Just how high can South America weather concerns drive
Some doubts crept in in Chicago to drag both crops well below early highs, on what might have been expected to be a red letter day.
Taking weather out of the picture, there was plenty to boost risk assets, which took succour from better-than-expected manufacturing activity data in a range of countries, plus German jobless data showing unemployment data at a 20-year low.
In another sign of the risk-on feel, the
And the party was not even unseated by fresh
A risk-on feel, a weak greenback (making dollar-denominated assets more appealing as exports), higher oil prices – it should have been field day for a dollar-denominated risk asset used in making biofuels.
The sweetener also got a hand from ideas of buying by commodity index funds who, in an annual January rebalancing process raise positions in 2011's laggards and cut holdings in the best performers to bring weightings back to mandated levels.
In the case of sugar, that should mean buying, given its dismal performance last year, when the sweetener lost 27% in New York.
"The sugar bulls will point out that at the start of the year we typically get the tracker funds allocating resources, and perhaps the index funds may well be getting off the sidelines in the coming weeks," Thomas Kujawa at Sucden Financial said.
He added: "If that's your best excuse to go long sugar then our prayers are with you."
However, corn, another ethanol feedstock, performed nowhere near as well.
And this was with the help of the continued hot and dry weather in southern Brazil and, in particular, Argentina, at a sensitive time for corn and soybean crops.
Over the next week, "central Argentina will see temperatures running anywhere from 2 to as much as 6 degrees Celsius above normal", WxRisk.com said.
"Rainfall amounts will continue to run much below normal - only 25% of normal or less over all of south west and south east Brazil, as well as Paraguay and all of central, eastern and northern Argentina."
Broker US Commodities said: "The dominant driving force on the grains remains the weather in South America.
"The trade is fearful that corn yields are being lost daily and soybeans will soon join."
Benson Quinn Commodities added: "The next real opportunity for moisture in the drier regions is offered for mid next week. But extended forecasts have offered potential rain events, while little moisture seems to materialise."
However, while Chicago corn for March rose nearly 3% to $6.64 ½ a bushel recovering its 100-day moving average, it could not stay there, and fell back to close at $6.58 ½ a bushel, up 1.9% on the day.
"Export inspections released after the opening were not supportive," Darrell Holaday at Country Futures said, after the US Department of Agriculture revealed that US crop shipments, as measured by cargo inspections, fell steeply in the week to December 29.
That said, it was a holiday period, and the figures for corn, soybeans and
Still, technically "stochastic levels indicate corn and soybeans are overbought and due for a correction", Mr Holaday added.
And US Commodities reminded that "the market is as good as the next forecast".
Soybeans too, dropped back from intraday highs, if closing up 1.7% at $12.18 ¼ a bushel for January delivery, and by 1.6% to $12.27 ½ a bushel for the better-traded March lot.
And with corn past its best wheat, which has far looser fundamentals, had no chance, closing up a modest 0.7% at $6.57 a bushel for March – reverting to a discount against corn.
The rally was boosted by a round of short-covering helped by ideas that high prices were needed to secure US sowings against corn and soybeans, whose prices have been so buoyant.
New York cocoa for March closed up 0.3% at $2,115 a tonne, if only on ideas of purchases during the index fund reweighting.