Grain futures slip

US grain and soyabean futures lost ground on Thursday as worries about the "fiscal cliff" weighed on commodities despite signs of bullish supply and demand fundamentals for some crops. The nearby March wheat contract on the Chicago Board of Trade slid to a near six-month low, before recovering in part and finishing with modest losses shared by soyabeans and corn.
In the wake of President Barack Obama's return to Washington to restart negotiations over the federal budget, US equities also traded lower. "The whole commodity world feels this fiscal cliff is going to be deflationary," said Chris Manns, president of Traders Group Inc in Chicago. "It's going to be fewer dollars chasing fewer goods and services if we fall off the fiscal cliff." Late in the grain-trading session, however, news broke that the US House of Representatives will hold a work session on Sunday, one day before the Dec. 31 deadline for reaching a deal to avert the fiscal cliff. Without a deal, the deadline would trigger spending cuts and tax increases.
Wheat, corn and soyabeans all pared their losses in the final minutes of trading. Chicago soyabeans and wheat are, despite big losses this quarter, heading for the largest yearly gains of the 19 components of the commodities benchmark Reuters Jefferies CRB Index. Both are up about 18 percent on the year, boosted by drought-related production declines in key growing regions. But concerns about the struggling US winter wheat crop and growing-season weather for South American corn and soyabean crops are secondary to fears about the fiscal crisis, Manns said, with thin holiday-season trading volumes leaving grain markets vulnerable to quick turns.
With the US fiscal cliff" in mind, large speculators have slashed their bullish bets on corn to the smallest level since June and boosted their net short position in Chicago wheat to the highest since May, data from the US Commodity Futures Trading Commission showed last week.
Chicago March wheat fell 2-1/4 cents, or 0.3 percent, to $7.72-1/4 a bushel, after dropping to $7.64-1/2 earlier, the lowest price since early July. Chicago Board Of Trade January soyabeans dipped 5-3/4 cents, or 0.4 percent, to $14.18-3/4 a bushel, while March corn shed 1-3/4 cent, or 0.3 percent, to $6.91-1/2 a bushel, pressured by long liquidation. Soyabeans were underpinned by the USDA's report on Wednesday of sales of 115,000 tonnes of US soyabeans to China and 108,000 tonnes to unknown destinations, both for delivery in 2012/13.