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Morning markets: crops edge higher as key euro meeting looms

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One Chicago adage was battling another on Tuesday as agricultural commodities, and other risk assets, extended their revival into a second day.

The prospect of a Turnaround Tuesday oft noted in Chicago, whereby the second day of the week reverses a strong trend in the first, was claiming some traction as of 08:30 GMT, with crops well off early highs.

But the bigger moves were positive ones, by crops seeming more keen on fulfilling another saying prevalent in the last few days, that "if the bears have Thanksgiving dinner the bulls have a Christmas feast".

Better health

Wheat

was on the winning side.

The two-point rise to 52% in the proportion of the US winter wheat crop rated "good" or "excellent", in weekly US Department of Agriculture crop condition data, might have been seen as a setback to prices, although, it has to be said, it hardly shows a crop in excellent health.

For hard red winter wheat, even with an improvement to 48% in the good or excellent rating, the crop "goes into dormancy in below average condition relative to the last six years", Paul Deane, at Australia & New Zealand Bank, said.

He added: "Across the seven key hard red winter wheat states, Kansas was unchanged. Improvements in Texas, Oklahoma, Colorado, Montana and South Dakota were offset by a decline in Montana."

Furthermore, at Commonwealth Bank of Australia, Luke Mathews reminded that "slow demand for US wheat continues to remain a fundamental drag on prices".

Key meeting

However, Asian

stockmarkets

maintained the positive trend set by European and US shares in the last session. Tokyo and Seoul stocks closed up 2.3%. (While European stocks opened Tuesday in negative territory, declines were marginal.)

Much of the improvement in sentiment is down to hopes that a meeting of eurozone finance ministers later on Tuesday will at least approve a E440bn rescue fund, clearing the way for the facility to beef itself up further by raising money from other quarters.

And the safe haven of the

dollar

fell 0.4%, providing an extra hand to dollar-denominated assets by making them more competitive as exports.

Short-covering threat

Wheat also had another foot up from regulatory data overnight showing that speculators had raised their net short in Chicago wheat by 14,000 lots to a historically high 50,000 contracts.

The downside of this is that it leaves the grain liable to an upward spike in prices on bullish news, as speculators rush to cover short positions, meaning they may be reluctant to sell down further

"Traders are mindful of the short position in Chicago and the possibility of a short covering rally," Dave Lehl at Benson Quinn Commodities said.

Chicago's March contract added 0.7% to $5.97 ¼ a bushel.

'New month and new money'

For

corn

, there are some key technical considerations too, with a rapid selldown by large funds of corn positions, with the net long falling by 47,000 lots to a weak 83,000 contracts.

"But we would expect that should slow or possibly be reversed as we move into the month of December," Jon Michalscheck said, with month beginnings often bringing new money.

"A new month and new money on Thursday may tell us if the large funds are still being comfortable being long at the present time."

This time, the expiry last Friday of December options, and the coming on Wednesday of the start of the expiry process for December futures, and with it ideas of how much corn is being delivered against contracts, are seen as having impacts too.

"Bulls may argue the pace [of selldowns] has been escalated the past couple of weeks due to the December options expiring and first notice day coming up this Wednesday," Mr Michalscheck said.

These factors ironed out in 0.25-cent rises to $5.92 a bushel in the December contract, and to $5.98 ¾ a bushel in the better-traded March lot.

'Favourable crop development'

Soybeans

were also kist in positive territory, as the positive force of the weaker dollar, and stronger hopes for Chinese buying, met ideas of strong South American crops.

"Continued favourable crop development in South America continues to hang over the market, with one Brazilian consult [Agroconsult] raising its estimate of Brazil's soybean crop from 73.8m tonnes to 74.8m tonnes," Mr Mathews noted.

Chicago's January lot added 0.2% to $11.22 ¾ a bushel.

Elsewhere in the oilseeds complex,

palm oil

was firm too, gaining 0.7% to 3,089 ringgit a tonne in Kuala Lumpur, continuing to gain on fears of La Nina-inspired bad weather in Indonesia and Malaysia, the top two exporters.

Past its low?

But, in Tokyo a rally in

rubber

lost traction, sending the tyre ingredient 0.6% lower to 269.90 yen a kilogramme.

Nonetheless, rubber remains more than 10 yen above a low earlier this month, helped by a rash of short-covering.

"Prices of Thai USS 3 grade raw material, a key determinant of processed rubber prices, which had fallen to almost 80 baht a kilogramme earlier this month, have again risen slightly above 90 baht a kilogramme," Ker Chung Yang at Phillip Futures in Singapore noted.

By Agrimoney.com

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