Agriculture Commodities Mixed As Year-End Approaches

Momentum across some of the key agriculture commodities are showing very different trends and performances as year-end approaches. Some of the strong performers lately such as Paris milling wheat and cocoa are currently exposed to some year-end selling as speculative positions are being reduced.

CBOT Wheat futures fell to a near four-month low on Tuesday after a US government report estimated that global inventories would rise to a near record the coming season, not least due to bigger crops in Canada and Australia. Momentum has turned negative this week not least after the price of the march future dropped below previous support at USD 6.50 per bushel. Even Paris milling wheat which has seen non-stop positive momentum since September has begun to show signs of weakness with momentum now slowing.

CBOT corn has joined soybeans in showing improved sentiment. For corn, this has been driven by news of strong demand both from home and abroad not least after the price reached a four-year low which triggered extra demand for animal feed and from ethanol producers. The subsequent downgrade in ending stocks from rising demand will lend some near-term support but we should not forget that supplies for use until the end of the current 2013/14 marketing year which runs until next August will be the largest in eight years. Attention from here will continue to focus on demand and the outlook for the South American crop which is now entering into a critical growing period.

Live cattle remains rangebound within an uptrend that has lasted since May. The price of the most traded month of February 2014 is currently within a relatively tight range within 131.25 and 134.5 cents per pound. Speculative investors held a net-long of 91,142 as of December 3, so any surprise weakness at this stage could signal a deeper correction. especially with the holiday season which could become a bit thin on the liquidity front.

The sharp sell-off in sugar since October seems to have slowed but after seeing the RSI recover a bit from the oversold levels recently, the risk is still that the downtrend will continue. Since the end of October, sugar has only seen higher daily finishes on a handful of occasions which gives an indication of how unloved the sweetener has become among the speculative community. Abundant near-term supplies will continue to weigh on the price so for now a major reversal in the downtrend seems unlikely.

Cocoa has moved to the bottom of its current trading range as consolidation continues after the flow of price-friendly news began to dry out. This recent move has triggered a return to negative momentum raising the prospect of some additional long liquidation by funds as year-end approaches. A clear break below USD 2,740/mt could signal further weakness towards USD 2,710/mt followed by USD 2,680/mt.