Evening markets: wheat crop upgrade sees grains miss rally
It might not have looked that way in Chicago, but Wednesday was an upbeat day for risk assets, many commodities included.
With minutes of a Federal Reserve meeting showing broad agreement for measures to ease monetary policy, and Slovakia deemed set in the end to get to the "right" answer on the eurozone bail-out fund, sharesgained. Wall Street stocks stood 1.7% higher in late deals.
The Vix volatility index, the so-called "gauge of fear", fell below 30 for the first time since August, and the safe haven of the dollar fell 0.9%, so further improving the appeal to foreign buyers of dollar-denominated assets such as raw materials.
Copper rallied 3.3%, boosted by signs of Chinese buying too, and many soft commodities ended sporting a plus sign, led by coffee, which added 2.7% to 229.45 cents a pound in New York for December delivery.
Investors appeared in tune with a warning from the International Coffee Organisation on Tuesday that scope for price falls was "limited".
Softs traders Jurgens Bauer noted that the bean has been "receiving attention from some excellent chartists and respected fundamental traders, several of those had called for the last rally". Positive attention, that is.
Meanwhile, raw sugar for March added 0.3% to 25.93 cents a pound, after trading in both positive and negative territory, as investors awaited further direction, which may come from India, the second-ranked producer.
"The Indian Food Ministry is reported to have announced that it will decide early next month on the quantities it will authorise for exports during the current season which began this month," Nick Penney at Sucden Financial said.
The ministry has pegged domestic sugar output above 26m tonnes, consumption at 22m-23m tonnes, and current stocks at 6m tonnes.
However, the biggest action of the day was seen in Chicago, where investors digested the latest monthly Wasde report from the US Department of Agriculture, which – to a large part – strayed from the line of recent briefings in being generally a little tame.
"In comparison to recent history, this was a relatively non-eventful USDA report," Rabobank said.
The estimate for the US corn yield, which had been the focus in the run-up to the briefing, was left unchanged at 148.1 bushels per acre, thesoybean yield only downgraded a touch, to 41.5 bushels per acre.
And while there were some rejigs in the smallprint, US end 2011-12 stocks forecasts ended up more or less where the market had expected – a little more generous in corn, a little less in soybeans.
Bearish, bearish, bearish
The downbeat karma in Chicago was injected by wheat, and ahike of 7.8m tonnes to 202.4m tonnes in the USDA’s estimate for world stocks of the grain, the highest for 10 years, reflecting lower expectations for livestock feeding and upgrades to Australian and Kazakh crops.
That was a "bearish result", according to Rabobank.
Darrell Holaday said: "The real bearish news for wheat was in the world numbers."
Benson Quinn Commodities said: "The report pertaining to wheat was decidedly bearish."
RJ O’Brien said: "Wheat saw the most fundamentally negative revisions this morning."
‘Wheat is in trouble’
Chicago trader Matthew Pierce added his dime’s worth too.
He said: "Wheat is in trouble. There is technical support but funds are short with an appetite to add to those shorts on the rally.
"There is nothing supportive for wheat from the fundamental side, so continue to fade any Chicago wheat rally over corn."
(He turned more upbeat on southern Plains sowings of hard red winter wheat too.
"The better-than-expected weekly precipitation in Kansas, Oklahoma and Texas offers a window to plant with improving conditions. The forecast turns dry again but this is a start.")
Rice on top
Whatever, it looked like investors heeded his advice, selling heavily in Chicago wheat to send the December lot 5.2% lower to $6.26 ¾ a bushel, giving back more than half the gains of the last session.
Indeed, it was enough to lose wheat its recently regained premium over corn too. December corn lost 0.7% to $6.40 ¾ a bushel in Chicago.
Soybeans, graced with the below-forecast US stocks estimate, added 0.1% to $12.39 ½ a bushel.
Even so, it was rough rice, which started strongest in Chicago, which finished best too, up 2.4% to $16.355 a hundredweight, even though the USDA lifted its estimate for output in flooded Thailand by 500,000 tonnes, citing expectations of "bumper" crops on higher ground.
The support was a USDA cut of 4.0m hundredweight, to 186.9m hundredweight, in the US crop, making it the smallest in 13 years.