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Evening markets: grain prices plunge, with US export hopes

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If the problem for grain markets is weak and uncompetitive US exports, investors did their best to tackle the issue. They sent futures prices plunging.

In fact, poor weekly US export data were not the only concern in town on Thursday, with jitters over eurozone debts coming to a head with a dismal Spanish bond auction, where the country was forced to pay a yield just 0.03 percentage points short of 7.00% fret threshold to get 10-year bonds away.

French debt concerns popped up again too as yields on its 10-year bonds rose 2.04 percentage points (204 basis points) above comparable German debt, a record for eurozone times.

And, this time, there was no positive data from the US to offer consolation, with a Philadelphia Federal Reserve industrial activity index coming in below estimates, and concerns rising over the so-called "supercommittee" tasked with sorting out US public finances.

One way. Down

So, with the

dollar

rising 0.3%,

shares

lower, down 1.7% on Wall Street in late deals, with London

copper

plunging near 3% and

oil

by more than 3% (West Texas Intermediate and Brent crude) it was a risk-off day as it was.

New York

coffee

for March, for instance,. ended down 1.2% at 236.10 cents a pound, despite ideas of Brazilian plantations getting more dryness rather than needed rains.

And raw

sugar

dropped 2.0% to 24.04 cents a pound in New York, for March delivery – the lowest close for a spot contract in five months – despite news of long-awaited purchases by Malaysia and Tunisia.

'Looking bleak'

Sure, the International Sugar Organization widened by a smidgen its estimate for the world sugar surplus in 2011-12.

But a bigger trouble was that, technically, "the picture is looking bleak in the short-to-medium term," Sucden Financial noted.

"The market has gradually eroded. Yesterday was the fifth successive day of lower high, lower low and lower settlements and today looks like following the trend."

And getting deeper into chart-speak "New York sugar futures are sinking below the long-term uptrending channel", the broker added.

"The break of this opens deeper downside potential toward 23.38 cents a pound support, but also highlights the bearish head-and-shoulders risk below 20 cents a pound."

'World competition is huge'

But grains had the extra headwind of poor US weekly export sales behind them, at a time when investors were already fretting about the competitiveness of American shipments.

What, with Japan, the top

corn

importer, buying 800,000 tonnes of the grain from Ukraine, and with it cheaper for US east coast feed groups to turn to Brazil and UK

wheat

, as they did last week…

"Japan is our old line stable buyer," US Commodities noted, adding that "wheat remains caught in a world competition battle".

"Saudi Arabia is buying wheat from Australia and the Black Sea region. World competition is huge."

'Charts turned sour'

The export figures, by the way, were 334,560 tonnes for wheat, 2011 and 2012 crops, a modest disappointment, and 208,950 tonnes for corn, a big one. (The lowest pre-release estimate was 350,000 tonnes, with some traders hoping for 600,000 tonnes.)

"Export sales this morning were negative corn and wheat," US Commodities said, while rival brokers Benson Quinn Commodities and Country Futures termed them "disappointing", etc.

"It doesn't matter that basis is still strong, that no-one is selling the stuff," Jerry Gidel at North America Risk Management Services said.

Nor that feeding margins are still positive, and on ethanol especially generous, putting corn demand from ethanol, thus far into 2011-12, on course to beat USDA hopes.

Prices dropped, "charts turned sour, and everyone got out some more", with the $6.30-a-bushel mark proving particularly sensitive for December corn.

The lot plunged to a one-month low of $6.10 ¼ a bushel before recovering some ground to end at $6.14 ½ a bushel, down 4.4% on the day.

'Swamped by corn'

Given that wheat, of which the world has abundant supplies, has relied on corn for support, it had little hope either.

The December lot closed down 3.9% at $5.92 ½ a bushel, a four-month closing low.

And

soybeans

got caught in the downdraught too, despite the announcement, at last of the Chinese purchase, of 475,000 tonnes, rumours of which the market has been humming too for days.

Furthermore, US soybean weekly export data, at more than 750,000 tonnes, were above market hopes.

"The soybean export sales were seen as supportive, but the corn market has swamped the soybean complex," Darrell Holaday at Country Futures said.

Buy the rumour, sell the fact

On New York

cotton

too, large export sales, of more than 640,000 running bales this crop year and next, were seen as insufficient to save the day.

Selling, blamed on "buy the rumour, sell the fact" thinking over huge Chinese imports at the centre of the buoyant data, took New York cotton down the exchange maximum of 3.0 cents to 99.50 cents by the close for December.

The March lot fell limit down too, to 96.48 cents a pound.

'Weather generally bullish'

If there is hope for Chicago bulls, it is that there was some smattering of more price positive news around on supply fundamentals.

Argentina's farm ministry cut its estimate for the wheat crop too, by 600,000 tonnes to 12.6m tonnes, leaving it even further behind the USDA forecast of 13.0m tonnes

And "weather is generally bullish today", Mr Holaday said noting that "dry forecasts remain in place for eastern Europe and on into the Black Sea region.

"The South American forecast also turned drier."

Paul Georgy at Allendale also noted that "the trade is shifting some focus to a drier trend that is developing in South America".

Some focus, perhaps. But not enough to save crops on Thursday.

By Agrimoney.com

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