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Morning markets: soybeans outperform corn. And more to come?

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There have been plenty of warnings of "volatility" in grain markets as investors position ahead of US Department of Agriculture data on Friday.

After already seeing decent price swings so far this week, such cautions looked good for Wednesday too, with Chicago's three major crops already having tasted both positive and negative territory, by 08:15 GMT, when they stood firmly in the former.

The one constant was the expectation that corn is in for a rough ride from Friday's USDA data on US crop sowings this spring, with the report expected by a ThomsonReuters poll to show a 94.7m-acre figure.

But even that briefing may not be the end of the price-negative story for


, with the USDA data based on a farmer survey taken before a spell of warm US weather this month which has encouraged many growers to sow early.

This means that even an unexpectedly-low corn plantings number on Friday may be largely disregarded by investors.

'Soybeans could continue to outperform'

Indeed, broker Benson Quinn Commodities clocked analysis that "final


acres tend to fall from March intentions while final corn acres tend to increase.

"And with the USDA survey taking place ahead of past week's spring warm-up, the market will make the case for that outcome this season as well."

New crop corn for December fell 0.4% to $5.48 a bushel, 1 cent from a 2012 low, while new crop November soybeans gained 0.2% to $13.31 a bushel.

That took the soybean:corn ratio 2.43, its highest for more than a year, and raising the incentive for farmers to plant the oilseed rather than the grain.

And that may not be the end of the revival in the ratio from levels below 2.0 in November.

"Based on historical performance in comparative years, [new crop] soybean prices could continue to outperform [new crop] corn, despite having rallied strongly in the past eight weeks," Paul Deane Australia & New Zealand Bank said, citing comparison with 1997, 2004, 2008 and 2011.

Chinese boost

Old crop contracts did better, for corn, soybeans and wheat, recovering some of their losses of the last session.

Old crop corn got a boost from Chinese prices, which rose for the first time in eight sessions on the Dalian exchange, where the September contract added 0.4% to 2,457 yuan a tonne.

Chinese prices, the equivalent of getting on for $10 a bushel, are particularly sensitive given the hopes, unrealised of late, that the country will turn increasingly to cheaper, imported US supplies.

"The market has been waiting for nearly the entire month for the Chinese to possibly surface as a buyer of US corn but each day that goes by becomes more of a disappointment for the bull," Benson Quinn said.

"There have been a few trade houses that have indicated, that we could see Chinese buying interest if the front contract would push down towards the $6.20-a-bushel level, give or take, and maybe that is where we are heading to test out whether they are correct."

'Not a pretty-looking chart'

Chicago's May corn lot edged 0.1% higher to $6.31 ΒΌ a bushel.

Frankly, any rise may be seen as a victory for bulls give the sharply-deteriorated technical picture.

The last session saw the May contract complete the surrender, all in the space of a week, of its major moving average lines, closing below the 100-day moving average, which comes in at a little over $6.37 a bushel.

Furthermore, it closed at its lowest since a January downswing, and below an uptrend line extending from December and January lows.

"Not a pretty-looking chart for corn," Mike Mawdsley at Market 1 said.

"Looks like traders are selling out expecting a bearish acreage report, and could make for a wild day on Friday."

'Water supplies depleted'


gained more, up 0.2% at $6.41 a bushel for May, amid lingering concerns of European drought, which gained a reminder on Wednesday when the UK's Environment Agency watchdog extended a drought warning to parts of Yorkshire in northern England.

"Another dry month has left river levels and underground water supplies depleted," the agency said.

Paris-based consultancy Agritel said: "On a climatic point of view, things are slowly getting worse in Western Europe where there is still no rain on the forecast."

Furthermore, damage from last month's cold snap "seems to be more important than initially estimated in Europe, with damage in Germany that wasn't taken in account until now".

And while US winter wheat has basked largely in warm wet weather until now, even this may change, with colder weather on its way, with some small risk of frost in sensitive areas.

'European wheat not competitive'

Furthermore, there is the potential for a boost from US grain inventory data also due on Friday, which could see signs of livestock feeders switching increasingly to wheat from expensive corn.

"There is a chance that the quarterly stocks figures could finally indicate wheat disappearance due to increased feeding," Benson Quinn said.

"This shift would likely be minor, but perhaps telling."

And, staying on the demand side, Egypt gave a reminder of end-user interest by issuing its latest tender late on Tuesday, which is expected to highlight the competitiveness of US wheat.

"European origin wheat is not competitive for now as prices have risen much more than in other places since the end of the cold wave," Agritel said.

Paraguay caution

Still, soybeans remained at the top of Chicago's pile, adding 0.5% to $13.76 a bushel for May in expectation of the oilseed coming out well from Friday's US acreage data, besides continued downgrades to South American crops.

Paraguay's UGP producers' association hardly hurt by forecasting the domestic drop at 4.3m tonnes, down some 50% year on year.

Soybeans also have proven demand from China, which on Tuesday unveiled the purchase of a further 120,000 tonnes of US soybeans.

Elsewhere in the oilseeds complex,

palm oil

edge 0.1% higher to 3,483 ringgit a tonne in Kuala Lumpur, but, signally, failed to match am intraday one-year high set in the last session.

A sign of a tiring rally? "We think the palm prices may go through some profit-taking activities," Kerr Chung Yang at Phillip Futures said.


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