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|Evening markets: pre-data fears sap grains. But coffee jumps
By James Moore - Published 10/09/2012
Even wheat, which ended last week with a bit of a bang, couldn't manage more than a whimper on a downbeat Monday in Chicago.
And it was not just the fault of the prospect on Wednesday of a key US Department of Agriculture report, the next in its monthly series of Wasde supply and demand briefings.
The pattern in Chicago of weakness following a firmish start was reflected in equities too, after Europe's deficit problems once again spilled over, taking the edge off risk sentiment.
Greece's prime minister, Antonis Samaras, failed to secure an agreement from coalition parties on spending cuts.
Even in the ags community, broker Doane noted that "second thoughts about the latest euro-crisis 'cure' are building.
"Germany and France are still not totally on board with the European Central Bank's plan to buy debt instruments from basket-case economies and then sell Eurobonds to pay for them."
In Europe, the FTSE 100 ended down, if by just 1.6-points.
Meanwhile, the Dow Jones Industrial Average posted also closed down around 0.1%. The S&P500 also finished in negative territory having earlier been at its highest in four years.
'No news is bad news'
Still, Chicago crops did the negative thing with greater gusto, in part because of a lack of positive news to support prices.
"It could be that old classic, no news is bad news," Jerry Gidel, chief feed grains analyst at Rice Dairy, said.
"As the saying goes, you have to keep feeding the bull" with bullish news to keep prices moving upwards.
Indeed, at RJ O'Brien, Richard Feltes highlighted that there was "nothing new on demand front this morning", with no fresh US crop export orders unveiled by the USDA.
However, "gains in index and managed fund longs last week will need more bullish news to support their additional length," he said, a reference to the turn back by speculators to raising net long positions in the main Chicago crops.
"With harvest accelerating, easing Chinese soy import pace and concern that US soy yields may exceed expectations—not sure where new bullish fuel will be coming from."
Sellers win stand-off
Benson Quinn Commodities early on noted something of a stand-off between the talk of poor harvest yields and the uncertainty ahead of Wednesday's Wasde.
"The corn and soybean markets seem to be caught between support from poor yield results and weakness stemming from fund selling based on the recent lack of upward momentum," the broker said.
Without new bullish fuel, by the close it was the fund selling which won out.
"Profit-taking continues as investors with long positions are exiting ahead of USDA production numbers on Wednesday," Darrell Holaday at Country Futures said.
'Second straight week of disappointment'
And as an extra reason to sell, there was a snippet of - downbeat - news, with US exports, as measured by cargo inspections, falling in the week to Thursday across the board.
Wheat export sales fell to 19.6m bushels, from 25.4m bushels the week before, with those for soybeans dropping to 12.9m bushels from 15.5m bushels last time.
Corn's rose week on week, but at 9.8m bushels were half the rate of a year before.
"Export inspections were slow and it marks the second straight week of disappointing shipments, especially corn," Mr Holaday said.
"The excuse the previous week was the hurricane, but there was very little recovery in this morning's number."
Broker Newedge had already warned over weak US corn exports, (albeit in a note forecasting the potential for further rises in corn futures, eventually).
And corn was indeed the worst hit by Monday's sell-down, ending 2.1% lower at \$7.83 ¼ a bushel for December delivery, the lot's lowest close since July.
Chicago wheat for December dropped 1.5% to \$8.89 ¾ a bushel.
Sure, Paris wheat for November ended up 0.1% at E265.25 a tonne, and London November wheat up 0.3% at £206.50 a tonne, but that was before Chicago wheat, the world bellwether, weakened into its close.
Chicago soybeans proved the most resilient of a weak bunch, but only having been sold off late last week too.
Indeed, a drop of 1.0% to \$17.18 ¾ a bushel for the November lot represented a fourth successive negative close.
'Red flag to the bulls'
For gains, it was necessary to travel to New York, where coffee had a stormer, closing up 6.5% at 173.65 cents a pound for the benchmark December lot.
The move was seen as largely technical as, despite forecasts from Commerzbank that a huge and rising net short position in New York coffee may stoke further selling, many investors took it as an excuse to pressure short investors.
Some see extreme speculative holdings, long or short, as marking the end of the line, making investors question where more such positions will come from.
US regulatory data "released late Friday showed a small increase in the net fund short position to 29,401 lots and although we didn't think this was out of the blue, the simple fact that the short had added was a red flag to the bulls", Sucden Financial said.
"From the off today, day trader and small spec buying took values quickly 2 cents higher and any selling from origin or trade was well absorbed. And, with a little rest over the lunch period, it was evident that earlier gains would hold."
Still, will the rally continue? "If you think back that it was only Thursday when things looked very different it is probably a good idea to expect a small retracement and a rest before resuming higher," the broker said.
Raw sugar futures also benefitted from technical buying.
New York's October contract rose by 0.3% to 19.43 cents a pound, after finding support last week ahead of the lows posted in June around 18.9 cents a pound.
Cocoa, meanwhile, lost ground as traders pared back positions.
ICE-traded Futures for December closed down \$19, or 0.7%, at \$2,657 tonne having hit a 10-month best last week of \$2,707.
Prices are expected to remain underpinned by concerns for the implications of weather, and regulatory reforms, on Ivory Coast supplies.
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