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Evening markets: weak crop data sink grains. Corn especially

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The tradition of limit moves in Chicago futures the day the US Department of Agriculture releases its January tome of data is beginning to become something of a hallowed one.

For a sixth year,

corn

moved the daily maximum allowed by the exchange. And this time, the grain jumped backwards, evening to 3:3 the years when it has touched limit up and limit down.

The move followed the USDA data which was disappointing for bulls in all the sensitive spots – the 2011 US harvest estimates was raised, instead of being trimmed as analysts thought; stocks as of December 1 beat expectations too; and downgrades to South American crops were limited.

Above all, the USDA left its estimate for US end-2011-12 corn stocks virtually unchanged, rather than enacting the 100m-bushel downgrade that investors had expected.

'Clearly bearish'

In Chicago, GrainAnalyst trader Matt Pierce said: "I see bearishness across the board,"

In Kansas, Darrell Holaday at Country Futures said: "Overall the reports were extremely bearish especially when one considers the strength in the market going into the report."

French-based Offre & Demande Agricole said: "US [corn] stocks are higher than expected which is clearly bearish for prices."

Etc, etc. Corn for March locked down the maximum $0.40 a bushel allowed in Chicago to end at $6.11 ½ a bushel.

And that threw a pall over the rest of the grains market. Not that soybeans and wheat needed much help closing lower too, with their own data providing a feast for bears, rather than bulls, too.

'Ending stocks are brutal'

The USDA raised its estimate for end-2011-12 soybean stocks to 275m bushels, 42m bushels above market ideas, reflecting a higher harvest estimate and reduced hopes for exports and the domestic crush.

Closing grain prices

Chicago corn: $6.11 ½ a bushel, -6.1%

Chicago wheat: $6.05 a bushel, -5.6%

Kansas wheat: $6.73 a bushel, -4.1%

Paris wheat: E194.00 a tonne, -3.6%

Chicago soy: $11.82 ½ a bushel, -2.2%

London wheat: £154.00 a tonne, -1.8%

Prices for March contracts, except May in London

For wheat, the end-stocks figure was cut, but not by nearly the 37m bushels that the market had expected.

And a separate USDA report showed winter wheat plantings were more than 1m acres above expectations.

"Wheat numbers are bearish across the board," Mr Pierce said.

'Bleeding won't run too deep'

All seemed lost.

"Following this report we see prices coming under pressure… and further deterioration in coming days," Rabobank said.

But as to how much deterioration, corn may not have that much further to fall, if signals from the options pit are anything to go by, when Friday brings a fresh opportunity for sellers to get.

There is "probably another $0.10" a bushel to go, Scott Briggs at Australia & New Zealand Bank said.

"We think the bleeding won't run too deep on this move, after today - there is enough demand lurking to step in between $5.50-6.00 a bushel on spot corn."

'Little has changed fundamentally'

And that was reflected somewhat in the wheat market, even in the close down 5.6% at $6.05 a bushel in the March contract, which was, at least, a $0.13 improvement from the intraday low.

Soybeans clawed back more than half their early losses to end at $11.82 ½ a bushel for March, down 1.7% on the day.

Societe Generale's Michael Haigh, speaking of corn, but a theme he took across the main crops, said that while Thursday's data was "certainly bearish in regards to market expectations, very little has changed fundamentally.

"We need to see some combination of increased corn acreage planted and a return to trend line yields to adequately replenish inventories to historical levels."

'Strong competition'

Elsewhere, the USDA data was viewed as negative for

cotton

too, in raising estimates for domestic, and world, stocks as of the end of 2011-12.

US stocks will be raised by "strong competition from foreign exports" for demand which, in top consumer China, looks like being 1,0m bales lower than had been thought, thanks to price support caused by a programme of rebuilding state inventories.

New York cotton for Mach closed down 1.2% at 95.69 cents a pound, if recovering more than half its early losses too.

Tenders cancelled

And, also among soft commodities, New York raw

sugar

was lower too, closing down 1.8% at 23.27 cents a pound for March delivery,

The market early on appeared to have continued its impasse, which has seen it trade in a small range for the last two months.

"Bears will tell you once there is a wall of Thai pricing above the market, and the bulls will tell you there is far eastern buying below the market," Thomas Kujawa at Sucden Financial said.

But bears got the advantage when the European Commission cancelled tenders for raw sugar imports, citing the region's own strong beet sugar production.

"The commission has decided to suspend all the remaining tenders foreseen in January and February. However, we will continue to monitor the market closely and take any measures deemed necessary to ensure sufficient supply for the EU market," the commission said.

That was not such bad news for London white sugar, which now faces less competition at home from sweetener refined from imported raws.

White sugar for March closed up 0.4% at $620.60 a tonne.

By Agrimoney.com

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