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|Evening markets: demand ideas lift grains, but softs soften
By Agrimoney.com - Published 31/10/2012
If Turnaround Tuesday was disappointing for the bulls, Wednesday disappointed bears, in failing to provide end-of-month selling often witnessed, as Chicago swirled with talk of rising demand pressures instead.
OK, soft commodities ran according to the script that funds tidy up positions as months draw to a close, typically withdrawing cash to pay clients, bonuses etc, before injecting funds at month beginnings.
New York arabica coffee closed down 1.6% at 154.65 cents a pound for December delivery, within an ace of its lowest finish for two years, as roaster buying failed to show up to rescue the contract from falling through further negative chart points.
With ideas of losses of certified stocks to Hurricane Sandy "now forgotten the market has now resumed its bearish stance", broker Sucden Financial said.
"The support level at 156.55 cents a pound was broken, so everyone will most likely now be looking for 153.70 cents a pound as the next area of interesting support as this is the current low for 2012."
Raw sugar dropped 0.5% to 19.46 cents a pound for March, with Sucden noting that "physical values continue weak and weather in Centre South Brazil is drier than expected, leading some to believe that output will be greater than expected in the latter stages of the cane crush".
'A lot of searching for corn'
However, grains and oilseed outperformed both softs and the average 0.2% rise in commodities, as measured by the CRB index.
That was largely down a turn in the market from looking at supply troubles to demand dynamics, and the growing idea that grain buyers will not for long be able to avoid coming to the US market they have largely avoided so far in 2012-13 - especially for corn - because of high prices.
"US grain and soybean futures continue to find support from ideas that the world is going to have to turn to the US as a supplier of last resort," Benson Quinn Commodities said.
At Country Futures, Darrell Holaday, flagging "a lot of searching for corn offers for January, February, March shipment in the world market", said that most buyers "are trying to avoid the US.
"But they are not having much luck as the South American supply is gone until a new crop is produced."
"The buyers have tapped all of the supplies except the US," he added, noting also a rise of \$0.60 a bushel in Ukraine corn basis over the last two weeks.
'Not many offers surfaced'
US Commodities highlighted that "South Korea yesterday was tendering for corn, not many offers surfaced out of South America".
Furthermore, "corn supplies out of the Black Sea are contracting. It is the reduced world corn and wheat supplies that are supporting the market".
Dan Cekander, at Newedge, said that while US corn's increasing appeal as a source of exports, as alternative ran dry, "had been anticipated, the fact that it is actually happening" was supporting values.
And US supplies for export will need to be sourced against a background of a strong US cash market.
With production fears being kept alive by concerns over rain-delayed plantings in Argentina, Chicago corn for December added 2.1% to \$7.55 ¾ a bushel.
There was something of the same dynamic going on in wheat too, with the latest Egyptian tender highlighting the competitiveness of US supplies which, were it not for the extra freight costs of shipping across the Atlantic as well as the Mediterranean, would have dominated orders.
OK, Egypt's Gasc grain authority plumped for French, Romanian and Russian wheat, but none came within \$3 a tonne of the best offers for US soft red winter wheat (as traded in Chicago), let alone the soft white winter some \$10 a tonne cheaper still.
And, with Ukraine wheat not offered, that eased the, few, concerns that the country's confirmation that it will not after all ban exports of the grain would open up a fresh burst of supplies.
However, prices ended well off their highs on fears that data later on the health of the winter wheat crop might show seedlings making a less bad start than factored in.
Rain on the Plains?
Certainly, the GFS weather model put more rains in forecast for Plains hard red winter wheat areas in the eight-to-10 day outlook, precipitation which would alleviate the dry conditions slowing germination.
"There is not a lot of confidence in those forecasts, but worth monitoring," Mr Holaday said.
December wheat ended at \$8.64 ½ a bushel in Chicago, up 0.9% on the day, but 10.5 cents below its intraday high.
Kansas wheat for December closed up just 0.2% at \$9.04 a bushel.
In Paris, the November contract added 1.1% to E262.26 a tonne, helped by French victory in teh Gasc tender, while its London peer gained 0.6% to £210.50 a tonne.
Need for physical crop
For soybeans, the dynamics are somewhat different, given that US export sales of the oilseed have been running anyway at a heady pace.
Furthermore, the market had deliveries, by ABN Amro, of 500 contracts against the November lot to deal with, and the idea of rains in central and northern Brazil improving the conditions for, delayed, plantings.
However, on the plus side was, besides the strength in grains, the firmness of Midwest cash markets which indicates that buyers have something of a trial on their hands to win supplies.
"Exporters have a lot of contracts for export delivery that they must deliver on and they do not have the soybeans in hand at this time," Darrell Holaday said.
"The buyers want their soybeans as they front loaded their purchases."
Indeed, China is still rumoured to have made a series of purchases this week, against a background of doubts that the country's crop turned out as big as the near-13m tonnes that the likes of the CNGOIC and IGC say it was.
However, it was soyoil which China was confirmed as buying from the US on Wednesday, 25,000 tonnes.
That helped the vegetable oil close up 0.01 cents at 50.16 cents a pound in Chicago, for December delivery, despite a negative close earlier for rival vegetable oil palm oil in Kuala Lumpur, down 0.2% at 2,496 ringgit a tonne.
Soybeans for November closed up 0.9% at \$15.47 a bushel, keeping up with the better-traded January lot, which ended at \$15.48 ¾ a bushel.
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