coast", weather
service WxRisk.com said, although there could be some storms later in the week.
And the week is expected to bring some more much-needed rains
to central Brazil's important soybean
belt too, where growers are starting sowings, although the outlook from the weekend
is less encouraging, on WxRisk.com forecasts.
"Brazilian farmers had an early start in planting what is
expected to be a bumper corn and
record soy crop," Ms Tan noted.
"This is widely heralded as a welcoming sign that is
expected to help to replace some of the crops lost in the worst drought in a
century in US, but only if rains continue in the coming weeks as forecasted."
Furthermore, corn and especially soybeans were weighed by
funds' willingness to sell down large net long positions, which were above
200,000 lots for Chicago contract in both crops as of last Tuesday, even after
"The long fund position in wheat has been manageable, while
length in the corn market has had to be liquidated due to a lack of upward momentum,"
Benson Quinn Commodities said.
Funds were little encouraged to hold by external markets in which
concerns over world economic growth returned, sending shares lower in Asia, and
fostered a negative start to the week for many commodities such as copper and Brent crude which dropped below $111 a barrel.
The safe haven of the dollar,
meanwhile, added 0.2%.
Also to factor in was a week-long holiday starting later
this week in China, a huge buyer of commodities including soybeans, cotton and palm oil.
And Informa data from Friday, estimating US corn production
at 11.093bn bushels, above a US Department of Agriculture forecast of 10.727bn
bushels to factor in.
The higher estimate was largely based on an assessment of
extra sowings than the USDA has factored in, with a bigger yield figure too, of
126.6 bushels per acre compared with the official 122.8 bushels per acre.
For soybeans, Informa pegged the crop at 2.663bn bushels, a
little above the USDA figure of 2.634bn bushels.
In Chicago, corn for December recouped early losses to add
0.1% to $7.49 a bushel, but November soybeans dropped 0.7% to $16.11 a bushel, and earlier dropped below $16 a bushel for the first time in a month.
The oilseed weakness looked even worse in Kuala Lumpur where
palm oil, undermined by some negative analyst comment and a chart signal flashing red, plunged nearly 7% at one point to 2,577 ringgit a tonne, a
The lot recovered some ground to stand at 2,652 ringgit a
tonne, a decline of 4.0% on the day.
'Wet weather harvest
Soft commodities started mixed, in sugar's case despite news
of Syrian tender for 100,000 tonnes of refined sugar, which gave some relief to
itself added 0.1% to $561.40 a tonne in London for December delivery, while in
New York raw sugar was flat at 19.38 cents a pound.
"Wet weather harvest delays are expected in Brazil's Centre
South this week, providing a source of near term price support," Luke Mathews
at Commonwealth Bank of Australia noted.
"However, the delays are only expected to be temporary and
the rain should provide a boost to late season cane growth."
'Demand remains weak'
Meanwhile, New York cotton
shed 0.2% to 73.08 cents a pound.
"Demand remains weak and the US harvest may soon add further
headwinds to fibre prices," Mr Mathews said.
"Global inventories are forecast to rise to record levels
this year, creating an environment which is more typical of 60-70 cents-a-pound
cotton, at best, rather than the recent 70-80 cents-a-pound range."