(Agrimoney) – There are, many Christian denominations say, 12 days of Christmas.
And ag investors have had to wait until the penultimate one for grain futures to show anything like a decent gain.
Tuesday bought a more bullish feeling to many markets as the concerns over China which overhung the last session in particular subsided.
OK, Shanghai stocks extended their losses this time, but by a modest 0.3%, compared with the near-7% slump on Monday.
And damage in other Asian stock markets was limited too, to 0.4% in Tokyo, and 0.7% in Hong Kong, while Seoul stocks gained 0.6%, helping foster a 0.7% bounce in London shares in early deals.
China influence
In China, ag markets were at least largely stable, if not hugely positive, with May soybeans, for instance, nudging 3 renminbi higher to 3,614 renminbi per tonne on the Dalian exchange, having set a contract intraday low of 3,571 renminbi per tonne in the last session.
Dalian corn for May did add 1.1% to 1,912 renminbi per tonne, but losses were seen in the likes of cotton andsugar.
And with China concerns sidelined for now, that allowed investors to focus on some other news in the sector which is not, all, so negative.
Hedge fund selling spree
Take the Commodity Futures Trading Commission data out overnight, for instance, which showed hedge funds ramping up their net short positions in ags, turning net short again in fact on the top 13 US-traded contracts, from corn to cattle, for the first time in six months.
Short positions exceeded long holdings by 8,415 contracts as of last Tuesday, a change of 118,181 lots week on week.
While underlining the extent of negative feeling around on agricultural commodity prices, the data also question whether the short position is looking a bit “crowded”, and whether speculators might be more reluctant to put in fresh short bets at these price levels.
This is particularly the case for grains and the soy complex, in which hedge funds held a combined net short of nearly 278,000 lots, not far from the record 305,000 lots reached in May.
‘Bullish report’
“A bullish [CFTC] report could offer some support as funds were notably short wheat and soybeans,” said Benson Quinn Commodities.
And the data on corn “showed funds piled into the short side”, the broker said, adding that “this could offer some support” to prices.
Still, it has to be said that wheat was somewhat recalcitrant nonetheless, rebounding a modest 0.2% to $4.59 ¼ a bushel in Chicago for March delivery as of 09:45 Uk time (03:45 Chicago time), and remaining within sight of the five-year low of $4.51 ¼ a bushel set a month ago.
‘Overall outlook is improved’
While there are ideas that a recent cold snap did hurt wheat in the former Soviet Union – Commodity Weather Group has estimated damage at 10-15% of the Ukraine crop and 10% in Russia – others have taken a more benign view.
“Many analysts have backed off their concerns for Ukraine and southern Russia,” Benson Quinn said.
“Apparently recent snowfall fell just in time to protect the crop from this week’s harsh temperatures.
“Areas of central Russia are still at risk, but the overall outlook is improved.”
Separately, UkrAgroConsult on Tuesday lifted by 1m tonnes, to 14m tonnes, its forecast for Ukraine wheat exports in 2015-16, factoring in a harvest of 24.8m tonnes and seeing stocks end the season at 2.84m tonnes.
US wheat condition
Meanwhile, as far as the US goes, separate data overnight was somewhat downbeat too, showing improvements over the past month in the condition of crops in Kansas, the top wheat-growing state, and Oklahoma to readings above those a year ago.
In Kansas, 54% of the winter wheat crop is rated “good” or “excellent”, with the Oklahoma figure at 77%.
There is also some comment over problems in France loading 180,000 tonnes due to Egypt, the top importer of the grain, amid worries over letters of credit.
Paris wheat for March, having set a 15-month closing low to the last session, at least nudged 0.2% higher to E171.25 a tonne in early deals.
‘Very impressive’
Back in Chicago, rival grain corn fared better, adding 0.6% to $3.53 ¾ a bushel for March, rebounding from a contract closing low to the last session.
The CFTC hedge fund positioning data showed a particular sell-down in the grain, with the net short soaring 54,000 lots to 136,111 contracts, among the largest in the past two years.
That offset some of the disappointment from Monday’s data showing US corn exports last week at 325,000 tonnes, well below trade expectations, and below the 575,000 tonnes shipped the week before.
And this at a time of strong exports from rival Brazil which came in at 6.29m tonnes for December, up from 4.76m tonnes in November and 3.41m tonnes in December 2014, and a figure termed “very impressive” by Terry Reilly at Chicago broker Futures International.
South American export disappointment
Soybeans, meanwhile, added 0.7% to $8.61 ¾ a bushel for March delivery, helped by a 1.0% gain to $266.90 a short ton in March soymeal futures.
Brazil’s soy export data were less impressive, booting hopes for the US, with 731,000 tonnes shipped last month, “less than expected”, Mr Reilly said, if above the 139,000 shipped in December 2014.
Brazilian soymeal exports were, at 1.04m tonnes, below the 1.13m tonnes shipped in December, although up from volumes of 870,000 tonnes in December 2014.
Meanwhile, Argentina said it had also been disappointed with its pace of exports, after dropping its export tax on soybeans by 5 points to 30%.
“We were expecting that more stock reserves would have been sold by this point,” said Ricardo Negri, secretary for agriculture, livestock and fisheries.
Crush data
Also out overnight were data on the US soybean crush for November, which came in at 165.8m bushels, some 900,000 bushels below the average trade estimate.
Still, markets have shown a habit of reacting to low crush data in terms of the lower level of products implied, rather than looking at them through the lens of depressed demand.
Certainly, soyoil stocks, at 1.914m pounds, were 96m pounds below forecasts, and down from the 1.991m pounds in October too.
