PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 21:00 GMT, Monday, 9th Jan 2017, by William Clarke
PM markets: grain futures rise at the start of a big week

Traders buckled in for a big week, with index fund rebalancing, and a major data release coming later.

"Grain traders this week will have several major events to deal with", said Paul Georgy, at Allendale.

Firstly is the rebalancing of index funds, which started on the Monday session.

Funds are expected to be big net buyers of wheat and corn, with a touch of soybean buying as well.

Although this movement should be mostly priced in, it will support grain volumes.

USDA data awaited

And the other big news will be a slew of data to be released on Thursday, by the US Department of Agriculture.

Thursday will see the release of final US production figures for 2016-17, as well as quarterly stocks figures, winter wheat seedings, and the monthly supply and demand estimates.

Analysts are expecting record large corn and soybean stocks.

Good export sales

Export numbers will be in the spotlight this week, after Friday's surprise news of a big cancellation in soybean export sales.

But the news of Monday was mostly supportive.

The USDA announced sales of 112,500 tonnes of corn, and 120,000 tonne of hard red winter wheat, although there was still no sign of soybean export sales, which are badly needed.

"Brazil is very close to starting this year's soybean harvest which could change China's buying from the US trend," said Mr Georgy.

Weekly export inspection figures exceeded analyst expectations for corn and soybeans, at 877,000 tonnes and 1.46m tonnes respectively.

But wheat export inspections were an underwhelming 261,000 tonnes, missing the range of analyst expectations.

Weather concerns

And markets are still watching weather developments in South America closely, with some of the concern switching from soybeans to wheat.

"Weekend weather remains good for the Brazilian crops, however, too much rain has been seen for Argentina's growing area," said Mr Georgy.

"Forecast is for some drying to occur in the 6 to 10-day period in Argentina but that may not last long," he said.

But Mr Georgy noted that "analysts are expecting Brazil's crop to out produce any losses in Argentina's production".

Winterkill fears in US

Kim Rugle, at Benson Quinn Commodities noted the possibility that the rains could hit Argentine wheat quality.

"Ongoing rains in Argentina continue to help support the grains sector," said CRM AgriCommodities.

And the weekend weather in the US was enough to raise some concerns as well, with the question of whether snow-cover was sufficient to prevent winterkill after a cold weekend.

"Wheat is getting support from the cold US weather causing concerns of winterkill," said Mr Georgy.

March Chicago wheat finished up 0.9%, at $4.27 a bushel.

March soybean futures finished up 1.0%, at $10.05 a bushel.

March corn futures finished up 0.4%, at $3.49 a bushel.

All quiet in Western Africa

Cocoa futures underwent a sharp downward correction, as the risk of unrest in top-grower Cote D'Ivoire.

There were concerns on Friday after a widespread mutiny by disgruntled soldiers.

But the country was reportedly calm, and the soldiers dispersed on returned to barracks, including in the country's second-largest Bouake, the epicentre of the disturbance.

President Alassane Ouattara appeared on Ivorian television on Saturday, saying that a deal had been reached over pay and conditions, with an amnesty offered for mutineers.

March New York cocoa settled down 3.4%, at $2,184 a tonne, after hitting lows of $2,141.

Ample Brazilian supply

Sugar prices fell further back from last week's seven-week high, under pressure from ample physical supply.

"There seems to be plenty of sugar at terminals in Brazil waiting to be loaded and the shipping lineup has been reduced," said Nick Penney, at Sucden Financial.

Physical prices have not followed the rally in futures and at some stage something has got to give in order for convergence to take place," Sucden Financial senior trader Nick Penney said.

And there is likely to be heavy index fund selling this week.

"In sugar it is estimated the Index Funds will need to sell around 15,000 lots to rebalance portfolios," said Mr Penney.

"This will have been largely written in and should not affect values too much, but bears watching," he said.

March raw sugar futures settled down 1.6% at 20.42 cents a pound.

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