Grain, soy price falls 'gone too far', brokers say
The fall in grain and oilseed prices may have gone too
far, being fuelled by fund sales rather than
fundamentals, a clutch of brokers said, viewing wheat
as particularly oversold.
The improving weather conditions in South America -
where some parched areas of Brazil are receiving rain,
and flooded parts of Argentina drying out – have been
seen as fuelling a decline in corn, soybean and wheat
futures to six-month lows already in 2013.
"Corn and soybean harvests in South America are
looking likely to be very robust this spring,"
Commerzbank said.
In the US, some analysts foresee corn sowings hitting
their highest since the 1930s, of nearly 100m acres,
while winter wheat plantings have been pegged at their
highest in four years.
'Price fall exaggerated'
"Nonetheless, we believe the latest fall in prices to be
exaggerated, as the supply risks – which have not
gone away – are largely being ignored," the bank
added.
Ag prices gain - for a change - as of 15:45 GMT
(09:45 Chicago time)
Chicago wheat: $7.55 ¼ a bushel, ( 1.1%)
Chicago corn: $6.86 ½ a bushel, ( 0.9%)
Kansas wheat: $8.10 ¾ a bushel, ( 0.8%)
Chicago soybeans: $13.76 a bushel, ( 0.6%)
London wheat: £208.00 a tonne, ( 0.3%)
Paris wheat: E251.50 a tonne, ( 0.2%)
Prices for March contracts, except May lot for London
wheat
"The unfavourable weather in the US, for instance, is
likely to negate part of the expansion in winter wheat
acreage, while the coldest winter for 28 years in China
could hamper the development of this winter
crop."And the sentiment was echoed by Luke Mathews
at Commonwealth Bank of Australia, who said that a
negative reaction to Friday's weekly US wheat export
sales data, which fell to 402,000 tonnes from 1.0m
tonnes the week before, was "unwarranted considering
the Christmas disruption".
"More importantly, cumulative sales over the past four
weeks are up 107.5% year on year," Mr Mathews said.
He also noted the return to a, widening, premium of
east coast Australian wheat, which for March delivery
closed on Monday in Sydney at Aus$278.00 ($292) a
tonne, over Chicago grain – a dynamic long forecast by
CBA and indeed by rival bank Australia & New Zealand
Bank.
"Despite weakness last week, local markets remain
buoyant compared to those offshore. East coast wheat
basis now quoted around Aus$18 a tonne versus
Chicago," Mr Mathews said.
'Higher-than-normal abandonment'
Meanwhile, Societe Generale – which was among the
more bearish commentators running into the slide in
crop prices since the autumn - said it was "cautious
over becoming too optimistic" on prospects for US
corn and soybean crops "given the lingering drought
conditions in large areas of the Corn Belt".
SocGen said the persistence of drought was "especially
troubling for the major hard red winter wheat areas", if
it lasted into the "critical heading stage of
development once the crop breaks dormancy in April".
"While there is still time for improving conditions,
speculation is already beginning that abandonment of
planted acreage will be higher than normal this
summer," SocGen analyst Christopher Narayanan said,
noting that 77-79% of area sown typically makes it to
harvest.
"Higher than normal abandonment and/or lower yields,
owing to the drought, could bring final production
numbers much lower than currency expected."
Chicago vs Kansas
SocGen recommended a long bet in the hard red
winter wheat, the variety traded in Kansas, potentially
hedged against a short position in Chicago wheat,
which if of soft red winter type.
While Kansas futures already have a premium over
Chicago ones - of some $0.57 a bushel as of early
deals on Monday, above the five year average of $0.46
a bushel - "it stands far below the spring-time high of
2011 of just above $1.77 a bushel when drought
conditions in hard red winter wheat sent the spreading
soaring".
The comments came as grain and soybean prices
indeed showed signs of recovery on Monday, the start
of the week which will on Friday bring much-watched
US Department of Agriculture reports on world crop
supply and demand, and domestic wheat sowings and
grain inventories.
Nonetheless, they remain near six-month lows, a
factor blamed in part on withdrawals of fund money
from agricultural commodities, with what positions
remain taking an increasingly bearish stance.
http://www.agrimoney.com/news/grain-soy-price-
falls-gone-too-far-brokers-say--5374.html
The fall in grain and oilseed prices may have gone too
far, being fuelled by fund sales rather than
fundamentals, a clutch of brokers said, viewing wheat
as particularly oversold.
