PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 10:01 GMT, Tuesday, 31st Dec 2013, by Agrimoney.com
Morning markets: wheat price slide stalls at key $6 level

Will agricultural commodities end a difficult year on a downbeat note?

Wheat, at least, chiselled out gains in early deals on Tuesday, as the prevailing selling trend came up against a key technical point - $6.00 a bushel for a spot Chicago contract.

 A spot lot has not closed below this psychologically important level since May 2012.

And while the March contract briefly dropped below it on Tuesday, hitting $5.99 a bushel, the failure of this move to spark additional selling, or a spree of automatic sell orders, prompted bears to think twice about keeping up the pressure, for now.

'Lack of buying interest'

Not, it has to be said, that there is much in the way of fundamentals to turn the tide.

Recent news has included an official Russian estimate for the domestic crop of 54m tonnes, 2.5m tonnes above the US Department of Agriculture estimate, and on Monday some weak weekly US export data, of 13.4m bushels.

That was below trade estimates of 16m-22m bushels, and the 19.2m bushels the week before, besides the 16.4m bushels needed to keep shipments on track to meet the USDA average.

"Prices are expected to remain weak, going into the new year, on lack of buying interest and fresh supportive news to encourage the funds to clean up their current fairly large short position in Chicago," CHS Hedging said.

In fact, speculators were net short by nearly 70,000 lots as of last Tuesday, only 1,800 contracts shy of the record level set the week before.

'Oversold nature'

While some concern has been lodged about the lack of snow cover for former Soviet Union wheat seedlings, that only looks likely to start gaining real attention with the onset of severe cold.

"Given the prevailing trend in the wheat markets, it's tough to convince oneself that buyers are going to emerge," Brian Henry at Benson Quinn Commodities said.

"The oversold nature of all three [major US wheat] markets has little influence without a fundamental catalyst."

Still, Chicago's March contract as of 09:15 UK time (03:15 Chicago time) recovered above $6.00 a bushel - to $6.01 a bushel, up 0.2% on the day.

Nonetheless, Chicago wheat has, on a spot contract basis, lost 22% this year.

Argentine weather

That is a better performance that Chicago corn, down 39% in 2013, the biggest annual slide on record, weighed by the record US harvest, a record crop in Ukraine too, and the prospect for decent production in South America early next year.

More immediately, prices are feeling pressure from improved weather conditions in Argentina, where rains have eased concerns over damage to crops from dryness and heat.

"Forecasts call for improved chances for needed rain over the next 1-2 weeks, particularly in central and north eastern Argentina," broker Doane said.

Follow-up rains in Cordoba, Santa Fe and Entre Rios this week to the weekend precipitation "should further improve moisture there, and will ease stress on corn and soybeans", weather service MDA said.

'Dryness is increasing again'

That said, "dryness is increasing again across central and southern Buenos Aires, and the drier pattern there through the next 10 days should allow moisture shortages and crop stress to rebuild there", MDA said.

And the Rosario grains exchange has come out with a relatively downbeat estimate for the Argentine corn harvest, of 22m tonnes, compared with a USDA number of 26m tonnes.

Chicago corn for March stood 0.1% lower at $4.23 a bushel.

'Mostly ideal'

That was in turn better than soybeans, standing down 0.2% to 13.06 a bushel for March delivery, and by 0.1% to $13.27 a bushel for January, feeling pressure from the South American weather outlook.

"Brazilian weather and forecasts remains mostly ideal," Benson Quinn Commodities said.

"Northern Brazil is turning drier which will aid early harvest activity while drier southern regions will receive rainfall over next several days."

The prospect of the imminent Brazilian harvest is stoking concerns that China will cancel orders from the US, and opt for South American supplies.

"Fear of Chinese soybean cancellations is keeping the soybean market on the defensive," CHS Hedging said, with weekly US exports of 43.2m bushels, below trade estimates for 45m-55m bushels, only stocking such jitters.

 

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