by Agrimoney.com
The question was not whether agricultural commodities were going to fall on Monday. All risk assets looked in for a pounding after Standard & Poor's downgrade of America's sovereign credit rating.
The real question was by how much the decline would be.
And some markets indeed showed notable drops. Tokyo shares closed down 2.2% at its lowest level since the aftermath of the tsunami, while Shanghai stocks stood 3.8% lower in late deals.
Oil dipped 2.8% to $84.44 a barrel as of 07:15 GMT (08:15 UK time) – if failing yet to crack its lowest point reached Friday, before the late recovery. Copper fell 2.0% in Shanghai.
"No one is sure what the week will bring, but if funds/traders/investors decide to continue to liquidate, this action could come over into the grains pits as well," Mike Mawdsley at Market 1 said.
Grains vs energy
But farm commodities showed some composure, and proved better able to draw some support from a dollar which dipped 0.8% against a basket of currencies, improving the competitiveness of dollar-denominated assets on export markets.
OK, that did not mean that many were in positive ground, although sugar and corn were showing small gains on the Dalian exchange in China.
Crops' - relative – strength "may be a sign of traders finding value in these markets regardless of what is happening to the outside markets what is happening to the outside markets", Brian Henry at Benson Quinn Commodities said.
"It may also be a case of traditional commodity funds not having to raise capital by selling net long positions.
"One could make the case that funds heavily involved in energies are reallocating capital from those markets to the grains given the concerns about the economy."
Report worries
There were also ideas of a reluctance to sell ahead of a US Department of Agriculture monthly Wasde report due on Thursday which looks like being one of the most important of the year, among a series which is always closely watched by crop traders anyway.
The estimates for the US corn yield, following the July heatwave, and acreage, tested by a poor sowing season and spring floods, will be most closely watched.
Investors appear "unwilling to give up too much of the additional risk premium" added into corn last week "on ideas that the upcoming USDA report could see the corn crop production being reduced", Jon Michalscheck at Benson Quinn said.
Nonetheless, analysis of trading positions released by US watchdogs late on Friday showed that there was space for fast money to move back into corn, if the USDA data indeed prove bullish.
"Net longs in corn are still a long way below the highs seen over the last 12 months, leaving plenty of room for speculators to jump back into corn over the next week if we get a shock from the report," Paul Deane at Australia & New Zealand Bank said.
Chicago corn for December delivery, the best traded contract, fell 0.8% to $6.87 ½ a bushel.
Lots of shorts already
The limited drop was some help to other grains, with wheat also getting fundamental support from the dryness and heat which looks set to continue to dog southern US winter wheat regions, posing a challenge to sowings.
In the 11-to-15 day outlook "the Lower Plains and deep South regions looks above normal with respect to temperatures", WxRisk.com, although other areas look less threatened.
"Some models show some heat -91-95 degrees Fahrenheit - getting into Kansas, Nebraska, Missouri southern Illinois and Indiana and Kentucky, but not all the data agrees with this."
Furthermore, as far as fund positions go, they have already got a net short of 53,200 positions in Chicago wheat, according to the latest regulatory data, meaning there may be some reluctance to add too many more.
Indeed, this position is the biggest since July 2010, just as Russia's drought sent prices soaring and caught many funds out.
Chicago wheat for September fell 0.9% to $6.73 a bushel, with its Kansas hard red winter wheat equivalent falling 0.7% to $7.74 ¾ a bushel and Minneapolis spring wheat down 0.4% at $8.24 a bushel.
Worst headlines
The worst headlines were posted in the oilseeds complex, where soybeans dropped to a one-month low, but here again the declines were not so dreadful (yet), considering that weather forecasts for this month, crucial for the crop in the US, are looking better as well.
The November contract fell 1.0% to $13.23 a bushel, after touching $13.16 a bushel earlier.
That said, technically, "the longer we stay under $13.50 a bushel, the more $12.90, $13.00 a bushel is likely," Mr Mawdsley said.
In Kuala Lumpur, palm oil fell 1.2% to 3,015 ringgit a tonne, the lowest since October, with a lift to exchange margin requirements added to investor caution.
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