Will agricultural commodities end a difficult year on a downbeat
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 ½ 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
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
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
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 ¾ a bushel, up 0.2% on
Nonetheless, Chicago wheat has, on a spot contract basis,
lost 22% this year.
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.
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.
That was in turn better than soybeans, standing down 0.2% to 13.06 ½ a bushel for March
delivery, and by 0.1% to $13.27 ¼ 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
The prospect of the imminent Brazilian harvest is stoking
concerns that China will cancel orders from the US, and opt for South American
"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