19th Apr 2013, by Agrimoney
Often, especially in a weather market, investors take a cautious tone heading into the weekend.
After all, who knows what changes in the forecast the break could bring?
For soybeans, this meant selling pressure, as investors took gains on profits made from a rally of 5% in the oilseed in Chicago from 10-month lows reached in early April.
For corn, it meant buying, as investors with short positions who profited from the last session's tumble sold out – encouraged by a turn worse, indeed, in the weather outlook, bringing extra rain to slow plantings.
'New, strong cold front'
In the six-to-10 day outlook, "both the European and the GFS models are showing a new, strong cold front and fairly deep trough in the jet stream moving into the eastern Plains and the Midwest April 27-28", David Tolleris at weather service WxRisk.com said.
"This is a new development which is not on the weather models earlier in the week.
"This cold front does bring some showers and maybe a few storms with it, and it reinforces the cold air," he said.
"Far more importantly it does not allow for significant drying to occur or warming temperatures in the six-to-10 day period."
'Colder, wetter forecast'
US Commodities said: "A colder, wetter forecast is now projected into the end of the April. Snow/rain is forecast about every four days.
"The confidence in a warm-up in the 11-15 day outlook is lower this morning," too.
So brokers – already forecasting US corn planting will show up on Monday's US Department of Agriculture crop progress report at 7% complete, down from an average of 18%, and 28% last year – curtailed hopes for after then too.
"US corn planting the following week, April 28, is unlikely to top 15% versus the 33% average, and 53% last year," Richard Feltes at RJ O'Brien said.
Planting thwarted
Of course, the link between delayed plantings and disappointing yields is loose with 2009, for instance, bringing a slow start to plantings, but also a bumper crop.
But it helped funds, who sold an estimated 13,000 corn contracts in the last session, replace some of them, about 5,000 lots.
"Corn and wheat are supported by the continual parade of rain and cold systems that moved down from the north and indicate very little chance of a window for planting corn and hard red spring wheat," Darrell Holaday at Country Futures said.
New crop corn for December rose 1.1% to $5.47 a bushel, closing a little of its discount to the best-traded July old crop contract, which ended 0.6% higher at $6.33 a bushel.
'Nervous market'
As far as spring wheat went, the Minneapolis May contract again did its outperforming thing, up 1.0% at $8.25 ½ a bushel, for reasons which have puzzled many observers (including Agrimoney.com).
Theories have ranged from an exit ahead of expiry to fears that river closures forced by heavy snowmelt will block off short-term supplies.
Whatever, it was ahead of the July contract, which added 0.5% to $8.05 a bushel on fears of snowmelt further delaying northern US and Canadian plantings currently prevented by snow itself.
That was ahead of Kansas-traded hard red winter wheat, grown further south, and the focus of fears of frost damage, which added 0.3% to $7.64 ¼ a bushel for May, and 0.2% to $7.50 a bushel for July.
Mr Holaday said: "Cold temperatures in hard red winter wheat areas make for a nervous market, but a market that carries a substantial premium to corn," so limiting its premium.
Soft red winter wheat fears too
Weather fears are also appearing for US soft red winter wheat, as traded in Chicago, which has hitherto been seen as having strong harvest prospects, thanks to the drought breaking in major growing areas such as Illinois (in contrast to lingering dryness in hard red winter wheat states such as Kansas).
"The soft red winter wheat area has too much rain with water standing," US Commodities said.
FCStone noted that "Illinois has seen some areas receive up to five inches of rain with localised flooding being reported".
Chicago wheat for May added 0.9% to $7.09 a bushel, with the July contract adding 0.7% to $7.11 ½ a bushel.
'Basis on fire'
Soybeans' ease back of 0.1% to $14.28 ¼ a bushel for May, and 0.5% to $13.82 ½ a bushel for July came despite continued talk of the strong market for the oilseed, and soymeal, in the US and among importers.
"Soybean and soymeal basis is on fire," Paul Georgy, president of broker Allendale, said.
"There are reports of soybean processors in Iowa bidding $1.00 over the July futures."
Soymeal basis, meanwhile, "continues to strengthen as some processors are closing and others are slowing down productivity due to lack of their ability to buy soybeans".
The November soybean contract lagged, as might be expected with ideas of slow corn sowings, which could see farmers switch area to the oilseed, which has a later planting window.
"Corn planting pace is falling further behind and snows in the Dakotas could see further acreage move across to beans," FCStone said.
Buoyant beans
Soft commodities did better, including cocoa which gained from data showing a surprisingly strong 5.8% rise to 125,887 tonnes in the North American cocoa grind in the first three months of 2013.
This following firm data from Europe earlier in the week.
"Cocoa butter ratios have improved," boosting processing margins, Macquarie analyst Kona Haque told Agrimoney.com.
"There may also have been some inventory rebuild," after a drop in stocks of cocoa products last year.
Cocoa for July closed up 0.8% at £1,555 a tonne in London, touching £1,558 a tonne earlier, its highest since December.
In New York, July cocoa settled up 0.6% at $2,333 a tonne, having hit a four-month high of $2,348 a tonne earlier.
'Fund short-covering'
Meanwhile, arabica coffee for July gained 1.7% to 143.20 cents a pound, a gain attributed to short covering, which was seen behind a 1.6% rise to 17.97 cents a pound in raw sugar too.
"Bulls will point out there will probably be a friendly/large fund net short position out later this evening, which may trigger some fund short-covering," Thomas Kujawa at Sucden Financial said earlier.
Record large net short positions among hedge funds, which sugar had as of last week, can instil nerves in raising questions over the appetite for more such holdings.
