(Agrimoney) – Corn futures seem to have set a bit of a trend.
OK, the broad commodities complex came nowhere near matching this session the 4% slump in corn last time.
But selling was most definitely in vogue.
Even as the ink was drying on a statement from Bcom that the commodities index had “returned 3.8% in March and capped an eight-month losing streak” and the index was beginning April with a slide of 1.1%.
‘Upward momentum lost’
The drop was encouraged by a reviving dollar, although the rally faded in late deals, with a strong greenback undermining value of dollar-denominated exports, such as many commodities.
And a big dent to sector confidence came from a drop of more than 4% in oil prices, leaving Brent crude back well below $40 a barrel, at $38.68 a barrel in late trading.
Which was hardly helpful to prices of ags such as raw sugar, of which values are linked to the ethanol market, and offered another reason for investors to continue a trend of selling which seems to have set in.
“The selling in the past days may be liquidation as a result of a lack of upward momentum or profit taking ahead of the end of the quarter,” said Sucden Financial.
The broker noted also the technical setback from an attempt in the last session of New York May futures to break back above the psychologically important 16.00-cents-a-pound mark, only to top out 0.01 cents short.
“At any event the upward momentum has been lost for the present.”
‘Good weather for cutting cane’
The point was echoed by Tobin Gorey at Commonwealth Bank of Australia, who said that “the market has lost momentum.
“Some investors got long because of [upward] momentum” earlier last month.
“Without it they will exit.”
Meanwhile, with April 1 bringing the start of a new cane-crushing season in Brazil’s Centre South region, the market also felt pressure from the prospect of a fresh round of sugar supplies from the major producing area.
“Weather forecasters have a drier pattern emerging in Brazil’s southern cane region over the next week or so – good weather for cutting crushing cane,” Mr Gorey noted.
May raw sugar closed down 1.1% at 15.18 cents a pound in New York.
‘Trying to form short-term low’
Arabica coffee futures fared a little better, easing 0.2% to 127.25 cents a pound, amid ideas that technical support may be lying ahead.
“The market still appears to be trying to form a short-term low as chart patterns still suggest that futures have seen a correction to the medium-term move higher,” said Jack Scoville at Price Futures
Still, the close was weak enough to send the contract back below its 200-day moving average, albeit by only 0.03 cents a pound,
It took cotton futures to really give softs bulls something to shout about, with the May contract closing up a further 1.3% at 59.20 cents a pound, closing above its 40-day moving average for the first time this year, and continuing to defy apparently bearish US sowings and export data on Thursday.
The cotton market is discussed in greater depth here.
‘Key support level’
It was also a help for the fibre that rival row crops sidestepped the commodities sell-off, and closed higher in Chicago.
That included even corn, which rebounded 0.6% to $3.51 ½ a bushel for May delivery, albeit only after setting a fresh contract low earlier of $3.47 ¼ a bushel, and despite a forecast from the International Grains Council of a strong world harvest this year.
The key this time was, from a technical perspective, that it indeed rebounded from this level, which spot corn futures have recovered from before, in June, August and September last year.
“The spot May contract is testing the key spot support level at $3.47 a bushel,” said Darrell Holaday at Country Futures.
“The technicians will use that key spot to determine the next move.”
‘Risk premium needs to be retained’
Meanwhile, there remains considerable scepticism that the huge 93.6m-acre sowings number which the US Department of Agriculture on Thursday estimated for US corn this year (and which was behind the last session’s price tumble) will actually be achieved.
In part, that is down to wet weather in the US South, an early seeding region.
“Heavy rains in the Delta will bring field work to a halt, which will likely bring planting delays”, said CHS Hedging.
And then there is the idea that prices have now reached low enough levels to persuade farmers to grow other crops.
At broker Halo Commodity Company, Tregg Cronin said: “There isn’t a great deal of follow through selling in corn yet, and some measure of risk premium needs to be retained, especially with wet weather in the Delta and already the talk of acres switching.”
‘Continue to find buying interest’
The other crops are likely to include largely soybeans, of course, for which the USDA seeding estimate was below market expectations, but which are looking more appealing thanks to the continued growth in their price relative to corn.
The much-watched November soybean: December corn futures price ratio ended the day at 2.53, around its highest for the time of year in at least a decade, and polishing the appeal of the oilseed over the grain for farmers.
“Soybeans continue to find buying interest despite a weak tone in the cash markets and hints that the recent technical support is waning,” said Benson Quinn Commodities.
Indeed, Mr Cronin flagged that “going home last night, CIF [export] bids were indicated around +35K for spot barges which would be the lowest since October 2011.
“This would compare with +76K last year and +73K on the 5-year average, underscoring the fierce competition between North and South America.”
‘Cheaper than Brazil’
On the positive side for soybeans, the cheap export basis is at least helping the US offers undercut those from rival Brazil.
“Interestingly, FOB offers out of the US Gulf last night at $347.50 a tonne compare with Brazil at $354.87 a tonne,” Mr Cronin said.
“In fact, the US is cheaper than Brazil every month through July.”
That said, Argentine was cheaper still, “showing indications around $336.85 a tonne for May shipment”.
‘Very good conditions’
In fact, wheat, which emerged with the strongest credentials from Thursday’s USDA sowings data, proved the weakest of Chicago’s big three this time, edging only 0.1% higher to $4.75 ¾ a bushel.
Spring wheat, which the USDA report showed was in for its weakest US sowings in 44 years, ended down 0.1% in Minneapolis at $5.28 ¼ a bushel for May delivery.
Sure, the weather outlook for the southern Plains continues to look unduly dry, boding ill for winter wheat, but crops in many other geographies are faring better.
“Wheat and soil moisture conditions throughout key wheat growing areas in Europe and Black Sea Region are very good,” Darrell Holaday at Country Futures said.
The French soft wheat crop was rated 92% good or excellent on Friday by FranceAgriMer, the best reading in five years.
‘Sterling support’
And Paris wheat futures, having missed out on the gains enjoyed by US peers in the last session, looked unwilling to play too much catch up this time.
Paris wheat for May ended up 0.8% at E154.00 a tonne, failing to erase all Thursday’s losses.
Still, London wheat for May actually did a bit better, gaining 1.6% to £106.00 a tonne, just £0.05 below their 50-day moving average, which they have not closed above in five months, and helped by weakness in the pound.
“Sterling has continued under pressure, reaching 80p to a E1, as the markets react to the UK current account deficit reaching a post war high and the potential impact of Tata looking to sell their UK steel plants,” UK traders at a major commodities house said.
“Weaker sterling has given some support to UK cereal prices.”
