China factor keeps corn and soybeans ahead(1)
Usually the China-buying-US-corn trade has been very much in the "buy the rumour, sell the fact" vein, with strong purchasing up until the event is confirmed � when the grain tanks.
On Tuesday, the US Department of Agriculture confirmed a sale of 240,000 tonnes of corn to an "unknown" destination, widely presumed to be China.
Darrell Holaday at Country Futures said: "This is the China purchase that has been talked about since last Friday," and which has helped extend a rally in the grain.
Yet this time, the grain braved selling to end 0.4% higher at $6.62 a bushel for Chicago's best-traded May contract.
The near-to-expiring May lot ended up 0.4% at $6.74 a bushel, the highest for a spot contract in nearly six months.
'All beer and skittles'
That was down in part to a landmark day for risk assets, with Wall Street shares on course to close at their highest since June 2008, helped by data showing US retail sales rising last month at their fastest pace in five months.
In Europe, London stocks ended 1.1% higher, with Frankfurt shares gaining 1.4% and Paris shares 1.7%.
"It's all beer and skittles on the macro front apparently - equities making new highs, bond yields rallying, inflation breakevens rallying, Chinese shares still rallying," Scott Briggs, director, agricultural commodities at Australia & New Zealand Bank, said.
'Additional fund buying'
The average commodity, as measured by the CRB index, added 0.7%, with agricultural commodities in particular seen continuing a trend of appealing to fast money, as highlighted by the latest regulatory data.
"Fund buying continues to support the market," US Commodities said.
Rival broker Benson Quinn Commodities added: "The prospect of the US doing additional export business, along with the positive upward price momentum, has the potential to trigger additional fund buying."
Furthermore, "the speculative community is not expected to show an appetite for establishing shorts until the technical structure of the market weakens".
As Agrimoney.com pointed out this morning, many chart patterns have turned more positive in Chicago.
'Pretty heavy farmer selling'
Benson Quinn advised farmers that the "situation should be viewed as an opportunity to establish additional old and new crop sales".
And many growers have indeed been exploiting higher prices, with Mr Briggs among those to report "pretty heavy farmer selling of old crop US corn into the system".
Still, on the positive side for values, it is not clear that 240,000 tonnes is all the corn that China bought, with talk of 800,000 tonnes of purchases.
That is no totally out of the question, given that corn prices on China's Dalian exchange stand at the equivalent of about $9.85 a bushel.
"The Chinese government hints at having comfortable supplies of corn, while it appears private firms are focused on securing imports at sizeable discounts," Benson Quinn said.
