(Agrimoney) – Oil prices managed to curtail their losses a bit this time.
Brent crude for January stood down 0.3% at $70.30 a barrel in late deals.
But that wasn’t so much of a help to agricultural commodities this time, although soyoil, a major raw material for biodiesel, did stand 0.8% higher at 31.53 cents a pound in Chicago for May delivery.
Still, this was likely largely down to the strong performance by rival vegetable oil palm oil in Kuala Lumpur, jumping 1.4% to 2,172 ringgit a tonne.
Palm’s rise was on “ideas that production would be down 13-14% in December versus November, which is down more than the seasonal 5-9% decline”, said Anne Frick at New York-based Jefferies.
Not that Ms Frick was so upbeat about soyoil, flagging market “concerns about Congress’ inability to pass a tax extenders’ package, containing the re-establishment of the biodiesel tax credit, in light of the threatened presidential veto”.
‘Plenty of cheap grains’
Indeed, broader grain market sentiment was downbeat with Benson Quinn Commodities flagging price falls that had “fundamental bears’ sighing with relief that we seem to be getting back to trading the more than ample world carryouts.
“There is, or will be, plenty of cheap corn, wheat and soybeans in the world,” the broker said.
Furthermore, the dollar remained strong, hitting a five-year high earlier against a basket of currencies, and so making dollar-denominated exports such as many commodities that much less competitive.
“A new five-year high in the US dollar this morning does not help US chances to be competitive in global export market,” one broker said.
‘Corn liquidation continues’
In fact, Benson Quinn Commodities, saying that “money flow is also on the radar today” noted that “as the year comes to a close the chatter is getting louder that the funds are getting out of the grain and soybean markets.
“Neither the long, passive traders nor the short, speculative traders have had much luck this year.”
An exit of cash would appear a particular threat to corn, given the substantial net long, of more than 200,000 contracts, that hedge funds have built up again, as unveiled by regulatory data on Monday.
“Corn liquidation continues in the wake of Monday’s Commodity Futures Trading Commission report showing the largest managed fund corn long since late May,” Richard Feltes at RJ O’Brien said.
Weaker ethanol data
Indeed, corn futures for March delivery were 0.4% lower at $3.79 a bushel, earlier falling below their 40-day moving average for the first time since October.
Weekly US ethanol production data offered little solace, in falling 20,000 barrels a day from the previous week’s record high to reach 962,000 barrels a day.
And US ethanol inventories rose too, by 217,000 barrels to 17.29m barrels.
The weaker-than-expected production number – some analysts had expected a fresh record high – helped ethanol itself extend gains, to stand 3.2% higher at $1.726 per gallon.
‘Excessive rains’
More helpful to corn was the weather forecast for Brazil.
“Excessive rains are seen this week causing some planting delays with slightly above average temperatures into Saturday,” CHS Hedging said.
Furthermore, the US Department of Agriculture announced the sale to Mexico of 196,000 tonnes of US corn, showing some demand even against a rising dollar.
‘Notably off-line’
Once again, where were no US sales of soybeans to China, the top importer of the oilseed.
In fact, China is “notably off-line on soy buying, as they face huge soybean unloads the next six weeks,” RJ O’Brien’s Richard Feltes said, also noting “negative crush margins”.
Also on the negative side, there was the hurdle represented by the formation of a so-called “head and shoulders” chart pattern in the January soybean contract.
This “suggests a downside objective of $9.40 a bushel”, US Commodities said, implying a drop to levels not seen for two months, and only rarely over the last five years.
Soybeans certainly fared worse than corn, falling 0.8% to $9.95 ½ a bushel for March, and dropping below their 50-day moving average for the first time since October.
Wheat tender results
The big question was how wheat would fare, with some weather fears deemed to have been overplayed, and after the release of tender results by Gasc, the Egyptian grain authority, which showed US supplies well out of contention, at $286.55 a tonne excluding freight.
The winning bids, from Romania and Ukraine, were around $271 a tonne including freight.
The result was certainly no cause for celebration among wheat bulls.
But a dearth of Russian offers to Gasc did take futures off early lows, indicating that statements over curtailments on quality grounds may indeed be provoking concerns among merchants.
Chicago wheat for March dropped 2.1% to $5.90 ½ a bushel, but remained above intraday lows.
Paris wheat for January stood down 1.6% at E187.00 a tonne.
‘Prices to bounce’
Among soft commodities, arabica coffee recovered a little poise after its near-4% plunge of the last session, adding 0.3% to 183.90 cents a pound in late deals in New York.
The rebound was helped by bullish comment from Commerzbank, which downplayed data showing a 150,000-bag rise, year on year, in Brazilian coffee exports last month, despite a drought-hit 2014 harvest.
“Although global production suffered considerably from the drought in Brazil, this has so far been reflected in lower world market supply only to a limited extent,” the bank said.
However, this may be down largely to the release of stocks left over from 2013 harvests.
“If the effects of the drought are still felt on the next Brazilian crop – as is to be expected – the supply situation will doubtless tighten noticeably.
“We expect the arabica price to soon return to above the 200 cents-per-pound mark.”
