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Evening markets: Wheat futures tumble to contract low, on US export downturn

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Investors were cautioned over the potential for ag market turbulence on Friday.

 

What, with it bringing the expiration of December options in Chicago, often a time of volatility as futures prices are pulled towards levels of options open interest, against what other forces may be around.

 

And this when, the day after Thanksgiving, in a shortened session, with many US investors away, trading volumes were meant to be low.

 

As for what other market dynamics were in play, the Argentine weather outlook appeared modestly bullish (depending of course which one you believe).

 

“With Argentina dry over the past day, some traders could be buying the market,” Terry Reilly at Futures International said early in the day.

 

“Argentina will see less rain than expected bias western, central, and some southern parts of the country,” he added.

 

‘Disappointing sales’

 

However, Mr Reilly, and other observers, also flagged the depressant to values of weak US export sales data, for soybeans and wheat especially, with corn’s 1.08m tonnes at least within the range of market expectations (as reported in Agrimoney’s Markets Extra).

 

“Weekly soybean exports disappoint with China cancelling 204,500 tonnes of sales,” Benson Quinn Commodities said.

 

“Wheat export sales were disappointing with a hard red spring wheat sales net reduction.”

 

Chicago soft red winter wheat futures for March ended down 1.7% at $4.33 ¼ a bushel, a fresh contract low, little helped either by bearish comments from Societe Generale.

 

Paris wheat for March also set a contract low, in ending down 0.8% at E161.00 a tonne, weighed too by a strong official rating, of 96% good or excellent, for the French winter crop for harvesting next year.

 

Canola, corn fall

 

Soybean futures for January dropped 0.5% to $9.94 ¼ a bushel, although remaining well above a clutch of moving averages around the $9.85-a-bushel mark.

 

The protection granted to oil-heavy oilseed canola/rapeseed by a firm close for Kuala Lumpur palm oil, up 0.8% to 2,630 ringgit a tonne, also wore off, with Winnipeg canola for January down 0.5% at Can$510.30 a tonne in late deals.

 

Paris rapeseed for may shed 0.7% to E374.00 a tonne, closing back below 50-day, 100-day and 200-day moving averages.

 

Back in Chicago, corn futures fared better than wheat, but were still pulled lower by the rival grain, ending 0.7% down at $3.55 a bushel for March delivery.

 

Still, that was enough to narrow its discount to wheat to less than $0.80, March basis, compared with a July high above $1.80 a bushel, during the fears over the dent to US spring wheat prospects from drought.

 

India worries

 

Among soft commodities, cotton fared particularly well, adding 1.3% to 72.04 cents a pound for March in late deals in New York, and set for a two-month closing high.

 

The gain was helped by strong US export sales (although not export) data, and strong Chinese imports last month too.

 

Furthermore, there are growing worries over output prospects in India, where Commerzbank reported that “pest infestation has caused significant crop losses and is reducing the supply available for export.

 

“Current crop estimates are for 37.5m bales,” below figures of a record 40m bales which had been pencilled in, and prompting downgrades to export hopes.

 

“One of India’s leading cotton exporters therefore expects a reduced export supply of about 6m bales, while previous estimates came to 7.5m bales,” Commerzbank said.

 

“Consequently, the demand for US cotton from major importing countries Bangladesh, Vietnam and China should rise, and the stock build-up outside China should be somewhat smaller,” a dynamic which “suggests higher prices overall”.

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