The second session of the week by repute, of course, brings
reversals in trends in Chicago grain prices.
But while futures showed some elements of a Turnaround
Tuesday, they proved unwilling in early deals to give back too many of their gains
of the last session.
And that may not be such a surprise, given two factors
underpinning the market.
'If it looks like a
The first is the crisis in Ukraine, where raised tensions
show no signs of easing off.
US President Barack Obama urged his Russian counterpart,
Vladimir Putin, to try to end pro-Russian demonstrations in Ukraine.
However, Mr Putin rejected claims of Russian interference in
fuelling the protests, terming such reports "unreliable", if not a denial which
convinced all observers.
"It looks very similar to what happened previously in Crimea.
If it looks like a horse and walks like a horse, it's usually a horse," said
Frans Timmermans, the Dutch foreign minister, when asked about Moscow's
possible role in Ukraine unrest.
And as a reminder that the threat to Ukraine grain supplies
is not just from the possibility of logistical upsets, and of the loss of two
further major ports if the east of the country were to follow Crimea into
Russian hands, the country's central bank unexpectedly raised interest rates.
The bank late on Monday lifted the benchmark discount rate
from 6.5% to 9.5% and the overnight loan rate from 7.5% to 14.5%.
That is hardly good news for Ukraine farmers needing credit for
spring sowings programmes, or to pay for fertilizers and sprays for winter
The central bank said that it "considers it necessary to
take the step to increase the value of the national currency, to restrain
inflation and to stabilise the situation on the money market".
'Need for more favourable
Meanwhile, US crops came under the spotlight too, as US
Department of Agriculture data overnight showed the winter wheat crop continuing to deteriorate, and corn sowings, at 3% complete, behind the average of 6% by
"Taken collectively, the USDA's weekly crop bulletin is
positive [for prices] given slippage in wheat condition and a lag in small
grain/corn planting that underscores the need for more favourable weather,"
said Richard Feltes at broker RJ O'Brien.
And such an improvement in weather does not look too forthcoming,
with cold temperatures again plaguing US farms.
"More cold weather this week will further delay seeding
progress," Luke Mathews at Commonwealth Bank of Australia
" That said, most participants are not too worried given up
to a third of the crop can be seeded in just one week - if conditions are
That is certainly some comfort to US farmers, who achieved such
a feat last year, but the extent of the cold is nonetheless unusual
"The main worry for corn planting is deep penetrating frost,"
said Gail Martell at Martell Crop Projections noting that subsoil" is still
mostly frozen in the northern two-thirds of Midwest" in the deep soil layer
down 4-15 inches.
"Deep soil temperatures in northern Illinois are 44-52 Fahrenheit."
And indeed the USDA crop progress report showed seeding delays in the state in
"Minnesota's subsoil is even colder with 37-44 Fahrenheit. Producers
would not proceed with corn planting until frost is entirely gone," with corn
requiring 50 degrees Fahrenheit or so to germinate, and agronomists generally
recommending that sowings are not undertaken without a possibility of
Still, corn for May succumbed to some turnaround Tuesday
selling, falling 0.6% to $5.00 a bushel as of 10:00 UK time (04:00 Chicago time).
'Burn back some
That represented an underperformance against wheat, which
succeeded in holding the great majority of its 3% gains of the last session,
falling 0.3% to $6.77 a bushel in Chicago for May delivery.
In fact, Kansas City-traded hard red winter wheat, as grown
in the dry and cold southern Plains, added 0.1% to $7.42 ½ a bushel, as the
USDA data showed a further deterioration in crops in the major growing states
of Kansas and Oklahoma.
While USDA scouts expected rains last week to wreak some
improvement in the Kansas crop, there is the counter-threat of cold damage this
"In most cases, cold overnight temperatures are expected to
burn back some vegetation," said Brian Henry at Benson Quinn Commodities, if noting
that the persistent cold up to now ironically offers some cause for comfort, in
that it has delayed crop development, and emergence from dormancy into a more
"There is a strong chance that the slow development of the
wheat crop to this point will limit damage," Mr Henry said.
Spring vs winter
Minneapolis hard red spring wheat rose too, by 0.1% to $7.18
a bushel, in part thanks to the prospect of disappointing supplies of hard red
winter wheat, an alternative source of higher protein supplies.
"The low-rated 2014 US hard red winter wheat ratings, in the
absence of dramatic improvement in the next six weeks, suggests that US hard
red spring wheat demand will be bolstered by reduced 2014 hard red winter wheat
production," said RJ O'Brien's Richard Feltes.
He also highlighted a seasonal pricing factor, as underlined
by Moore Research, showing a "strong tendency for Minneapolis wheat to gain on Chicago
wheat from mid-April to late June".
The spread is also supported by the improved conditions of
soft red winter wheat (the type traded in Chicago), the "likely delay in hard
red spring wheat planting, and prospects for only a nominal gain in 2014 hard
red spring wheat acres on the heels of superior row crop returns compared with
wheat in the northern Plains", Mr Feltes said.
Still, one factor investors should also remember is the high
level of supplies still left over in Canada from last year's record crop.
Benson Quinn's Brian Henry noted that Canada has "some aggressive
offers" to an ongoing Iraq tender, ranked second in competitiveness behind
Russian supplies, which took the prize of cheapest of 18 cargos offered.
Mr Henry added that "18 cargos told me there's no shortage,
anywhere" of wheat for export.
Among soft commodities, cotton
for July added 0.2% to 92.49 cent a pound in New York, despite the USDA crop
progress data showing US sowings of the fibre in line with historical averages,
at 8% complete.
In China, cotton turnover inventory in the country's 174
major warehouses has fallen to a three-year low of 192,000 tonnes, down 53,000
tonnes month on month, the China Cotton Association said.
Among oilseeds, in Kuala Lumpur, palm oil added 1.1% to 2,663 ringgit a tonne, boosted by growing
concerns over the threat of an El Nino to production, with the weather pattern
typically causing dryness in South East Asia.
And in Chicago, soybeans
for May gained 0.4% to $14.82 ¾ a bushel for May.
The absence of fresh news on Chinese defaults on import cargos
has tipped focus back to thin US stocks, and surprising strong US exports of
Although the 9.8m bushels the US shipped last week was a steep
drop from the 18.7m bushels the week before, it is "near 3 times the weekly
pace needed to reach" the USDA forecast for exports for the whole of 2013-14,
Benson Quinn Commodities said.
Jefferies Bache said "to hold US soybean exports to the
USDA's estimate of 1.58bn bushels, they need to average 2.6 mil bushels a week
for the remainder of the season", an estimate that factors in Census Bureau
estimates for shipments so far.
These are "running ahead" of the figure from the weekly
cargo inspection data.
Also on the subject of data, the NOPA industry group will
later today reveal US soybean crush data for March, expected at 145.1m bushels,
up from 141.6m bushels in February.