The bull market in grains
appeared to have one of its wings clipped on Wednesday, when Vladimir Putin
took a more conciliatory stance towards Ukraine's elections, taking some of the
heat out of regional tensions.
Mr Putin, the Russian president, termed Ukraine's
presidential election on 25 May is a step "in the right direction", adding that
Russia had pulled back its troops from the border.
Shares in Moscow
certainly revived, adding 3.4% as measured by the Micex index, and stocks recovered
to close flat in London and stand 0.6% higher in New York in late deals.
European prices drop
futures maintained high altitude, staying near one-year highs, in the US at
It was a little bit of different story in Paris, where wheat
for November closed down 0.7% at E207.25 a tonne.
Having been thoroughly unimpressed by the other story boosting
wheat markets, poor US weather, European investors were hardly likely to react
positively to signs of calm in Ukraine, and a lower danger of disruptions to
exports from a major grain shipping country.
London wheat for November fell 0.7% to £157.75 a tonne.
'Money moving into
But US contracts had support from the speculators who have,
against expectations at the start of the year, renewed their passion for agricultural
commodities, encouraged by the Ukraine crisis, besides the weather setbacks in the
US – too dry in the south, too wet in the north – and Brazil, with the looming
El Nino weather pattern posing the potential for further upsets.
"The key driver is money flow moving into commodities as a
hedge against the effects of a full blow conflict in the Black Sea Region,"
Paul Georgy at broker Allendale said.
"Corn and wheat
are getting the benefit as Ukraine and Russia are major exporters of these
Benson Quinn Commodities said: "The recent pattern indicates
hedge fund types favour more ownership of commodities.
"I wouldn't discredit ideas that some hedge funds are
rotating capital out of equities and into commodities."
'Rotation to ag
The broker added that the "rotation to ag futures has
reached the late innings.
"With the pace of corn planting increasing and the state of
the US hard red winter wheat crop already in dire straits in the southern Plains,
the first sign of weakening technical momentum should trigger selling from the
funds and the rest of the speculative community."
But investors looked unwilling to sell too much ahead of a
key US Department of Agriculture Wasde report on Friday, which will give the
first full, world estimates for 2014-15 crops, besides updating old crop numbers.
"The market has taken a bit of a siesta for now," Jerry
Gidel, chief feed grains analyst at Rice Dairy, told Agrimoney.com.
There was nothing too significant in terms of improved
weather for the drought-hit US southern Plains.
In fact, the Plains wheat belt forecast was "slightly drier"
for Saturday, weather service MDA said, adding that already this week, "significant
heat has added to yield losses to heading wheat in southern areas, although
[temperature] readings should moderate beginning today".
While rains are still due for some parts of the Plains, they
are likely to prove limited.
As for the Wasde, it is expected to forecast US stocks
falling to 553m bushels in 2014-15, from a current figure for end-2013-14 of 583m
bushels, with one analyst guessing as low as 425m bushels.
Spring vs winter
Hard red winter wheat, the type under threat from the southern
Plains drought, dropped a modest 0.2% to $8.44 ¼ a bushel for July, while Chicago
soft red winter wheat for July fell 0.1% to $7.37 ¾ a bushel, recovering 3 cents
of its discount to its peer, which widened massively last week.
In fact, Minneapolis-traded hard red spring wheat did best,
adding 0.2% to $8.06 ½ a bushel for July, the contract's best close in nearly
Is it also a sign that the gap between hard red spring wheat
and hard red winter wheat will close, an idea Agrimoney.com reported on
Hard red spring wheat is getting support from excessive
wetness, and cold, in northern states slowing sowings, and data from
Saskatchewan in Canada is due tomorrow.
'Stall planting once
Corn, which has
taken something of a lead from wheat, fared a little bit worse, but losses, at 0.7%
to $5.14 a bushel for July delivery, were not extreme.
