AM markets: grains seek to end tricky month on positive note

AM markets: grains seek to end tricky month on positive note
Month-ends are often associated with price weakness in grains, with funds seen tidying up portfolios and withdrawing cash to pay clients.

But grains, this time, stood in positive ground, at the end of a somewhat difficult January.

Perhaps the, small, gains were a reflection of the extent of fund short positions put on this month, which to take profit on would place upward pressure on prices.

But there are also some ideas of end-user demand too at lower values, as highlighted by the positive set of US export sales data released on Thursday.

Wasde talk already

Indeed, for soybeans, for which US export sales came in at 888,200 tonnes last week, double the most upbeat market forecast, investors are talking of an upgrade to the US Department of Agriculture estimate for the full 2014-15.

"The next USDA supply and demand [Wasde] report is on February 10 and already trade is talking about an increase in export demand in the coming report," said Kim Rugel at Benson Quinn Commodities.

"Whether or not USDA counters that increase with lower crush estimate will is uncertain, though," she added, with analysts appearing to stick with ideas of US ending stocks of 410m bushels of soybeans, the current USDA estimate.

'Demand remains strong'

CHS Hedging noted the firm demand for soymeal, the feed ingredients processed from soybeans, and for which US export sales hit a marketing year high of 296,000 tonnes last week.

"Soymeal demand remains strong domestically and in the world market as world buyers continue to come to the US at the beginning of the South American harvest season," with soybean supplies from the South American harvest not strong enough yet to allow a ramp-up in output of processing products.

"US crush margins remain in the black," CHS Hedging said, if adding that "China crush margins are supposedly now in the red".

That is important, given that China is the top soybean importing country.

'Demand has perked up'

Meanwhile, for corn and wheat too, US weekly export sales data were strong.

For wheat, the export sales number of 544,400 tonnes last week for 2014-15 "speaks for itself as there is more demand as US values get more competitive," Benson Quinn Commodities said.

"The US does not hold the edge by any means. But demand for hard red winter wheat has perked up, while the pace of hard red spring wheat remains quite good."

Indeed, CHS Hedging flagged "market chatter that China is showing some interest for US spring wheat again", reheating a rumour that was around earlier in the month.

Furthermore, Saudi Arabia is in the market for 660,000 tonnes of wheat.

Prices rise

Wheat futures nudged 0.4% higher to $5.09 Ύ a bushel in Chicago for March delivery, as of 09:25 UK time (03:25 Chicago time).

Kansas City hard red winter wheat added 0.5% to $5.46 Ύ a bushel, recovering from a four-year low set earlier this week.

For soybeans, a rise in prices was not such a formality, given the cloud sat over the soyoil market since US authorities on Wednesday backed Argentine biofuel groups as eligible to quality for US biodiesel credits.

(Biodiesel is made from vegetable oils, such as soyoil.)

However, after closing the last session with the weakest finish in six years, soyoil for March perked up this time, adding 0.8% to 29.77 cents a pound.

That eased the pressure on soybeans themselves, which gained 0.3% to $9.71 a bushel for March delivery.

Ukraine competition

Where headway was not so straightforward was in corn, which bounced in and out of positive territory in early deals, although stood up 0.1% at $3.72 a bushel as of 09:25 UK time.

While US export sales of the grain last week were strong, at 1.07m tonnes, there is much comment over the growth of Ukraine as a rival origin.

"Ukraine is thought to have sold 310,000 tonnes of corn to South Korea," CHS Hedging said, flagging "chatter that Ukraine may have substantial tonnage still available for export".

Benson Quinn Commodities said: "Ukraine and now reportedly Argentina are offering the cheapest corn to export markets.

"Note the Ukraine still has plenty of shells left in the chamber with nearly half their expected exports left to peddle."

Furthermore, Ukraine's curbs on wheat exports come with a silver lining for merchants in freeing up logistical capacity for corn shipments.

Sugar news awaited

Among soft commodities, cotton, for which US export sales data for a third week came set a marketing-year high, retreated, easing 0.3% to 59.41 cents a pound in New York for March delivery.

Still, the contract remained above its 20-day moving average, which it closed above in the last session for only the second time in 2015.

Raw sugar was up 0.2% at 14.88 cents a pound, although with investors awaiting signals from India on whether it will approve a fresh export subsidy, said to be pegged at 4,000 rupees a tonne, up from 3,300 rupees last year.

The move may reportedly win approval as early as next week.

agrimoney.com