CBOT weekly: Chinese demand weighs on corn, soy

(Lisa Guenther photo)

CNS Canada — As the price of oil falls and wheat surges in price due to volatility in Russia, investors in corn and soybean markets are looking to China for near-term direction just days before the calendar year comes to an end.

Corn futures at the Chicago Board of Trade finished higher during the week ended Wednesday. A lack of compelling fundamentals left values open to persuasion from a variety of external factors, according to Sean Lusk, a director with the commercial hedging section of Walsh Trading in Chicago.

“There’s a feeling more old crop purchases could be coming as a Chinese delegation is touring Chicago’s commodity sector right now. Something significant could be announced,” he said, adding that if the purchases were new-crop, it wouldn’t mean much to the market.

Values burst above the psychologically important $4 per bushel market a few days ago, momentarily testing reaches of $4.10-$4.12/bu. (all figures US$).

Prices, however, eventually trended back down — “due to a lack of conviction to the upside,” said Lusk.

The falling price of oil is putting pressure on the ethanol market, too, which has been known to impact corn as it causes ethanol to be less attractive because of its price.

CBOT soybeans chopped lower during the week ended Wednesday, pressured by declining demand, according to Lusk.

“Last week’s export sales of the beans kind of revealed that China backed off significantly,” he said.

Lots of traders are out there with long positions, according to Lusk. If demand on the market becomes weak, he said he expects some of them to get out of those positions before January rolls around.

“They (China) had about 15 to 20 ships sitting out in their ports, harbours, waiting to unload. It could indicate demand is winding down or curtailing,” he said.

Private sales could also help determine the long-term direction, said Lusk, who views $10.10 as a key support level.

“We need to see the new export numbers, if they come in like last week or a little weaker, they might signal that China has fully backed off their aggressive buying stance that we saw earlier in October, November,” he said.

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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