Morning markets: wheat stages some revival amid US cold snap

Was it just down to the uncertainty in markets ahead of much-anticipated jobs data?

Or was it because of the chill weather expected hitting the US.

Whatever, Chicago wheat did manage small gains on Friday, after matching, for the benchmark March lot, a contract closing low in the last session.

Minneapolis spring wheat - which has set contract lows after spring wheat giant Canada hiked its harvest forecast on Wednesday - made a little headway too.

Data later

This may, though, only have been down to profit-taking on short positions which have been a good earner for investors in the last few sessions, and potentially encouraged by the prospect of US jobs data.

While the non-farm payrolls data are always keenly watched, that is especially so this time as the data are seen as potentially giving clues to the Federal Reserve's plans for monetary stimulus.

The figure is expected to show the US added 185,000 jobs in November.

But a number above the consensus forecast could prompt the Fed to accelerate scaling back its asset purchasing scheme, an economic outcome seen as of global importance.

'Amazing amounts of ice'

However, there were some other reasons for investors to watch their bearishness on wheat, one being the cold weather in the US.

Temperatures have been in the single digits Fahrenheit (-12 Celsius or colder) from Nebraska north into the Dakotas.

Looking ahead, the "main issue" for now is a "band of developing winter precipitation behind the arctic cold front which extends from northeast Texas and the eastern half of Oklahoma into the  northwest third of Arkansas the southeast third of Missouri, the far southern third of Illinois  and the southwest portions of Indiana", said.

These areas are going to receive "heavy, amazing amounts of ice - sleet so heavy that it will accumulate as a least a few inches and  you actually will be able to shovel it", although in northern areas it may well fall as snow.

'Brutally cold'

"Saturday morning will simply be a brutally cold day across much of the Plains and the western Corn Belt," said. 

"There will be temperatures in Montana and North Dakota which make it down to -30 Fahrenheit (-34 Celsius).

In fact, "if the current temperature forecasts through December 15 are correct, the first half of December will be the coldest [for the period] since 1950".

What affect all this has on wheat seedlings, well, snow would protect them from the chill, and MDA says that "any winterkill should be very limited".

Iranian purchases

As an extra reason for bears to pause for though, there is talk of heavy wheat buying by Iran, amid talks on its nuclear programme which have eased sanctions.

"Iran made a purchase of about 300,000 tonnes of wheat for the past three weeks as the country builds its grain reserves following the suspension of Western-led sanctions," Vanessa Tan at Phillip Futures said.

"Going forward, Iran could continue making large purchases while the sanctions remain suspended as they continue to stockpile just in case the suspension of sanctions ends."

Canada logistical problems?

And Japan highlighted the downside of Canada's huge crop, ironically by issuing a surprise tender for 162,011 tonnes of Canadian wheat.

This extra volume is to add some extra cushion into Japan's supply chain in case Canada struggles to cope with shipping its huge crop, a reasonable possibility.

"Perhaps Friday can attract some short covering," Benson Quinn Commodities said.

Indeed, Chicago wheat for March edged 0.3% higher to $6.54 a bushel as of 08:40 UK time (02:40 Chicago time) while its Minneapolis spring wheat peer gained 0.2% to $6.85 a bushel.

'Trading amid cross-currents'

Corn gained too, adding 0.2% to $4.34 a bushel for March, with short covering again potentially a key factor in keeping it above early lows.

Key from a technical perspective, the lot is also staying above its 10-day and 20-day moving averages, although with the 50-day moving average looking out of reach for now.

Indeed, headway is hardly plain sailing.

"Corn is trading amid cross-currents of fund short covering and handsome ethanol/feeding margins, squaring off against ample supplies that could swell even further 2014-15," Richard Feltes at broker RJ O'Brien said.

Crop upgrade ahead?

Indeed, there are ideas that the US Department of Agriculture could yet upgrade its forecast for the US corn harvest this year, (although not until its January Wasde report).

"I am hearing more trade chatter about a likely upward revision to final 2013 US corn production," Mr Feltes said, with such speculation surrounding the US soybean crop too.

Still, at least, from a corn bulls' perspective, there has been a lull in talk of Chinese rejections of US corn imports.

Reports from China on Friday in fact say that Beijing is still evaluating the Syngenta variety at the heart of the furore, with previous applications by the group apparently short on necessary data.

Argentine tax move?

Soybeans lagged, falling 0.4% to $13.22 a bushel for January delivery, and this despite increasing scepticism over ideas that Argentina is to cut soybean export taxes in a bid to encourage selling by farmers who have been hoarding crop as a hedge against inflation and currency devaluation.

But weather in South America remains benign, potentially heralding huge crops early in 2014, with Agroconsult raising its forecast for the Brazilian crop to 90.7m tonnes, above the USDA estimate of 88.0m tonnes.

(Indeed, it would beat the US harvest of 88.7m tonnes.)

'Show resiliency'

"Brazil should be producing a record large soybeans output during the 2013/14 season," Phillip Futures' Ms Tan said.

"With abundant supplies in other soybeans exporting countries, demand for US soybeans could be reduced."

Still, "soybeans continue to show resiliency near the $13.20-a-bushel level and shows that there is still some decent demand for soybean futures out there," one US broker said.

And export sales remain decent, at 806,000 tonnes of old crop last week, although a tail-off in Chinese interest is not so positive for prices.

Sugar sweetens

New York raw sugar did better in adding 0.8% to 16.82 cents a pound for March delivery, having in the last session, just, having managed to post its first gain in 12 sessions.

The sweetener was helped by data from China showing a crop of 12.8% to 748,200 tonnes in domestic sugar production in the October-to-November period, the first two months of 2013-14.

China's sugar imports are a key price point, as Australia & New Zealand Bank highlighted earlier this week.

Still, there is bearish talk around, with Phillip Futures flagging that "the raw sugar market is currently facing abundant global supplies of raw sugar, with expectations of more as Brazil experiences favourable weather conditions which would boost harvest of cane and India is now crushing cane.

"With abundant supplies flooding the market, we can expect prices to be pressured as the export market would be highly competitive. "

At least, for sugar bulls, Czarnikow has offered hope for decent demand too.

Evening markets: weak US exports sink wheat. Corn eases too
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