(AgriMoney) – Grains and oilseeds recovered some of their gains of the last session, their last five sessions in fact, with the market afraid to travel too far in a downward direction without clear signals that US harvest prospects have not weakened even further.
Indeed, investors are walking something of a tightrope, with price-negative thoughts very much alive, sharpened by memories of what happened to prices at this time in 2011.
Mike Mawdsley at Market 1 became the latest to issue a reminder of the fall in crop prices which happened last year, just when everyone was getting comfortable about higher values.
“Funds are long. If they choose to leave markets can go down. Last year we lost $2.27 a bushel in cornand $3.13 in soybeans between the end of August and the first part of October,” he said.
And even the most bullish investors acknowledge the weight from harvest pressure, which undermines prices by producing a temporary spike in supplies.
“It is difficult to rally during harvest and old crop/new crop prices will soon converge,” Mr Mawdsley said.
“Many think $9-plus a bushel and $19-plus are in the cards for corn and soybeans respectively. But it may not occur until after harvest.”
‘First yields very disappointing’
Still, moving too far into negative territory is a risk too, with harvest results for corn hardly pointing so far to an idea that negative yield thought are misplaced.
“The first echoes of US yields are very disappointing,” consultancy Agritel said.
Meanwhile, on the demand front at least US ethanol plants have been increasing their demand for the grain, although more on that will be seen with weekly official output and inventory data later.
Taiwan signal
And, for soybeans, demand seems to be ticking over, with the US on Tuesday unveiling the sale of a further 110,000 tonnes to China, while Taiwan has also purchased 178,000 tonnes of soybeans, from Brazil and the US.
What “was interesting” was that this purchase extended out to July and was for more than one cargo”, Benson Quinn Commodities said.
“Taiwan traditionally buys one cargo at a time and no more than two-to-three months out.
“This is second purchase in less than a week in which Taiwanese buyers booked numerous cargoes for shipment up to one year in advance.”
‘Precariously bearish’
This may mean that Taiwanese uers at least believe that further price rises are on their way.
But investors remained less sure, with even technical signals proving mixed.
Benson Quinn Commodities noted that in the last session, soybean futures “posted a lower low, lower high and with market opening and closing at near same price levels, indicating much uncertainty in the marketplace.
In fact, this so-called “doji” pattern on a Japanese candlestick chart “seems precariously bearish”, the broker added
“But the technical trader will be looking for verification of market weakness in coming sessions with closes or tests of key support levels.”
Friday meeting
As an extra reason for investors to think twice about extending a trend too far, it is the end of the month, a period when funds often tidy up positions, take profits and often reverse their prevailing investment flows, a factor which seemed alive in the last session.
Furthermore, Monday is a US holiday, meaning a long weekend which is often a cause for market caution.
And Friday brings the start of the annual meeting of central bankers at Jackson Hole in Wyoming, at which there are some ideas that Federal Reserve chairman Ben Bernanke may announce economic stimulus measures.
Indeed, what movement there was on external markets was broadly positive, with shares rising 0.4% in Tokyo, 0.6% in Seoul and 0.1% in Singapore.
Russian export curbs?
What also helped wheatstage an attempt for its first positive close in six sessions was another meeting on Friday, of Russian farm officials, which many believe will bring grain export curbs after a drought-depleted harvest.
Furthermore, Saudi Arabia launched a tender for 550,000 tonnes of wheat, a further sign of demand, after purchases by the likes of Jordan, Tunisia and Egypt of late.
December wheat added 1.1% to $8.84 ¾ a bushel in Chicago as of 09:15 UK time (03:15 Chicago time) in expectation of some action.
“Expect Ukraine to implement some type of tariff structure, if the Russians implement a shift in export policy,” Benson Quinn Commodities said.
Wheat’s performance helped corn too, which added 0.6% for December delivery to $8.00 ¼ a bushel.
And November soybeans gained 0.7% to $17.33 ½ a bushel.
‘On hold’
Not that many investors foresee a sustained upward trend setting in, just yet anyway.
“In the bigger picture, price adjustments this week are nominal relative to historically high price levels—confirming that row crop markets in particular are on hold awaiting more clarity on 2012-13 supplies and whether current prices are achieving necessary rationing,” Richard Feltes at RJ O’Brien said.
Agritel said: “The markets could still remain cautious until next week.”
