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Evening markets: Corn futures rebound, after rout attracts commercial buyers

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This time, it was grains’ turn to outperform shares.

 

Not that shares fared badly, with Wall Street stocks nudging to fresh record highs, as did European shares, with the pan-European Stoxx 600 index rising as much as 1% to a record high of 424.90.

 

But corn, a big loser of the previous session, managed gains of a bigger order, recovering its substantial losses of the last session, and adding a bit extra on top.

 

‘Active in buying’

The Chicago March corn contract closed up 3.7% at $3.89 ¼ a bushel, as end users took note of the substantial head-scratching around over the last session’s losses, and took advantage of the lower prices while they were still there.

 

After all it is holiday weekend in the US, which celebrates Martin Luther King day on Monday, meaning three days without trading.

 

Commercial investors are proving “active in buying due to the dip on Thursday”, said Terry Reilly at Futures International, if noting that even after the last session “Ukraine and Argentina corn appear to be cheaper than US Gulf.

 

“A large Brazilian meat company,” ie JBS, “bought Argentina corn yesterday,” to the tune of 70,000 tonnes apparently.

 

Corn vs wheat

Still, by another measure, the comparison with Chicago wheat, corn did look cheap, with its discount March basis reaching a 16-month high earlier of $1.90 ½ a bushel.

 

“The price differential between wheat and corn is almost $2,” said Commerzbank.

 

“The last time it was any higher was in the summer of 2018, when hot and dry conditions in the wheat-growing areas of the US Midwest fuelled fears of crop outages.

 

“Though there are similar concerns in Australia at present, these should already be sufficiently priced in, as the crop estimates for Australia have already been revised significantly downwards by market observers.”

 

‘Winter storm’

The US weather outlook didn’t do any harm to corn either, in bringing wintry weather to areas including those where substantial corn is still standing in the field, awaiting a spring harvest.

 

“The US will see a winter storm over the weekend,” said Terry Reilly at Futures International, although nothing that “a portion of the western Great Plains will miss out on snow coverage”.

 

Maxar noted that “snow cover has increased cross the west central Midwest over the past week”, although the deepest snows remain “limited to the eastern Dakotas, northern Minnesota, and northern Wisconsin.

 

“Snow is expected this weekend across the north eastern Plains and much of the northern Midwest, which will increase snow depths, particularly in northern Iowa, Minnesota, Wisconsin, and Michigan.

 

“Cold weather will prevail through early next week across the north central US,” although “much warmer weather is expected later next week”.

 

‘Double cropping with be down’

Meanwhile, weather in Brazil, for the sowing of the safrinha corn crop needed to replenish the country’s export-drained supplies, and eliminate the need for JBS and peers to turn to imports, may be less than ideal, depending on who you ask.

 

“We are seeing reports that double cropping with be down in Brazil which in turn will mean less corn competition for the US in the global market,” said Karl Setzer at Agrivisor.

 

(Safrinha corn means doubled cropping, in being grown on land vacated by the ongoing soybean harvest.)

 

Maxar said that in Brazil “rains in northern areas through next week should improve moisture, but dryness will expand again in central and southern areas”, which is where safrinha corn is grown.

 

Strike force

The wheat complex was firm too, helped by the bounce in rival grain corn, but also by some reversal in ideas that the strike by French transport workers was close to conclusion.

 

Ie, French wheat exports remain under threat from an inability to get crop to port.

 

“Wheat markets consolidate as French wheat values appear steady, better as protesters vow to continue their strike through the weekend,” said Benson Quinn Commodities.

 

Paris wheat for March in fact ended up 0.5% at E194.00 tonne.

 

‘Russian posturing’

Benson Quinn Commodities also noted that some jitters remained over Russian supplies after Moscow’s threat to impose a quota on shipments.

 

“Russian posturing may move more buyers toward” rival business, notably in fact Ukrainian, the broker said, flagging reports that importer Bangladesh “is not willing to get caught up with export curbs”.

 

CHS Hedging also noted that a report from Sigma Conseil that pegged the French soft wheat planted area for the 2020 harvest “down 10% at a 19-year low due to rains delaying planting”.

 

Chicago soft red winter wheat for March ended up 1.0% at $5.70 ½ a bushel, recovering most of ground lost in the last session.

 

Kansas City hard red winter wheat for March did the same by rebounding 2.0% to $4.94 ¼ a bushel, returning to its outperformance of wheat which historical analysis from Moore Research has been a consistent feature of this time of year.

 

Technical boosts

Soybean futures for March, meanwhile, put in a more modest gain of 0.6% to $9.29 ¾ a bushel.

 

But this after proving relatively resilient in the last session.

 

Furthermore, Friday’s recovery represented a clear “outside day, up”, a positive chart sign, when the contract trades beyond the range of the previous session but ends higher.

 

Also, the contract recovered above 40-day, 50-day and 100-day moving averages.

 

Palm oil vs soyoil

Buoyancy was helped by a decent session for soyoil, which added 0.9% to 33.35 cents a pound for March delivery, after earlier bouncing off its 200-day moving average some 0.6 cents lower.

 

Interestingly, soyoil’s gains contrasted with a(nother) negative session for rival palm oil, which ended down 1.7% at 2,837 ringgit a tonne in Kuala Lumpur for the April contract, now the benchmark lot.

 

But then maybe that divergence may set a trend for now, as India, which has clamped down on Malaysian palm oil amid a political dispute, seeks alternative supplies of vegetable oils, of which it is the world’s top importer.

 

“India is turning its back on Malaysian palm and buying more Indonesian,” said Benson Quinn Commodities.

 

“They may also be sniffing around US soyoil as a replacement. Look for palm-soyoil spreads to lean bean oil’s direction.”

 

Cococo

Among soft commodities, cotton had a strong session, adding 1.5% to 71.25 cents a pound in New York for March delivery, also helped by ideas of a bit of bargain hunting, after prices fell in the last session despite decent weekly US export data.

 

And New York cocoa futures for March soared 3.1% to $2,797 a tonne, a 20-month closing high, as worries over West African output trumped some disappointing quarterly grind data, as reported elsewhere on Agrimoney.

 

Arabica coffee swam against the tide in settling down 0.1% at 112.15 cents a pound for March, although signally closing above its 100-day moving average, which it fell below earlier for the first time in two months.

 

Brazil’s CNC producers’ group noted the “low volatility” in arabica futures prices, “showing a lack of interest on the part of operators at this time”.

 

Trading volumes are also weak.

 

More positively for prices, Cepea flagged the potential for some improvement, given ideas that this year’s Brazilian harvest will fall short of 2018’s record high.

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