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Morning markets: SA heat fears see crops recoup early losses

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Many investors had expected something of a reversal on what is the second US trading day of the week, if not the Tuesday which Chicago typically associates with "turnarounds".

"The market has become overbought and I would not be surprised by lower overnight and 'turnaround Tuesday' trade," Kim Rugel at Benson Quinn Commodities.

But while very early deals saw Chicago prices indeed pull back, amid talk of profit-taking and increased farmer selling, the wave had passed, for now at least, by 08:50 GMT, when corn, soybeans and wheat had recovered to show small gains.

Latest forecasts

Macro-market factors were less helpful this time, with some concerns of the next chapter eurozone crisis re-emerging to sink some

stockmarkets

(Shanghai shares retreated 1.4%) as well as the likes of London

copper

, which fell 1.6%.

Brent

crude

and the

dollar

stood little changed.

However, the South America weather concerns remained alive to keep lead in bulls' pencil.

In fact, the latest run of the GFS weather model had boosts for both sides, for bears showing up "wetter for central and eastern Argentina for January 10-11," David Tolleris at WxRisk.com said,

"The model shows 60% coverage of 0.5-1.5 inches, with 2-3 inch rains over north west Argentina."

That would certainly be helpful for drought-deprived corn and soybean plants.

'Weeks of heat'

However, for bulls the forecast in the 11-15 day timeframe "shows signs of a new heat dome developing over the south east portions of the southern Pacific Ocean", which if it spread on land looks poor news for South American growers - if helpful to exports from rival US.

"Argentina has suffered from weeks of heat and below-normal rains due in part to the La Nina weather pattern. A smaller crop could potentially shift export demand to the US," Lynette Tan at Phillip Futures said.

The extent of the threat was highlighted on Tuesday by consultancy Cropcast, which cut to 24.5m tonnes its forecast for Argentina's corn harvest - down 3m tonnes in a week.

And the market is also beginning to take note of the next US Department of Agriculture's flagship Wasde report on world crop supply and demand, which Benson Quinn's Mr Rugel said "offers support" to prices for now.

Price moves

Chicago corn stood 0.2% higher at $6.59 ¾ a bushel for March delivery, 5 cents above an early low.

The contract nonetheless, remained below its 100-day moving average, at $6.64 a bushel, which it grappled with on Tuesday, and looks like a key resistance level to upward progress.

Soybeans for March added 0.3% to $12.31 a bushel, remaining below its 100-day moving average, at $12.57 a bushel.

Wheat

for March added 0.4% to $6.59 ¾ a bushel, lifted by fellow grain corn.

'Demand hopes'

In New York, cotton, which in the last session rose the exchange maximum, proved less able to eradicate early losses, standing 0.3% lower at 95.50 cents a pound for March.

Commonwealth Bank of Australia's Luke Mathews, explaining the last session's gains, said that "bullish outside markets, including better than expected economic data, raised hopes that fibre demand may soon lift".

In Kuala Lumpur,

palm oil

for March rose 0.2% to 3,230 ringgit a tonne, if pulled back below an early high of 3,241 ringgit a tonne.

The Indonesian Palm Oil Association pegged production in Indonesia, the top palm oil producing nation, at 25m tonnes this year, up 6%, with exports seen rising 9% to 17.5m-18m tonnes. However, such figures looked within existing market expectations.

By Agrimoney.com

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