The Morning Vibe

28/12/12 -- Fund liquidation has been the name of the game for the past month as we approach year-end.

In fact exactly a month ago today front month CBOT corn was USD7.60 and wheat was USD8.76, meaning that corn has fallen 9% and wheat nearly 12% since Nov 28. Soybeans are down a more modest 2% during this time.

In the same period London wheat is down almost GBP20/tonne, or nearly 9%, whilst Paris wheat has declined by just over EUR26/tonne, or 9.4%.

The big question now is how will things shape up once we are past year-end? And will Obama pull another 11th hour rabbit out of the hat to avoid the US toppling over the edge of the fiscal cliff?

What we do know is that the Index Funds will be rebalancing their exposure to certain commodities in January. There's an interesting article on this here.

The upshot being that some funds are including soymeal and Kansas wheat for the first time. To "make room" for these commodities funds are expected to be net sellers of CBOT corn, soybeans and wheat, whilst buying CBOT soymeal and KCBT wheat.

Without a deal on the fiscal cliff AND fund selling in CBOT corn, soybeans and wheat prices could be under pressure early in January regardless of market fundamentals. Don't you just love the funds?

In other news today, MDA CropCast have left their Argentine wheat production forecast unchanged at 9.98 MMT, saying that "rains are now easing across the region, and should remain quite limited through next week. This will allow wetness to ease a bit, and also allow wheat harvesting to finally improve a bit. The drier weather will be most beneficial in central and eastern areas."

China's Zhengzhou Commodity Exchange has started trading rapeseed and rapemeal futures today, and they've got off to a bit of a flyer with Sep 13 rapeseed closing 4.3% higher at 5,215 yuan (USD828/tonne) and May 13 rapemeal up 2.1% at 2,409 yuan (USD382/tonne).

China's Ministry of Commerce estimate the country's Dec rapeseed imports at 418,500 MT versus their previous estimate of 121,100 MT.