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Morning markets: wheat holds, defying talk of ditched orders

Has US wheat become the subject of export order cancellations too?

It emerged that one of the reasons that it fell in the last session, besides some talk of rain ahead for dry US winter wheat seedlings, and for Australia, was of Nigeria and Brazil ditching orders of US wheat, potentially in favour of Ukrainian supplies.

"Wheat was lower after rumours floated about Brazil purchasing Ukrainian wheat and cancelling US orders," one US broker noted.

"Corn was lower following wheat," the broker said, if adding that "these rumours are not confirmed and may just be 'headline chasing' during turbulent markets".

'Their actions will have consequences'

They sure touched a raw nerve, with Chinese cancellations of soybean orders from the Brazil and the US remaining rumoured, if with confirmation hard to come by.

And Chinese corn import reversals remain a live subject too, with Cofco cautioning that the country may import less than 3m tonnes of corn in 2013-14, well below the US Department of Agriculture estimate of 5m tonnes.

China has rejected a series of cargoes of US corn on grounds of containing a genetically modified variety unapproved by Beijing, a factor which prompted Fred Gale, China chair for the US Department of Agriculture, to warn Chinese buyers may in future pay a premium on orders.

"The Chinese are going to have to learn that their actions will have consequences," Mr Gale said.

"Sellers are going to have to add a risk premium if China is going to be a risky customer."

'Doesn't make sense'

Still, wheat futures held their ground on Friday as talk of its export cancellations came further under the microscope, and was seen as, for Brazil especially, unlikely.

A switch by Brazilian buyers from the US to Ukraine "doesn't make a whole ton of sense", said Jonathan Watters at Benson Quinn Commodities.

"Unless something has changed very recently, Brazil regulations don't allow for imports out of the Black Sea."

Besides Brazilian import order commitments from the US still on the books are "minimal". Data on Thursday showed Brazil having 230,000 tonnes of import orders for 2013-14 as yet unfulfilled, up on the 152,000 tonnes a year ago, but a fraction of the 3.68m tonnes shipped already.

'Doesn't pack a punch'

The rumour of Nigerian cancellations "makes a bit more sense, and it could be possible that other Latin American countries have started to favour the Black Sea given the recent price moves", Mr Watters said.

And he was somewhat cautious too on the forecasts for US rain relief. Precipitation forecast in the 11-to-15 day outlook "is too far out to get people too worked up".

Sure, official US meteorologists on Thursday, in a spring weather outlook, forecast that "drought improvement is likely" in some major wheat producing areas, including "western and central sections of Nebraska and Kansas, central Oklahoma", where dryness has been a real worry to the market.

"But again this is the type of thing that doesn't pack a punch without much rain in the forecast," Mr Watters said.

'Strong crop conditions'

Not that all the weather talk is going bulls' way.

In Australia, the Bureau of Meteorology is forecasting 25mm-150mm of rain over the coming week across inland New South Wales and Queensland, states where a dearth of rain has raised concerns over forthcoming winter grain sowings.

"Importantly the best falls are slated for the driest regions from northern New South Wales to central Queensland," Luke Mathews at Commonwealth Bank of Australia said.

Mr Mathews also flagged Thursday's upgrade by Strategie Grains to its forecast for the European Union harvest too, if only by a meagre 200,000 tonnes to 137.7m tonnes.

"The news supports the view that world wheat crop conditions outside of the US Great Plains are currently strong," Mr Mathews said.

Dollar retreat

Chicago wheat for May gained, if by a modest 0.1%, to reach $7.04 a bushel as of 09:45 UK time (04:45 Chicago time).

The grain, and other dollar-denominated commodities, also gained from a slight reversal in the dollar, as markets reassessed ideas that comments from Janet Yellen, the new chair of the Federal Reserves, on Wednesday implied that the US may raise interest rates sooner than had been thought.

Thinking prevailed on Friday that too much had been read into Ms Yellen's comments. Shares gained 1.2% in Hong Kong, 0.8% in Sydney and 2.7% in Shanghai. (Tokyo markets are closed.)

A weaker dollar makes dollar-denominated assets more affordable to buyers in other currencies.

Reports ahead

Indeed, corn showed a small gain of 0.1% to $4.78 a bushel in Chicago for May delivery, if lacking direction, although this will change in 10 days' time, of course, when the US Department of Agriculture unveils two important reports on prospective grain plantings and on quarterly grain inventories, as of March 1.

CHS Hedging flagged a trend of "profit taking, as traders prepared for the plantings report".

Still, whatever figure the report comes out with looks like being the subject of some challenge, with weather potentially hampering early seedings and driving farmers to later planted crops such as soybeans.

Vanessa Tan at Phillip Futures flagged NOAA comments that "there were likely to be planting delays in the northern regions of the Midwest due to a slow thaw following frozen soils as a result of the harsh winter".

Import debate

Indeed, soybeans themselves were hardly on the best of form, falling 1.3% to $14.15 a bushel for May delivery, undermined by continued chatter of Chinese buyers cancelling orders.

The USDA estimate that China will import 69m tonnes in 2013-14 is being increasingly challenged, with FCStone's Li Xiaoyne apparently forecasting a 67m tonne figure.

In fact, China's February imports were strong, at 4.81m tonnes, official data on Friday showed, up 66% year on year and easily a record for the month.

China's palm oil imports were up too, by 34% year on year to 566,000 tonnes.

But with talk of rains in dryness-hit South East Asian producing regions, and concerns over a rise in Malaysia's export tax next month too, the vegetable oil fell 1.1% to 2,742 ringgit a tonne in Kuala Lumpur.

Evening markets: rains dampen coffee prices, wheat too
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