The grain is also being supported by concerns over slow
sowings which, while not nearly as slow as last year, remained enough to limit
the removal of risk premium, especially with rain on its way.
In the US Midwest, "the drier pattern thus far this week has
allowed planting to progress very well, but the rains later this week and over
the weekend will stall planting once again", MDA said.
CHS Hedging said: "The corn market is maintaining stability
above $5 per bushel.
"Planting delays have concerned producers in the Northern
Plains whereas the southern farmer is just a step off average pace."
Weekly ethanol data were viewed as neutral, with US production
down a little, by 4,000 barrels a day to 894,000 barrels a day, but stocks
lower too, by 72,000 barrels to 17.14m barrels.
'Imports from Brazil'
It was soybeans
which once again fared worst among Chicago's big three, falling 0.9% to $14.46 ¼
a bushel for July delivery, undermined by continued talk of strong imports by
the US, whose tight balance sheet has been a big concern.
Richard Feltes at broker RJ O'Brien noted "continued
liquidation in soybeans as trade grows more confident that US soybean imports
will resolve the tight old-crop supply situation".
CHS Hedging said that "imports from Brazil continue to weigh
on the market", adding that there is "now talk of China auctioning off state
reserves next week", as Agrimoney.com highlighted earlier.
China's imports, and the diminishing prospect thereof, are
also under the spotlight thanks to the potential for the Wasde to cut the
2013-14 number from the current 69m tonnes, a downgrade many investors expect.
'More talk of
Indeed, there is continued talk of Chinese buyers ditching
"More talk of cancellations has some of the longs coming out
of the market," Allendale said.
As a further setback, Brazil's agriculture minister, although
not the ministry, itself, estimated the domestic soybean crop at a lofty 89m-90m
tonnes, above other estimates.
Brazil crop bureau Conab, which pegs the crop at 86.1m
tonnes, will unveil fresh forecasts on Thursday.
And as further fuel for bears, there were unexpectedly high
deliveries overnight against the expiring May soybean contract, of 176 lots, with
37 in soyoil and 19 in soymeal, potentially a sign that Chicago is more attractive
for sellers than cash markets.
Soyoil for July dropped 0.7% to 40.83 cents a pound, and
soymeal 0.5% to $474.90 a short ton, given some support by talk of a poor
result from Argentina's harvest, in quality terms.
Argentina is the top exporter of both soybean processing
Among soft commodities, cocoa
for July dropped 0.7% to £1,801 a tonne in London for July delivery, after hitting
£1,794 a tonne earlier, the weakest for a nearest-but-one contract since January.
New York cocoa
fell 0.7% to $2,899 a tonne, earlier hitting the lowest since February for a
second-in contract, at $2,883 a tonne.
The bean continued to come under pressure from ideas that
West African production will prove better than had been feared
"The fundamental situation keeps evolving towards a more
positive supply-side picture - rains over West Africa in the past 2-3 weeks
were significantly better than at the same time last year," Marex Spectron said
"Given how the lows have been broken, how moving averages
have crossed, how speculators are steadily liquidating, how the structure is
weakening, it is extremely difficult not to imagine cocoa going towards lower
levels," the broker said, analysis which proved right on the day at least.
Raws vs whites
But raw sugar
perked up adding 0.4% to 17.28 cents a pound for July, amid some relief that
the negative technical close to the last session did not cause further damage,
with investors appearing instead intent on keeping the sweetener in its recent
The contract regained its 75-day moving average, it not its
100-day moving average, on the day.
"Opinions vary between those who are increasing risk as a
result of these bullish weather forecasts and those who take a more sanguine
view and recall that there is still a potential surplus of sugar worldwide for
this campaign" Nick Penney at Sucden Financial said.
Still, while there is "not much evidence of demand picking
up in the refined product, the white sugar premium has strengthened a little in
the past month".
White sugar for August actually added 0.5% to $468.70 a
tonne in London, continuing to creep up its premium.