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Evening markets: funds move late to rescue crops

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Corn and soybeans, at least, staged something of a late comeback as some of the funds buying that investors have been awaiting once again appeared in late trade.

March corn crawled 0.25 cents higher to a fresh six-month closing high in Chicago of $4.18 ½ a bushel.

Soybeans for January ended up 2.75 cents at $10.52 ¼ a bushel, with the better-traded march lot up 3 cents at $10.61 a bushel.

Enter the funds

Both crops spent much of the day with their toes in negative territory, amid selling pressure by farmers and some concerns that the fund buying that investors had been expecting would not materialise.

"There simply wasn't much follow through support this morning, allowing selling to overcome early gains and push prices down," Vic Lespinasse at GrainAnalyst.com said half way through the trading day.

However, he highlighted the potential for fund buying "in the closing minutes of trading".

And less than a quarter of an hour from the close, Mr Lespinasse reported: "Fund buying is entering the pits and a rally into the close similar to late yesterday is expected in most pits."

US Commodities, the Iowa-based broker, said: "As you can see money is coming into the market. It is now fund rebalancing versus hedge selling."

Winterkill fears

The big difference from the last session, however, was in wheat, which ended down 4.75 cents for March delivery at $5.53 a bushel, near its low, and having led for much of the session.

Darrell Holaday, at Country Futures, had put its early strength down to the cold weather, which has raised the likelihood of winterkill for autumn-sown crops.

"The cold temperatures moving into the Plains could cause some damage," he said.

He added, and was proved right: "This is a normal price rally for this time of year, but it usually fails."

Rebalancing act

Still, it's not certain exactly how much investors are looking at fundamentals, given the prospect of fund rebalancing apparently to come later in the week.

"Goldman Sachs will begin the rebalance on Friday for the next five days," US Commodities said, with other funds said to be starting at different times in the immediate future.

Rebalancing is an annual process under which funds readjust funds to base weightings, meaning sales of top performers (maybe copper or sugar) and implying purchases of the lagging grains.

Brazilian beans

And there was some fundamental news around.

Oil World, the German-based analysis group, said that Argentina's soybean crop may come in better than its lowball 48m-tonne forecast, while various reports are suggesting a strong start to the Brazilian soy harvest.

"Brazil is currently harvesting early planted and maturing soybeans," Benson Quinn Commodities said.

"Yields remain good and prospects for the balance of the Brazilian crop are hopeful with more than adequate rainfall and moderate temperature."

Many brokers are also citing reports that China has, in Mr Lespinasse's words, "overbought US soybeans, which could result in a sharp and sudden drop in Chinese demand for US soybeans sooner than currently expected".

By Agrimoney.com

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