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Evening markets: analysts get one prediction right

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Analysts got one prediction right on Tuesday – that investors should expect volatility in commodity markets, as the coming of Christmas sapped volumes.

Corn, soybeans and wheat swung between positive and negative ground in Chicago, in soybeans' case extremely so.

The oilseed at one point touched $10.78 ½ a bushel for January delivery, a three-month high.

Where they guessed wrong was that crops would hold on to gains, with the beginning of the new month in theory providing a fresh investing opportunity for funds.

"Additional support is expected from the index fund sector, which is assumed to be buyers in early morning trade on new allocations as investors continue to increase their appetite for commodities," Benson Quinn Commodities said before the opening.

Vic Lespinasse, at GrainAnalyst.com, said: "It's a new month and the bulls fervently hope this brings new fund money into the market, as was the case the first two days of November, with much higher prices as a result."

Lower closes

However, whether funds have run out of new money, whether they have refined their investment techniques, whether they no longer see value in crops – who knows.

But markets ended a touch lower. The losses weren't huge, with soybeans ending 1 cent lower at $10.59 ½ a bushel, and corn for December closing 3 cents lower at $3.99 ¾ a bushel.

The better-traded March lot lost the same to $4.14 ½ a bushel.

Wheat lost 3 cents to $4.14 ½ a bushel for December and 4.75 cents to $5.84 a bushel for March.

And this despite a weaker dollar, which fell 0.5% to $1.5117 against the euro at one stage, making US exports such as crops more competitive.

Ethanol ruling

Still, there were some negative signals on fundamentals around to feed the bears.

Corn faced the setback of delays to higher ethanol blends in petrol, after the Environmental Protection Agency said its ruling, which had been expected on December 1, would not appear until probably the middle of next year.

For wheat, Canada's opposition party threw its weight behind government plans to legislate an end to the country's railway strike, which is threatening grain exports.

For soybeans, regulatory data showed huge selling by farmers, although some investors were taking that as a positive, given that prices remain robust.

Four-month top

Meanwhile European grains were helped to a firm finish by their early close, which occurred while some strength remained in the Chicago prices they set so much store by.

Paris wheat for January ended E0.75 higher at E132.25 a tonne, while London wheat for the same month edged £0.05p higher to £108.05p – its best close since late July.

"Fundamentally no new news but with the market moving on outside influences grains have gone higher," Hugh Schryver at Glencore's UK grain arm said.

Fireworks day cancelled

Among softs, cocoa did better at taking the cue from the weaker dollar, with New York's March lot jumping 2.9% to a month-high of $3,353 a tonne.

Cocoa has also been helped this week by relief that a large number of expiring December contracts in London have not been exercised.

"The fireworks of the December London options expiry failed to transpire," Stephanie Garner, at Sucden Financial, said.

"Talk had been of out-of-the-money options being exercised given the heavy volumes involved but this did not transpire to be the case."

London cocoa ended £32 higher at £2,205 a tonne.

By Agrimoney.com

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