Agricultural commodities took a somewhat mixed stance on
Wednesday, in line with the broader markets mood.
If early deals on Tuesday came against a backdrop of
fretting over Italy's election result, this time investors found some solac, in
comments by Ben Bernanke, the head of the Federal Reserve, reassuring that
ultra-easy US monetary policy would only be withdrawn when the economy was
The idea of sustained asset purchases, a negative for
currency strength, put the brakes on the rally in the dollar, which eased 0.2%, in turn improving the affordability of
dollar-denominated exports, such as many commodities, to buyers in other
An extra boost to agricultural commodities may be coming
from the end of the month, a period associated with position tidy-ups by funds,
which typically means selling pressure – but given the increasingly negative
stance taken by investors, could this time mean something more positive.
For US wheat, there is talk of robust demand too, especially
after Japan's order of 50,000 tonnes of soft red winter wheat for feed.
The deal "shows just how cheap US wheat has become, and
there is talk in the US that local wheat feeding has stepped up further", Luke
Mathews at Commonwealth Bank of Australia said.
At Phillip Futures, Joyce Liu said that "US wheat exports
are now at globally attractive levels compared to other major exporting
countries, such as Australia and Russia".
And while snow storms across the US Plains have "brought
some relief to the drought-afflicted wheat growing areas, whether winter wheat
yields can improve will depend on the moisture outlook from now up to end of
Technically, Brian Henry at Benson Quinn Commodities pointed
out that "the wheat markets remain oversold, which could trigger additional
short covering", with speculators holding a net short of nearly 50,000 lots on
Chicago wheat as of February 19, approaching record highs.
"I would question establishing new shorts near the current
levels," he said, if noting that "previous opportunities to post a correction
have failed miserably".
Still, this time, Chicago wheat has the narrowing of its
premium with corn, indeed its turn to a discount at some points in the last
session, to think about. Usually wheat has a healthy premium.
"I'm not sure if wheat will keep losing to corn from here,
thus monitor those spreads," Mike Mawdsley at Market 1 said.
Chicago wheat for March stood at $7.09 ½ a bushel, up 0.5%,
at 09:45 UK time (03:45 Chicago time).with the better-traded May lot up 0.4% at
$7.14 a bushel.
'Prices are now
That was enough indeed to open up a little bit of a gap over
corn, which missed out on the positive
trend in agricultural commodities, standing 0.1% lower at $7.04 ¼ a bushel for
March delivery, and down 0.2% at $6.93 ½ a bushel for May.
But this was after a strongly positive performance in the
last session, helped by ideas of better demand for this grain too.
"Investors are also hoping that US corn will regain
attention in overseas trading demand as prices are now competitive compared to
other countries," Phillip Futures' Ms Liu said.
Signally, even in decline, the March lot boosted its unusual
premium over the May contract, a factor seen as a positive, in signalling that the
market is incentivising farmers to release stocks rather than hoard.
also opened a healthy bull spread, which remained intact even as the pressure
from ideas of a pick-up in the Brazilian harvest, and the release by China of
crop from state reserves, eased off.
But as for where flat prices are heading, Kim Rugel flagged
the so-called "doji" which appeared on the charts on Tuesday, when the March
contract opened and closed at pretty much the same level, travelling in both directions
"The doji on the technical chart suggests uncertainty" she
"The lower low/lower high trading range implies more down
side. I would suspect market is probing for the bottom, but needs a fresh
catalyst to give it a push."
While there was little in the news early on to stimulate
gains, help from the weaker dollar made the default move upwards, and soybeans
for March stood up 0.2% at $14.50 a bushel, with the May lot gaining 0.2% to
$14.35 ¼ a bushel.
That kept the May lot above most moving averages, including
the 50-, 75-, 100- and 200-day lines.
As for soft commodities, the "bargain" hunting in cotton which enabled New York's May
cotton lot to recover in the last session from two-week lows held over into
The contract gained 1.1% to 82.74 cents a pound.
But raw sugar lost
initial headway to stand at 17.78 cents a pound, down 0.1% on the day, if above
a two-year low of 17.75 cents a pound touched earlier.
"Talk within the global sugar market has refocused on
forecasts for a fourth straight global supply surplus in 2013-14 and the
negative influence this will have on prices over the year," CBA's Luke Mathews
"The ongoing rebuild in global supplies is an inconvenient
truth for the bulls in the sugar pit."
In Kuala Lumpur, palm
oil lost early gains too, falling from an intraday top of 2,443 ringgit a
tonne for May delivery to stand at 2,414 ringgit a tonne, a drop of 0.2%.
Latest export data from cargo surveyors showed Malaysian shipments
speeding up from mid-month doldrums to post a gain of 2.7% for the first 25
days of February, compared with the same period of January, according to SGS,
with Intertek pegging the increase at 4.6%.
And Oil World on Tuesday highlighted the potential for lower
prices, which remain not far from two year lows, to spur demand for palm oil,
forecasting that imports will rise to 42.7m tonnes in 2012-13, from 40.2m
tonnes the season before.
"The preconditions for the demand of palm oil and its sister
product palm kernel oil are unusually favourable for the remainder of this
season, given waning competition from other vegetable oils," the analysis group
However, the vegetable oil was undermined by a drop of 0.7%
to 8,324 yuan a tonne in futures in rival soyoil
on the Dalian exchange in China, a major palm oil importer.