Morning markets: corn sets record, as Wasde fears diminish

The weekend cleared further doubts that latest US data on corn inventories were not quite as bearish as they first appeared.

Indeed, corn set a fresh record in electronic trading in Chicago, of 7.83 ¾ a bushel, for May delivery (an all-time high for a spot contract) before caution set in ahead of the live trading session, which is the real trend-setter.

Friday's estimate, in the US Department of Agriculture's flagship monthly Wasde crop report, of US corn stocks ending 2010-11 at 675m bushels, the same as the previous month, "was not as bullish as many analysts were expecting", Luke Mathews at Commonwealth Bank of Australia noted.

The market had expected a downgrade to the figure, after the USDA last month revealed US corns stocks were 170m bushels below expectations.

"But nonetheless, [Friday's estimate] was by no means bearish," Mr Mathews added.

After all, the higher stocks figure could, as Agrimoney.com suggested, imply that there is extra rationing to be done, meaning higher prices.

Middle way

Jon Michalscheck at Benson Quinn Commodities had a different take, suggesting that "the bull believes that would indicate the rationing still has to be done in the last half of the crop year while the bear believes that demand has already been slowed by the recent increase in the price".

"The correct answer could be that both sides maybe correct and that concerns over new crop supplies from here forwards could be what drives price direction."

But it's not clear that news on new crop is that helpful either, with much of the US looking unusually wet, outside the south plains region where crops such as hard red winter wheat are suffering from too little water.

"Episodes of wet weather delay spring fieldwork," was how Meteorlogix summed up US weather.

Dollar dips

Nor did external markets hurt, with the dollar declining again down 0.2% against a basket of currencies, near a 16-month low. A weak greenback makes dollar-denominated assets more affordable to buyers in other currencies.

Oil was steady, amid hopes of a settlement to the crisis in Libya brokered by the African Union.

And inflation concerns were evident in the rise in gold prices to a fresh high. Such fears can help other commodities too, given that they are the kind of assets for which price rises are implied in inflation fears.

Corn for May fell back, but only to $7.74 ¾ a bushel, remaining 0.9% up on the day as of 07:30 GMT (08:30 UK time). 

Chicago vs Kansas

Fellow grain wheat gained – at least in Chicago - 0.5% to $8.01 ¾ a bushel for May, having another crack at closing above $8 a bushel for the first time since late February.

Wheat enjoyed a mildly positive Wasde, with the USDA trimming its estimate for US wheat inventories at the end of 2010-11 and highlighting soaring demand for soft red winter wheat, the type traded in Chicago, as livestock farmers switch from expensive corn.

However, are concerns fading about the dry hard red winter wheat crop, as traded in Kansas?

"Operators' attention will be focused on weather forecasts this week, as water deficit is still making the headlines in the US Great Plains and in northern Europe," Agritel, the Paris-based consultancy, said.

"No rainfall is forecast for the beginning of the week, but light showers might be observed by the end of the week in the US and in Europe."

Kansas's May lot stood 0.6% lower at $9.27 ½ a bushel, continuing to unwind a bit of its premium over Chicago built up on dry weather concerns.

Chinese signals

Soybeans, meanwhile, returned to their pattern of less volatility, adding 0.2% to $13.95 ¼ a bushel for May, after a mixed Wasde report.

US soybeans face competition from supplies flooding from the South American harvest, while messages coming from China, the top buyer, are mixed.

The Wasde trimmed the estimate for consumption by Chinese soybean crushers, who are reported to be under extreme margin pressure.

On Sunday, Chinese trade data showed the country imported 3.5m tonnes of soybeans last month, a fall of 12% year on year, but up 51% month-on-month.

"The [calendar] year to date pace is only 0.7% lower than in 2010," Australia & New Zealand Bank said.

"Together with robust retail and investment data, China's overall economic performance remained solid in the third quarter. We forecast that China's first quarter GDP [data are due on April 15] will likely have expanded by 9.3%."

(Source: http://www.agrimoney.com/marketreport/morning-markets-corn-sets-record-as-wasde-fears-diminish--1044.html)