Investors highlighted their greater appetite for soft commodities over grains on Tuesday, sending cocoa and coffee to multi-year highs even as many Chicago crops plunged the maximum allowed by exchange limits.
In Chicago, the near-term wheat contract, for March delivery, tumbled 7%, taking its losses since a February 9 high to 15%, while soybeans fell 5% - both closing limit down.
Corn, which in early deals jumped to a two-year high, also sank the exchange maximum, as did oats and rough rice.
The declines, which were broadly blamed on a scramble by investors for safe havens amid turmoil in North Africa and the Middle East – and notably Libya - contrasted with resilience among many soft commodities.
Sugar closed in New York with marginal losses, while cocoa remained near a 30-year high hit earlier, when arabica coffee beans set a 13-year top.
The Gaddafi question
The diverging fortunes of the two sides of the agricultural commodities universe reflected in part investment patterns, Keith Flury at Rabobank said.
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Grain prices at close on Tuesday
Chicago corn: $6.79 ¾ a bushel, (-4.2%)
Chicago wheat: $7.62 ¼ a bushel, (-7.3%)
Chicago soy: $12.98 a bushel, (-5.1%)
Kansas wheat: $8.72 ¾ a bushel, (-6.1%)
Paris wheat: E246.75 a tonne, (-5.1%)
London wheat: E194.00 a tonne, (-4.4%)
Prices for near-term contracts |
"Grains are held more widely, and more widely traded, so that when uncertainty and macroeconomic factors strike, they are going to be a bit more vulnerable to a flight from risk," he told Agrimoney.com.
"There is so much uncertainty around. What happens for instance if Gaddafi leaves [as Libyan president]? There are no answers at the moment."
Furthermore, while fundamentals for many grains were strong they were "not quite the same" as for some soft commodities.
A number of analysts, including Rabobank, have named coffee as a top pick among the farm commodities complex, thanks to the prospect of a drop in output from Brazil, the top producer, at a time of already-tight inventories.
Sowings concerns
However, Kona Haque at Macquarie Securities questioned the stress being placed on global uncertainty, given the potential support that Libya's plight could give for programmes by other governments to stockpile grain and prevent food prices adding to civil unease.
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Soft commodity prices at close on Tuesday
New York cocoa: $3,633 a tonne, (+2.5%)
New York coffee: 273.60 cents a pound a tonne, (+0.7%)
New York cotton: 187.94 cents a pound, (-4.6%)
New York raw sugar: 30.96 cents a pound, (-0.2%)
London cocoa: £2,360 a tonne, (+2.6%)
London coffee: $2,335 a tonne, (-0.2%)
London sugar: $719.00 a tonne, (-0.8%)
Prices for near-term contracts |
The grains sell-off appeared to be being stoked by concerns that the US Department of Agriculture will, in long-awaited estimates revealed later in the week, confirm thoughts of a jump in US plantings.
"Everyone seems to think this report could be bearish, that prices being so high will feed through into big acreage expansion," she said.
"That is prompting a bit of risk to be removed from the market."
Broker US Commodities noted that market expectations earlier in the month of a 7m-acre rise in US sowings of major crops in 2011-12 had now shifted to 10m acres.
'Overbought condition'
Hightower Report analyst Terry Roggensack highlighted forecasts of rain for China's drought-tested winter wheat this weekend, and negative chart signals.
"The market is in the process of correcting the overbought condition, and the break is likely to attract better demand," he said.
Cocoa, meanwhile, was boosted by an extension to the ban on Ivory Coast cocoa exports imposed by Alassane Ouattara as part of a drive to unseat Laurent Gbagbo, who he beat in presidential elections in November.
The ban, which is preventing the flow of a strong Ivory Coast crop to market, and leaving some at risk of rotting in store, has been extended until March 10.
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