Fourth time lucky?
once again started firm, but whether they will end that way…
There may be some cause to hope that the trend which set in
on Tuesday, of strong starts followed by weak closes, may come to an end, if
only from the calendar.
This weekend is a long one in the US, with Monday bringing
Memorial Day, meaning that - with the risk of a change in the forecasts of rain
for the southern Plains and Russia which have been depressing prices - investors
may be tempted to take profits on short positions in wheat.
Benson Quinn Commodities noted that three-day weekends often
prove "trend changers", although the difference may only be evident after the event,
with the broker citing, in soybeans,
"the post Good Friday/Easter holiday sell off following the Thursday new
contract high in the July at $15.21 a bushel".
Too much, too late?
Furthermore, chart-wise, Chicago's July contract, having
fallen through a series of technical points with ease, is showing some
reluctance over falling through its 200-day moving average, at $6.58 a bushel.
The contract in the last session fell through it only to reverse
above, showing mettle which has been absent for most of the last two weeks.
And there are questions remaining too about how much good
the southern Plains rain will actually do to crops that are quite far along.
Could some crops actually be damaged by rains that look like
coming in at high rates, and potentially in the form of hail too, with tornado
risks on top?
"Forecasts are calling for 1-3 inches over the next five
days," CHS Hedging said
That said, the worldwide trend on wheat fundamentals has
taken a more reassuring turn, from a supply perspective, with Argentine wheat
sowing expectations growing, with the farm ministry pegging area at 4.5m
hectares, above a forecast from the Buenos Aires grains exchange.
In China, there are reports of a strong recovery in the
harvest in Henan province, responsible for about one-quarter of domestic
output, where higher sowings and better weather are expected by news agency Xinhua
to take production to a "new high".
Still, for now, Chicago soft red winter wheat, the world
benchmark, was up 0.5% at $6.62 ¾ a bushel as of 09:40 UK time (03:40 Chicago
Kansas City hard red winter wheat, the type hurt by US
southern Plains drought, added 0.2% to $7.53 ½ a bushel.
For soybeans, the
news from China has been more supportive, with fresh import orders, both
confirmed and rumoured, from Brazil and the US reassuring investors who had
been worried over falling demand, a knock-on effect from sagging livestock
"China did buy 120,000 tonnes of soybeans on Thursday, fuelling
rumours that they are once again in a buying mood," CHS Hedging said.
"One Chinese processor bought 600,000 tonnes of soybeans for
2014-15 last week for shipment to begin after September 1."
Sterling Smith at Citigroup said: "The market has clearly
lost any fears about Chinese demand either current or going forward."
But will that change today?
"There is holiday looming so seeing some profit-taking should
be expected," Mr Smith added.
Furthermore, the revival in prices of soybeans in China
itself faded, with the January contract on the Dalian dropping 0.7% to 4,584
yuan a tonne.
Besides, not all observers are quite so convinced over
another key part of the story behind the soybean rally, of tight US supplies,
and the idea that more rationing is needed to quell demand, and/or inspire
further imports from Brazil.
July vs November
Decent US old crop export sales data on Thursday "were the
first signs of bullish news to help explain the last three days of market action",
one US broker said.
However, on Thursday, "the July futures actually lost ground
to the November contract which is counterintuitive. If the market was strong due to old crop
tightness, the rally would be led by the front month contract, not the new
"We are still nearly 30 cents a bushel below that spread
high reached back in April, which means new crop soybeans have guided this
In fact the new crop November contract stood up 0.3% at
$12.74 ¼ a bushel, lagging the July contract, which added 0.4% to $15.24 ½ a bushel.
'May be providing a
The November contract also failed to gain any more ground
against December wheat, with the much-watched ratio between the two lots steady
at an elevated 2.68:1.
December corn was also up 0.4%, at $4.75 ¼ a bushel,
although it is not clear how much oomph there is behind the contract's rise,
with US spring sowings seen progressing quickly, after all.
"There are few signs that the speculative trade is committed
to adding length," Brian Henry at Benson Quinn Commodities said.
"However, the soybean to corn ratio of 2.7:1 is continues to
draw the speculative interest and may be providing a bid in the December corn
The July contract was doing a bit better, adding 0.5% to
$4.79 a bushel, supported by a better fundamental story, with US export sales
running well ahead of the pace needed to meet full-season expectations.
The weekly sale of 509,700 tonnes announced yesterday compares
with a weekly pace of 226,000 tonnes or so actually required.
'Very hard to be bullish'
Among soft commodities, the coup in Thailand, the
second-largest sugar exporting
country, continued to offer no support at all to prices of the sweetener.
Raw sugar for July fell 0.5% to 17.29 cents a pound in New
York, on course for a seventh successive negative close.
"Chatting around the market it seems domestic prices in some
important destinations are falling and so there seems to be only passive buying
rather than aggressive buying," Tom Kujawa at Sucden Financial said.
"It's very hard to be bullish at the moment. There are credible
upside risks but they investment community has already invested heavily on this
story, and look now a little exposed."
But New York cotton
perked up, adding 0.2% to 87.99 cents a pound for July, despite the southern
Plains rain, which is improving planting prospects.
Still, share markets are strong, with world shares around
their highest level in six years, according to the FTSE All World index, and cotton,
as an industrial commodity, tends to be more sensitive to broader market forces
than food ags.