March 10, 2015

10/03/2015: Grain prices rise as funds close shorts ahead of key data

Grains managed to hold on to early strength, led for once by wheat, but the firmness failed to carryover into soft commodities, Agrimoney reports.

The dollar helped by easing a touch from its highest levels against a basket of currencies since 2003, while ethanol rose 0.8 percent to US$1.472 per gallon in Chicago for April delivery, boosting demand prospects for ags used in making the biofuel.

But a bigger contributor to higher closes in the likes of corn, soybeans and wheat was the prospect on Tuesday of the US Department of Agriculture's monthly Wasde crop report, and the uncertainty that brings – at a time when hedge funds have taken a relatively downbeat stance on ag futures.

Their net long in the top 13 US-traded ags was, as of last Tuesday, the lowest since August 2013.
 

http://www.agrimoney.com/marketreport/grain-prices-rise-as-funds-close-shorts-ahead-of-key-data--3042.html

Hedge fund shorts

The negative positioning was notable in wheat, in which they raised their net short in Chicago futures and options above 50,000 contracts.

This attracted some short-covering on Monday.

"A significant increase in the size of the net short fund position in Chicago and Kansas City wheat futures should be given some credit" for higher prices of the grain, Benson Quinn Commodities said.

"Wheat markets were oversold and caught a bid overnight."

And there were other reasons too, besides the prospect of the Wasde, for investors to get more positive on the grain.

'Vulnerable to weather conditions'


One is some renewed worries over the condition of northern hemisphere winter wheat seedlings, or at least concern over whether more risk premium in prices is warranted.

"There is talk of dry conditions in the southern plains, northern Europe and portions of the Black Sea region, which complement the technical move higher in prices," Benson Quinn Commodities said.

"We have reached the time period when the wheat market deserve some weather premium."

Short positions in wheat "are vulnerable to weather conditions as crop emerges from dormancy", said Richard Feltes at Chicago broker RJ O'Brien.

"Managed funds typically start building longs into spring ahead of the uncertain northern hemisphere growing season."

Speaking of US wheat production prospects, Doane Ag said that "with dry conditions persisting, much will depend on timely rainfall over the next 60 days".

Export talk

There was also some more upbeat talk around about US exports, although not based on weekly data, as measured by cargo inspections, which showed volumes falling by 22 percent to 376,210 tonnes last week.

Soft red winter wheat, the type traded in Chicago, "priced late last week hit some levels that interested some buyers," said Darrell Holaday at Country Futures.

"In most cases the interest was in buying the US soft red winter wheat for feed," with talk of South Korea buying two or three cargos for this use.

Chicago wheat for May closed up 1.6 percent at UK$4.90 a bushel.

In Paris, May wheat ended up 1.4 percent at 187.25 Euros a tonne, while London wheat for May ended 1.1 percent higher at UK£119.00 a tonne.


Read more HERE.
 

The Global Miller
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