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Morning markets: Will corn futures build on their latest, modest triumph?

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Corn futures passed a couple of milestones in the last session.

 

The spot March contract, in adding 1.4%, not only closed ahead of the psychologically-important $3.50-a-bushel mark, it also finished back above its 50-day moving average, for the first time since October (and only the second time since July).

 

Did this open the door to higher prices, and an end to the gentle decline and low volatility that has typified the market for the past five months?

 

‘Something is bound to happen’

 

“Something is bound to happen at some point,” said Mike Mawdsley at First Choice Commodities.

 

That said, the rise in the last session was “on no news, just money flow”, on his assessment.

 

Certainly, there was not enough purchasing pressure around in early deals.

The Chicago March contract stood down 0.1% at $3.52 ½ a bushel as of 09:30 UK time (03:30 Chicago time), although remaining above its 50-day moving average.

 

Data later

 

Whether it stays at these levels later may depend on the outcome of weekly US ethanol production data, which had been supportive until late.

 

Were the downturns of the past couple of weeks down to more than cold weather and natural gas price rises (and maybe a touch of that holiday feel)?

 

Certainly, the revived strength in oil prices, with Brent crude remaining only just below $70 a barrel (down 0.3% on the day at $69.17 a barrel), looks helpful to biofuel groups - as does a revival in prices of one of the main byproducts, distillers’ grains (DDGs) too.

 

“DDG business has been deemed good as the container market as well as trains for export find willing buyers,” Benson Quinn Commodities said.

 

DDG price gains

 

As Agrimoney noted on Wednesday, DDG prices at US Gulf ports were priced by the US Grains Council at $211 a tonne as of January 11, up nearly 50% year on year, and the highest since July 2016.

 

“Merchandisers are reporting prices to Vietnam are the strongest of Asian destinations,” the USGC said in its latest DDGs market report.

 

In the US itself, “DDGs retain a $0.79 per-protein unit cost advantage over cash soymeal,” the rival high protein feed ingredient.

 

Export watch

 

There is also some hope that recent dollar weakness - which saw the greenback touch a three-year low of 90.1 against a basket of currencies in the last session, before staging a revival – may boost US corn exports, although data on that will not be released until Friday.

 

“US corn exports have been lacklustre of late to say the least,” said Tobin Gorey at Commonwealth Bank of Australia.

 

“We are waiting to see if prices at these lower levels, aided by a weaker greenback, can spur more US exports.”

 

On a shorter-term basis, CHS Hedging noted that traders are watching for US freight values “to ease as weather is expected to warm up, headed into the weekend, and help logistics”.

 

‘Pop-up shower’

 

And then there is the South America weather factor, in particular the dryness affecting parts of Argentina, but also ideas that Brazilian safrinha corn sowings may fall well short of last year.

 

“Trade chatters about Argentina not having perfect weather, however, some think only 10-15% of Argentina corn and soybean areas are lacking enough moisture to cause stress in the short-term,” CHS Hedging said.

 

“The rest of Argentina looks to have sufficient moisture through the end of the month, trending drier again in early February.”

Benson Quinn Commodities talked of a “pop-up shower” which moved through northern Argentina overnight Tuesday, “providing temporary respite for soybeans in Cordoba”.

 

Palm bounces

 

Still, soybean futures look to have got well over that, with the Chicago March contract nudging 0.1% higher to $9.69 ¼ a bushel, setting course for what would be a fourth successive day of gains.

 

It was helped by a revival in palm oil, of 0.4% to 2,496 ringgit a tonne in Kuala Lumpur, recovering from a tumble in the last session over concerns about the European Parliament’s vote to ban palm oil in biodiesel from 2021.

 

More cheery for palm oil bulls was a forecast by respected analyst James Fry, of LMC International, that world palm oil output will rise by 5m-6m tonnes this year, less than the 8m growth achieved in 2017.

 

Indonesia’s 2018 output will reach 40m tonnes, and Malaysia’s come in above 21m tonnes, Mr Fry said.

 

Export outlook

 

The Malaysian Palm Oil Board, meanwhile, forecast Malaysian production at 20.5m tonnes this year, up just 600,000 tonnes from 2017.

 

And Malaysia’s exports will rise 5.1% to 17.4m tonnes this year, though a stronger ringgit will be a "challenge", said Ahmad Kushairi, the board’s director general.

 

That would be the fastest rise in shipments since 2012.

 

Rival vegetable oil soyoil gained 0.4% to 32.65 cents a pound in Chicago for March delivery.

 

Wheat open interest

 

Chicago wheat futures for March, meanwhile, edged 0.3% higher to $4.22 ¾ a bushel.

 

“Buyers might finally have emerged given that US wheat, via lower prices and a lower greenback, will have cheapened considerably over the past week,” said Commonwealth Bank of Australia’s Tobin Gorey.

 

Ideas of short covering in the grain received a little support with exchange data showing a modest 649-contract drop in open interest in Chicago futures in the last session – small, but in marked contrast to the 22,000-contract surge over the previous two sessions.

 

Meanwhile, in New York, cotton got off to a strong start, adding 1.5% to 83.35 cents a pound for March delivery, after a strong performance overnight by futures on China’z Zhengzhou exchange, where the best-traded May lot soared 1.6% to 15,455 yuan a tonne, matching its strongest finish in three months.

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