It is not often that grain investors get to trade on February 29.
And this one provided an extra calendar item for them to focus on – the start of the March futures contract expiry process in Chicago. (And the finalisation of it in New York sugar.)
Month-ends are also, by repute, times when funds tidy up positions in ags, historically – given that they have always tended to run long positions – often leading to downward pressure on prices.
But, with ags holding a near-record net short in US-traded ags, as confirmed by data from the US CFTC regulator late on Friday, would that be different this time?
Large deliveries
In fact, soybeans weren’t particularly favoured on either score, with deliveries of 523 contracts against the expiring March lot, with deliveries often seen as a sign that the futures market is a more desirable place to sell than the cash market.
That said, “some” deliveries had been expected.
CHS Hedging said ahead of the data: “Traders are expecting a good chance for some soybean deliveries against the March contract.”
A large 1,296 lots were delivered against the Marchsoyoil contract.
‘Increase wetness concerns’
As for the CFTC data, it showed hedge funds slashed their net short in the oilseed by more than 21,000 contracts in the week to February 23, to 22,000 lots, although – again – was not hugely unexpected.
“This coincides with option expiration and market recovery into Monday [February 22] so is of no surprise and is market neutral for trade,” said Benson Quinn Commodities.
Still, such factors encouraged a bit of selling in soy, on what might have been a positive day for prices, with some concerns over weather in Argentina.
“Heavier-than-expected rainfall in some of central Argentina’s summer crop areas triggered flooding again over the weekend,” said Tobin Gorey at Commonwealth Bank of Australia.
And more rain is in the outlook.
“Lingering showers in Cordoba will increase wetness concerns,” said weather service MDA, although adding that “drier weather in Entre Rios will ease wetness threats”.
‘Producers very busy selling’
The dollar was also a little easier on Monday, down 0.2% against a basket of currencies, after the weekend meeting of the G20 focused on challenges to the world economy, including “the shock of a potential UK exit from the European Union”, besides “volatile capital flows, a large drop in commodity prices, escalated geopolitical tensions”.
(A weaker dollar supports the value of dollar-denominated exports, such as many ags, by making them more affordable.)
While grains often move in a different direction toshares, which fell by 2.9% in Shanghai and 1.0% in Tokyo, and opened down 0.9% in London, that wasn’t the case this time for soybeans, which eased by 0.2% to $8.62 a bushel in Chicago for May delivery, as of 09:50 UK time (03:50 Chicago time).
Key later for prices will be whether US farmers prove active in crop sales, as they apparently were last week.
“Producers were active cash sellers, despite nearby soybeans falling to a seven-week low,” said Terry Reilly at Futures International.
“US producers were very busy selling their cash grain to raise money for taxes and 2016 growing expenses.”
‘Heavily short’
The same, in terms of rapid producer sales, went forcorn too last week.
Still, on other measures, Monday provided less cause for investors to sell, with no deliveries against the expiring March Chicago contract, and CFTC data showing they have a net short of 134,000 lots in futures and options already.
“Last week’s positions report showed that investors, unsurprisingly, remain heavily short corn,” CBA’s Tobin Gorey said.
And with the rains in Argentina to keep an eye on too, corn for May gained 0.4% to $3.61 a bushel.
‘Eventually lead to a rally…’
Still, wheat fared best among Chicago’s big three, adding 0.6% to $4.55 a bushel for May delivery, albeit remaining close to near-six-year lows.
The Chicago delivery report saw limited appeal for sellers of delivering against the expiring March contract at such week levels, with six contracts offered.
As for the CFTC data, that showed the net short not far below 100,000 lots, and getting close to the record high of 111,409 contracts which would raise some assessment of whether there is appetite for more short contracts.
Indeed, “these numbers will eventually lead to a rally in wheat,” Benson Quinn Commodities said, if adding that they were “in line with expectations”.
Other news for the grain included a purchase by Saudi Arabia’s Sago of 870,000 tonnes, more than tendered for, albeit at prices of $184.58-193.16 a tonne including freight which appear hardly generous.
Meanwhile, Russia’s agriculture minister said there was no reason to revise the export duty, following up a rash of speculation which had, most recently, fagged the potential to ditch the duty on high quality supplies.
Big delivery ahead?
Back to futures contract expiry, and the day represents the last time for trading in March raw sugar futures in New York, and the expected delivery of a substantial tonnage against the lot.
“The New York March will expire on Monday with a delivery, the consensus believes, that will be around 500,000 tonnes,” said CBA’s Tobin Gorey.
For now, the contract was up 1.3% at 14.09 cents a pound, with the better-traded May lot up 1.1% at 14.16 cents a pound.
- See more at: http://ingredientnews.com/articles/grains-attempt-positive-close-to-tricky-month/#sthash.tRg7BocK.dpuf
