(Agrimoney) – Wheat futures tumbled back near to $5 a bushel and soyoil plunged to its lowest in nearly six years as bears took the reins on agricultural commodity markets.
The declines were in part based on technical factors, which have been closely watched of late amid something of a dearth of news on supply and demand factors.
For instance, a drop in hard red winter wheat futures, as traded in Kansas City, to $5.34 ½ a bushel for March delivery – the lowest for a spot contract since July 2010 – was attributed largely to its continued failure to find support at what appeared from the chart as likely price floors.
“The Kansas City wheat market was poised to test key support and really expected to hold it,” Darrell Holaday at broker Country Futures said.
“It has not held and as a result the selling pressure has been significant.”
US moisture
However, fundamentals played their part too, with weather forecasts showing rains for the southern Plains, where dryness has been a bit of a worry.
“The market is anticipating moisture returning to the southern Plains later this week,” Mr Holaday said.
Not that all is ideal, with the latest run of the GFS weather model “actually drier than the prior runs have been”.
At Chicago-based Futures International, Terry Reilly told Agrimoney.com: “Colorado and some far western areas of the Great Plains are starting to raise some concerns over a lack of snowfall.
“You have had temperatures higher than 70 degrees Fahrenheit in these areas. The worry is what happens if cold temperatures come along in the second half of February.”
‘Not seeing demand we need’
Still, there was little sign of the demand that investors have been looking for at these lower prices, as a sign that lower values are boosting consumption.
“You should be starting to see more US wheat flowing into feed at these levels,” said Brian Henry at Benson Quinn Commodities.
But US feed demand will not be picked up in data for a couple of months yet.
On exports, more closely monitored, “we are not seeing the levels we need in terms of demand. And there is demand for wheat, it has been for hard red spring,” as traded in Minneapolis.
“The European Union is in the driving seat in exports,” Mr Henry told Agrimoney.com.
And, with Paris futures tumbling 3.0% to E187.50 a tonne for March delivery, amid disappointment at the lack of spillover demand yet from export curbs in Russia and Ukraine, that was only an extra pressure on US wheat prices.
‘Shorts not hurt’
Besides, there has been no pressure on investors betting on price falls to reassess their positions.
“Shorts have simply not been hurt by being short,” Mr Henry said.
Kansas City hard red winter wheat actually closed down 2.7% at $5.35 ¼ a bushel, not far from the day low.
Chicago soft red winter wheat for March ended down 2.7% at $5.05 ¼ a bushel.
Minneapolis spring wheat, helped by being in greater export demand, outperformed in dropping a more modest 1.7% to $5.66 ½ a bushel for March delivery.
‘Spread getting hammered’
Pressure may also have come from spreads too, with talk of wheat being the butt of long corn/soybean-short wheat bets.
“The wheat-corn spread has been getting hammered, adding fuel to the fire,” Futures International’s Terry Reilly said.
Not that this could spare corn futures from a drubbing too.
Prices were undermined in part by a weak performance by ethanol futures, which tumbled 2.3% to $1.393 a gallon in Chicago for March delivery, squeezing margins for producing the biofuel.
Ethanol was hurt by data showing US stocks of the biofuel rising 224,000 barrels last week to 20.63m barrels, the highest figure since December 2012.
‘Bearish technically’
Meanwhile, the speed of the Brazilian soybean harvest has raised ideas for sowings of safrinha corn seeded on land cleared by the harvest.
“Soybeans are coming out of the ground faster than was expected, and we think a large amount of corn is being planted behind it,” Mr Reilly said, adding that Brazilian corn sowings may not decline “by the expected 10%”.
Chicago’s March corn contract ended down 2.1% at $3.73 ¼ a bushel, closing beneath its 100-day moving average for the first time in nearly three months, and indeed blotting its copybook from a technical perspective.
“A close below $3.76 a bushel on March corn would be bearish technically,” Mr Holaday said earlier.
“It is key trendline, sideways, support and also would be below the 100-day moving average.”
‘Opens the floodgates’
Meanwhile, amongst oilseeds, soyoil for March close down 2.6% at 30.57 cents a pound in Chicago, having touched 30.27 cents a pound earlier, the lowest for a spot contract since March 2009, in a decline blamed on a decision by US regulators to allow Argentine biofuel makers to quality for US biofuel credits.
The move is seen as allowing the South American country, a huge maker of biodiesel from soyoil, to sell more of the biofuel into the US.
“It opens the floodgates for Argentinian biodiesel,” said Anne Steckel at the National Biodiesel Board.
“This decision poses a tremendous threat to US industry and jobs,” she said, terming the decision “incredibly damaging”.
At least soymeal, the other main soybean processing product, managed to recover to end up 0.2% at $337.40 a ton, providing some support for the soy complex.
Soybeans themselves for March ended down 0.4% at $9.70 ¼ a bushel.
Softer softs
Among soft commodities, raw sugar for March closed unchanged at 15.16 cents a pound in New York, although later contract lost ground.
Green Pool revised upwards its forecast for the world sugar production surplus in 2014-15.
Arabica coffee for March eased 0.3% to 167.70 cents a pound, amid forecasts for a rains over Minas Gerais, although dryness concerns remain alive, and a worry especially in parts of Espirito Santo, the top robusta-growing state.
Robusta futures eased in London, but by a modest 0.2% to $1,984 a tonne for March delivery.
