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Evening markets: cotton, wheat escape further crop sell-down

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Remember July 2010, the early stages of the grains rally, when world economic optimism was on the rebound?

That was the last time Chicago's December

corn

contract closed below its 200-day moving average, a key technical indicator.

The lot, at the death on Friday, fell down through it again, after nearly 16 months, as fear once again overcame a growing consensus of more bullish thinking on the fundamentals for the grain.

"We could get people giving in on margin calls at the end of the day," cashing in to avoid having to stump up more collateral against losing bets, Mike Mawdsley at Market 1 said with an hour or so of trading to go.

Weekend factor

It looks like that's what indeed occurred, with funds preferring to cash in their, depleted, chips rather than hang on for any rebound.

"One of the negative issues is that many participants are afraid to go into the weekend long anything as they fear the weekend and the developments in Europe that could lead to a scary Monday," Darrell Holaday at Country Futures said.

"That is why we don't see any follow through buying on rallies."

Indeed, while December corn attempted to push higher for much of the day, recording 1% gains at one point, it could just not hang on with share markets struggling to hold gains too, and many commodities, including

oil

, lower despite a stable

dollar

.

Brent crude stood 1.4% lower at $103.97 a barrel in late deals, with the average commodity losing 1.8%, according to the CRB index (which ended, like soybeans, at a 10-month low).

Has China been shopping?

And as for that bullish talk, US Commodities highlighted the attractions of lower prices to end users who were, at the start of the month, looking to pay nearly $1.20 a bushel more for corn and

wheat

.

"End users are aggressively buying grain. The crush is profitable. End users are extending coverage out six-to-eight months. Thus the rationing theory is out the window," the broker said.

Benson Quinn Commodities noted that "South Korea has been an active buyer of corn this week" with rumours, still, "flying that China has been shopping for corn".

While, again, no confirmation emerged of purchases of US corn, through the US Department of Agriculture's daily reporting system, there was some more on Chinese purchases of American soybeans, with orders for a further 126,000 tonnes confirmed.

And there is talk that China bought far more, "upwards of six cargoes of US soybeans, overnight", Benson Quinn added.

'No hint of any rain'

Then there are some supply challenges to factor in, with dry conditions on southern US Plains set to continue, boding ill for sowings of hard red winter wheat.

"The plains stay mild and dry through October 5 with no hint of any rain for the lower Plains/ hard red winter wheat areas," weather service WxRisk.com forecast. And Ukraine is worryingly dry for winter grains sowing too.

Meanwhile, GrainAnalyst trader Matthew Pierce noted "record low temperatures overnight in Sioux City, Iowa, of 29 degrees Fahrenheit, and Norfolk, Nebraska, 28 degrees".

Such a frost "points to a serious problem with late developing crops. Remember, with the planting date delayed, a September frost does eat into yields and quality."

Informa revisions

And this before getting to an Informa Economics downgrade to its estimate for corn acres, cut to 91.862m acres, and production, reduced by 91m acres to 12.497bn bushels.

"But no-one is looking at that kind of stuff today," Mr Mawdsley said.

As for soybeans, whether from an Informa upgrade in its forecast, to 31m bushels to 3.0921bn bushels, or not, the oilseed closed down 2.0% at $12.58 a bushel for November delivery, a 10-month closing low for a spot lot.

Wheat bucked the trend, thanks in part to its increasing competitiveness on world markets, with the $262.80 a tonne at which Russia won an Egyptian wheat tender on Thursday equating to $7.13 a bushel.

"In wheat, we are looking at getting down to value levels," Mr Mawdsley said.

'Better news from Brazil'

Among soft commodities, there was a lone riser too,

cotton

, which added 2.0% to 101.24 cents a pound in New York for December delivery, responding better to reports of commercial buying.

But New York raw

sugar

dropped 3.2% to 24.84 cents a pound for October, the weakest close for a spot contract for three months.

"There is still conjecture that the northern hemisphere crops are progressing and talk of better news from Brazil and re-revision of the recent crop downgrades to better levels," Thomas Kujawa at Sucden Financial said.

The falling Brazilian real, down 17% this month against the dollar, has also being increasingly cited as a factor behind falling prices of futures in crops in which it is a major exporter, such as soybeans,

coffee

and sugar.

Indeed, December coffee lost 3.3% to close at 231.45 cents a pound in New York, earlier hitting 230.80 cents a pound – the lowest for a spot contract in nearly eight months.

By Agrimoney.com

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