(Agrimoney) – One big worry for ag bulls at the close of the last session was that the fall of soybeans back below the psychologically important $10-a-bushel mark would trigger a bigger decline.
Darrell Holaday at Country Futures, for instance, said that such a close, “below critical technical support levels… will point to a major slide in the soybean complex from a technical standpoint”.
Benson Quinn Commodities, noting “poor technical closes” to the last session, said that “the soybean bears appear to be back in control of the market”.
‘Looking for bigger stocks’
As an extra negative, talk remains more upbeat over South American plantings.
“Brazil has over 85% of their beans planted, Argentina is just shy of 50% complete and the weather looks good for them to get the balance of the crop in over the next week or so,” CHS Hedging said.
Earlier this week, of course, US Department of Agriculture staff in Buenos Aires, citing extra sowings, pegged the 2014-15 Argentine soybean harvest at 57.0m tonnes, 2.0m tonnes above the department’s official estimate.
And there is some speculation, on the US front, that slow soymeal exports may prompt the USDA, in its Wasde crop report next week, to raise its estimate for soybean stocks at the close of 2014-15, with lower ideas over meal exports meaning less beans need to be crushed.
“Pre-report poll of analysts’ estimates are not out yet but there is some talk that USDA could raise carryout 40m bushels to 490m bushels,” Benson Quinn Commodities said, if cautioning that revisions may not be enacted fully until the January Wasde.
“The market is looking for bigger stocks, whether they come in the US or from South America,” the broker added.
Dollar strength
As an extra negative for all dollar-denominated ags, the greenback extended its rise, adding 0.2% to set a fresh four-year high against a basket of currencies.
A stronger dollar undermines prices of dollar-denominated commodities by making them less affordable to buyers in other currencies.
But at least Brent crude was offering bulls some comfort, in gaining 0.8% to $71.08 a barrel as of 09:15 UK time (03:15 Chicago time), giving some support to biofuel-related ags.
These include soyoil, a basis for biodiesel, which gained 1.1% to 31.62 cents a pound for January, recovering from Tuesday’s session, when it set a contract low of 31.17 cents a pound.
Rising prices
That helped rival vegetable oil palm oil recover to stand up 0.8% at 2,160 ringgit a tonne, having opened well in negative territory, at 2,126 ringgit a tonne.
And it propped up soybeans themselves too, if not enough to send January futures back above $10, with the January lot adding 0.2% to $9.97 ¾ a bushel.
It was also a help that prices of soybeans in China, the top importer, did not overnight match Chicago’s losses of the last session, with the Dalian’s May futures contract easing a more modest 0.5% to settle at 4,290 yuan a tonne.
‘Shine coming off’
Back in Chicago, wheat, the market leader of late, failed to rediscover positive territory – indeed dropping below its own psychologically-important mark, in falling 0.7% to $5.99 ¼ a bushel.
The decline was attributed in part to some pullback in concerns over Russian exports, and to some extent over fears about cold weather too.
“The shine seems to be coming off the political/weather related Russia story as traders digest the decisions made so far,” Benson Quinn Commodities said, noting the lack of response in prices in the former Soviet Union itself.
“Black Sea values really haven’t reflected any major concerns related to supply from that region.”
‘Uncertainty is priced in’
Terry Reilly at Country Futures said: “The fact is traders seem to easing on the threat over a slowdown in Russia exports.”
He noted pressure Russia’s grain industry is applying on the government not to restrict grain exports.
The last session’s drop in Chicago futures, and close by Paris contracts well below intraday highs, “suggests that Russian uncertainty is priced in”, said Richard Feltes at RJ O’Brien.
Not that all observers were quite so negative.
At Commonwealth Bank of Australia, Tobin Gorey said that the conclusion from recent weather “must be that there has been ‘some’ damage to former Soviet Union wheat crops.
“Traders though will only know how much damage the crop has suffered in the northern hemisphere spring, so the market will simply have told hold a premium.”
Tender result
One big question mark for later in the day is the outcome of the latest tender by Egypt’s Gasc grain authority, which may give an indication of the availability of Russian wheat, besides offering price comparison between origins.
“Not that the US can get in that game with the dollar as strong as it is right now,” CHS Hedging said.
French wheat is favourite to win.
Record ethanol production?
Also on the slate for later are weekly US ethanol production data, which are expected to come in strong again, implying strong demand for corn from this segment.
“Record ethanol production is expected to continue with the cold temperatures, plentiful supplies from the big US crop and healthy margins,” CHS Hedging said.
Benson Quinn Commodities said: “Expect to see another weekly grind that rivals the record levels of the prior week,” noting that in the US corn cash market “typically, the best bid has been the ethanol producer”.
“Ethanol production remains quite profitable on the spot month trade. Ethanol production in the deferred timeframe is also profitable, but not nearly as good,” the broker added.
Nonetheless, corn, lacking much of its own story, trod as has been its habit of between soybeans, its rival in sowings, and wheat, a main rival in feed, standing down 0.1% at $3.81 a bushel for March delivery.
