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Morning markets: firm start for crops sees soybeans top $13

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Another day, another five-month high for


, which rose back above $13 a bushel.

The background was broadly helpful for risk assets anyway (not that many crops appeared to have noticed) with oil prices, whose elevation has raised economic growth concerns, easing a touch more.



was 0.5% lower at 09:00 GMT, easing back below $124 a barrel.

And the prospect of the European Central Bank on Wednesday releasing a further E500bn in cheap three-year loans to banks more than counteracted any fears for eurozone debt revived by Standard & Poor's downgrade of Greece to "selective default" following the country's latest bailout deal.

As the euro rose, the safe haven of the


eased 0.3%, while many


markets enjoyed a strong day. Stocks added 0.9% in Tokyo, 0.6% in Seoul and the same in Singapore, if easing a touch in Sydney.

'Drought affected crops'

And this helped Chicago soybeans extend gains, despite one headwind from a technical perspective, with the oilseed's nine-day relative momentum index, which compares upward and downward movement, indicating a figure of more than 80 – in other words, well into "overbought" territory.

However, on anther technical measures, the oilseed had a green light.

The March contract ended the last session above its 200-day moving average for the first time since September.

And all this of course against the backdrop of decent fundamentals, after the US Department of Agriculture on Friday forecast domestic stocks falling by one-quarter in 2012-13, sapped by strong exports and America picks up orders lost by drought-hit South America.

"Drought affected crops in South America, strong demand in China, high crude oil prices and expectations that oilseed stocks will tighten even more in 2012-13, because of low plantings, continue to support oilseed prices," Luke Mathews at Commonwealth Bank of Australia said.

Tipping point

The March contract gained 0.5% to $13.00 ½ a bushel, with the better-traded May lot adding 0.5% to $13.09 ½ a bushel.

The new crop November lot gained 0.3% to $12.85 ¼ a bushel, improving further its attractions compared with


in farmers' spring sowing plans.

The soybean: (December) corn ratio, which entered the month at 2.11, now stands at 2.31.

Some analysts take 2.25 as the tipping point, and others 2.50, with others viewing large changes as only likely outside the boundaries of 2.00 (below which favours corn) and 2.50 (above which favours soybeans).

Corn vs soybeans

Whatever, it is not clear yet that the rise in soybean prices has done much to secure that many extra acres, with FCStone saying that its US cash market followers are "pretty adamant the US farmer has but one crop in mind for the spring, and that's corn".

Furthermore, "the current weather patterns support a good probability that they will get into the fields early enough to get it planted with below-normal snowfall and above-normal temperatures.

"Watch for any delay in spring plantings to shift to soybeans but as we stand today corn looks like it will dominate."

December corn was 0.1% higher at $5.57 ½ a bushel.

Chinese purchases?

Old crop contracts recovered early losses too, amid continued talk of buying interest from China, where the grain was in cash markets seen making a record high.

"We would assume that China is watching old crop global stocks, with their cash and futures prices continuing to inch higher and the old-new spreads still widening in an attempt to slow down demand until new crop production can be better defined than it is today," Jon Michalscheck at Benson Quinn Commodities.

And this year's Chinese crop may not be so hot, thanks to dryness in some northern areas of China and the rising costs of fertilizer, with the country's agriculture ministry reported on state radio to have forecast a drop in total grains output to 525m tonnes this year, from 571m tonnes.

Chicago corn for March added 0.1% to $6.45 a bushel, and the May contract 0.25 cents to $6.48 ¾ a bushel.

'Little supportive news'

That left


, as typical of late, the slowest of Chicago's big three.

"Fundamentally the wheat market has little supportive news as world supplies are abundant and weather is favourable for US crops," Lynette Tan at Phillip Futures said.

"But persistent gains in soybeans, driven by South American crop concerns, are underpinning the whole grains complex."

Furthermore, there was some retreat in the ideas of improving US conditions, with weekly data showing the condition of the Texas hard red winter wheat crop returning to decline.

While the amount rated "excellent" rose 2 percentage points week on week, the proportion seen as "poor" or "very poor" gained 7 points.

Export competition

Besides, soft red winter wheat, the type traded in Chicago, is still seen as competitive on the world market too.

While Kazakh wheat is being quoted at $276 a tonne, this is "likely due to the questionable quality of a large percentage of that wheat", Benson Quinn said.

"There is little reason for the US market to break based on price action in the Black Sea, but the trade will closely monitor Aussie and Canadian offers."

Chicago's March lot added 0.1% to $6.46 ½ a bushel but later contract fell, with the May contract down 0.1% at $6.52 ¼ a bushel.

'Vulnerable to a correction'

In New York, raw


was mixed, down 0.1% at 26.48 cents a pound for March delivery, but up 0.01 cents a pound for May.

There is continuing interest in the expiry, on Wednesday, of the March contract, with speculation of a large buyer against deliveries.

And there are concerns of logistical constraints hampering Thai shipments, besides the worries over the Mexican cane crush, which may see a large portion of Central American supplies diverted north.

Furthermore, "sugar is currently trading at the upper end of its trading range and the overbought market is vulnerable to a correction", Ms Tan at Phillip Futures said.

"Near-term support is established at 25.55 cents a pound, and resistance at 27.67 indicated by the uptrend channel."


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