Often, especially in a weather market, investors take a cautious tone heading into the weekend.
After all, who knows what changes in the forecast the break could bring?
For soybeans, this meant selling pressure, as investors took gains on profits made from a rally of 5% in the oilseed in Chicago from 10-month lows reached in early April.
For corn, it meant buying, as investors with short positions who profited from the last session's tumble sold out – encouraged by a turn worse, indeed, in the weather outlook, bringing extra rain to slow plantings.
'New, strong cold front'
In the six-to-10 day outlook, "both the European and the GFS models are showing a new, strong cold front and fairly deep trough in the jet stream moving into the eastern Plains and the Midwest April 27-28", David Tolleris at weather service WxRisk.com said.
"This is a new development which is not on the weather models earlier in the week.
"This cold front does bring some showers and maybe a few storms with it, and it reinforces the cold air," he said.
"Far more importantly it does not allow for significant drying to occur or warming temperatures in the six-to-10 day period."
'Colder, wetter forecast'
US Commodities said: "A colder, wetter forecast is now projected into the end of the April. Snow/rain is forecast about every four days.
"The confidence in a warm-up in the 11-15 day outlook is lower this morning," too.
So brokers – already forecasting US corn planting will show up on Monday's US Department of Agriculture crop progress report at 7% complete, down from an average of 18%, and 28% last year – curtailed hopes for after then too.
"US corn planting the following week, April 28, is unlikely to top 15% versus the 33% average, and 53% last year," Richard Feltes at RJ O'Brien said.
Planting thwarted
Of course, the link between delayed plantings and disappointing yields is loose with 2009, for instance, bringing a slow start to plantings, but also a bumper crop.
But it helped funds, who sold an estimated 13,000 corn contracts in the last session, replace some of them, about 5,000 lots.
"Corn and wheat are supported by the continual parade of rain and cold systems that moved down from the north and indicate very little chance of a window for planting corn and hard red spring wheat," Darrell Holaday at Country Futures said.
New crop corn for December rose 1.1% to $5.47 a bushel, closing a little of its discount to the best-traded July old crop contract, which ended 0.6% higher at $6.33 a bushel.
'Nervous market'
As far as spring wheat went, the Minneapolis May contract again did its outperforming thing, up 1.0% at $8.25 ½ a bushel, for reasons which have puzzled many observers (including Agrimoney.com).
Theories have ranged from an exit ahead of expiry to fears that river closures forced by heavy snowmelt will block off short-term supplies.
Whatever, it was ahead of the July contract, which added 0.5% to $8.05 a bushel on fears of snowmelt further delaying northern US and Canadian plantings currently prevented by snow itself.
That was ahead of Kansas-traded hard red winter wheat, grown further south, and the focus of fears of frost damage, which added 0.3% to $7.64 ¼ a bushel for May, and 0.2% to $7.50 a bushel for July.
Mr Holaday said: "Cold temperatures in hard red winter wheat areas make for a nervous market, but a market that carries a substantial premium to corn," so limiting its premium.
Soft red winter wheat fears too
Weather fears are also appearing for US soft red winter wheat, as traded in Chicago, which has hitherto been seen as having strong harvest prospects, thanks to the drought breaking in major growing areas such as Illinois (in contrast to lingering dryness in hard red winter wheat states such as Kansas).
"The soft red winter wheat area has too much rain with water standing," US Commodities said.
FCStone noted that "Illinois has seen some areas receive up to five inches of rain with localised flooding being reported".
Chicago wheat for May added 0.9% to $7.09 a bushel, with the July contract adding 0.7% to $7.11 ½ a bushel.
'Basis on fire'
Soybeans' ease back of 0.1% to $14.28 ¼ a bushel for May, and 0.5% to $13.82 ½ a bushel for July came despite continued talk of the strong market for the oilseed, and soymeal, in the US and among importers.
"Soybean and soymeal basis is on fire," Paul Georgy, president of broker Allendale, said.
"There are reports of soybean processors in Iowa bidding $1.00 over the July futures."
Soymeal basis, meanwhile, "continues to strengthen as some processors are closing and others are slowing down productivity due to lack of their ability to buy soybeans".
The November soybean contract lagged, as might be expected with ideas of slow corn sowings, which could see farmers switch area to the oilseed, which has a later planting window.
"Corn planting pace is falling further behind and snows in the Dakotas could see further acreage move across to beans," FCStone said.
Buoyant beans
Soft commodities did better, including cocoa which gained from data showing a surprisingly strong 5.8% rise to 125,887 tonnes in the North American cocoa grind in the first three months of 2013.
This following firm data from Europe earlier in the week.
"Cocoa butter ratios have improved," boosting processing margins, Macquarie analyst Kona Haque told Agrimoney.com.
"There may also have been some inventory rebuild," after a drop in stocks of cocoa products last year.
Cocoa for July closed up 0.8% at £1,555 a tonne in London, touching £1,558 a tonne earlier, its highest since December.
In New York, July cocoa settled up 0.6% at $2,333 a tonne, having hit a four-month high of $2,348 a tonne earlier.
'Fund short-covering'
Meanwhile, arabica coffee for July gained 1.7% to 143.20 cents a pound, a gain attributed to short covering, which was seen behind a 1.6% rise to 17.97 cents a pound in raw sugar too.
"Bulls will point out there will probably be a friendly/large fund net short position out later this evening, which may trigger some fund short-covering," Thomas Kujawa at Sucden Financial said earlier.
Record large net short positions among hedge funds, which sugar had as of last week, can instil nerves in raising questions over the appetite for more such holdings.
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