(Agrimoney) – Grain futures eased in early deals, as the urge to take profits at the end of a somewhat volatile week won out.
A return by the dollar to making, small, headway did not help, in making dollar-denominated exports, such as many agricultural commodities, that much less competitive.
Brent crude eased too, by 0.6% to $69.26 a barrel as of 08:45 UK time (02:45 Chicago time), casting a bit of a shadow, although it has yet to come near challenging Monday’s five-year low of $67.53 a barrel.
And, after all, the prospect of the US Department of Agriculture’s next monthly Wasde crop report has emerged on the horizon, with brokers forecasting increases to estimates for US stocks of corn and wheat at the close of 2014-15 by 19m bushels to 2.03bn bushels and 10m bushels to 654m bushels respectively.
Still, for soybeans, a decrease is expected, by 23m bushels to 427m bushels.
‘Too early for price freefall’
And, indeed, grain price falls were not extreme in early deals, especially for soybeans, which eased 0.5% to $10.05 ¾ a bushel for January delivery. Nudging below their 40-day moving average, but staying well above the 50-day line.
“Regarding soybeans, it’s too early for price freefall as the bulk of the South American growing season still ahead,” said Richard Feltes at RJ O’Brien.
It is late January when price drops are more likely, assuming weather threats in Argentina and Brazil have not emerged.
Furthermore, data on soybean use, including Thursday’s strong weekly US export sales data, have cheered bulls.
Mr Feltes said: “There is a risk that multi-year low prices may spur Chinese soybean stockpiling,” leading potentially to imports of 80m tonnes this season, rather than the 74m tonnes being forecast by the US Department of Agriculture.
‘Like a ball under water’
At Commonwealth Bank of Australia, Tobin Gorey flagged technical support for futures.
“Soybeans are like a ball under water – they keep resurfacing. And the water line is at $10 a bushel,” he said.
“Traders seem reluctant to become too bearish before next week’s USDA crop report.”
Indeed, one US broker said that “it may be that the fresh shorts that got into the market from the soybean head-and-shoulders pattern”, a negative chart signal which emerged a few days ago, “are now bailing on the position and are part of the rally”.
Soyoil also offered some support in adding 0.1% to 31.74 cents a pound for January delivery, defying a fresh decline in rival oilseed palm oil by 0.4% to 2,157 ringgit a tonne in Kuala Lumpur.
Palm’s decline has been attributed largely to the fresh falls in Brent crude, with biodiesel plants a major buyer of the vegetable oil.
‘Wrought with political peril’
Wheat’s decline was modest too, with traders willing to remove some, but not all, the risk premium injected in recent weeks on fears of a Russian export squeeze, which now seems off the table for a while, and of poor crop weather in the likes of the former Soviet Union, Argentina and Australia.
“We think the wheat price highs are in for now,” given the idea that Russian export curbs are “off the table”, Mr Feltes said.
“However, the situation is fluid and wrought with political peril if the rouble – pressured by falling crude oil, Western sanctions and the cost of Ukrainian incursions – plummets further, triggering a corresponding surge in internal wheat prices,” he added.
High wheat prices could prompt the government to deter export demand in order to curtail food inflation, and the threat of a grumbling population.
Wheat for March eased 0.3% to $5.87 ¾ a bushel in Chicago.
‘Exports are improving’
It was corn which fared worst of Chicago’s big three, dropping 0.9% to $3.86 ¼ a bushel for March, although only after strong gains of the last session.
The decline took the contract into a technical battle to remain above its 10-day and 20-day moving averages, both around that level.
While the idea of taking profits ahead of the weekend may prove appealing, bulls have some comfort in the lightness of producer selling, as reported by a number of brokers, and strong demand for US exports, as confirmed in data yesterday.
CHS Hedging said: “This is about the third week of fairly decent export sales, suggesting that the US corn exports are improving despite a strong dollar.”
Export pace measures
Brian Henry at Benson Quinn Commodities said: “While weekly corn sales have lagged, sales of the last couple of weeks have come in roughly double the 561,700 tonnes that are needed” to ensure shipments meet the USDA estimate for the full 2014-15.
“Sales now sit at 51.2%” of the USDA forecast for the full season, which ends in August, although still behind an average of 54.2% at this time of year.
Interestingly, export sales are running 10% behind those a year ago, but actual shipments are 27% ahead, with the USDA forecasting a 9% decline for the full year, ADM Investor Services noted.
Sowings talk
Among soft commodities, cotton for March eased 0.1% to 60.35 cents a pound in New York, again proving reluctant to trade too far from the 59-60 cents a pound range.
CBA’s Tobin Gorey noted that “market chatter – possibly because of the lack of anything else to discuss – is now turning to the topic of just how much less cotton will be planted in the northern hemisphere next year”, a topic which emerged, for instance, in Commerzbank’s 2015 price forecasts.
Still, “the market still lacks an impetus to trend one way or another”, Mr Gorey said