The improving weather conditions in South America -
where some parched areas of Brazil are receiving rain,
and flooded parts of Argentina drying out – have been
seen as fuelling a decline in corn, soybean and wheat
futures to six-month lows already in 2013.
"Corn and soybean harvests in South America are
looking likely to be very robust this spring,"
Commerzbank said.
In the US, some analysts foresee corn sowings hitting
their highest since the 1930s, of nearly 100m acres,
while winter wheat plantings have been pegged at their
highest in four years.
'Price fall exaggerated'
"Nonetheless, we believe the latest fall in prices to be
exaggerated, as the supply risks – which have not
gone away – are largely being ignored," the bank
added.
Ag prices gain - for a change - as of 15:45 GMT
(09:45 Chicago time)
Chicago wheat: $7.55 ¼ a bushel, ( 1.1%)
Chicago corn: $6.86 ½ a bushel, ( 0.9%)
Kansas wheat: $8.10 ¾ a bushel, ( 0.8%)
Chicago soybeans: $13.76 a bushel, ( 0.6%)
London wheat: £208.00 a tonne, ( 0.3%)
Paris wheat: E251.50 a tonne, ( 0.2%)
Prices for March contracts, except May lot for London
wheat
"The unfavourable weather in the US, for instance, is
likely to negate part of the expansion in winter wheat
acreage, while the coldest winter for 28 years in China
could hamper the development of this winter
crop."And the sentiment was echoed by Luke Mathews
at Commonwealth Bank of Australia, who said that a
negative reaction to Friday's weekly US wheat export
sales data, which fell to 402,000 tonnes from 1.0m
tonnes the week before, was "unwarranted considering
the Christmas disruption".
"More importantly, cumulative sales over the past four
weeks are up 107.5% year on year," Mr Mathews said.
He also noted the return to a, widening, premium of
east coast Australian wheat, which for March delivery
closed on Monday in Sydney at Aus$278.00 ($292) a
tonne, over Chicago grain – a dynamic long forecast by
CBA and indeed by rival bank Australia & New Zealand
Bank.
"Despite weakness last week, local markets remain
buoyant compared to those offshore. East coast wheat
basis now quoted around Aus$18 a tonne versus
Chicago," Mr Mathews said.
'Higher-than-normal abandonment'
Meanwhile, Societe Generale – which was among the
more bearish commentators running into the slide in
crop prices since the autumn - said it was "cautious
over becoming too optimistic" on prospects for US
corn and soybean crops "given the lingering drought
conditions in large areas of the Corn Belt".
SocGen said the persistence of drought was "especially
troubling for the major hard red winter wheat areas", if
it lasted into the "critical heading stage of
development once the crop breaks dormancy in April".
"While there is still time for improving conditions,
speculation is already beginning that abandonment of
planted acreage will be higher than normal this
summer," SocGen analyst Christopher Narayanan said,
noting that 77-79% of area sown typically makes it to
harvest.
"Higher than normal abandonment and/or lower yields,
owing to the drought, could bring final production
numbers much lower than currency expected."
Chicago vs Kansas
SocGen recommended a long bet in the hard red
winter wheat, the variety traded in Kansas, potentially
hedged against a short position in Chicago wheat,
which if of soft red winter type.
While Kansas futures already have a premium over
Chicago ones - of some $0.57 a bushel as of early
deals on Monday, above the five year average of $0.46
a bushel - "it stands far below the spring-time high of
2011 of just above $1.77 a bushel when drought
conditions in hard red winter wheat sent the spreading
soaring".
The comments came as grain and soybean prices
indeed showed signs of recovery on Monday, the start
of the week which will on Friday bring much-watched
US Department of Agriculture reports on world crop
supply and demand, and domestic wheat sowings and
grain inventories.
Nonetheless, they remain near six-month lows, a
factor blamed in part on withdrawals of fund money
from agricultural commodities, with what positions
remain taking an increasingly bearish stance.
http://www.agrimoney.com/news/grain-soy-price-
falls-gone-too-far-brokers-say--5374.html
Comment