South African maize futures ended the session lower on Wednesday, which a trader attributed to some profit- taking on the back of concern surrounding dry weather conditions in Argentina.
The January 2012 white maize contract shed R16 to R2,694 per ton, the March 2012 white maize contract lost R2 to R2,642 per ton, while July 2012 white maize gave up R16 to R2,062 per ton, according to preliminary I-Net Bridge data.
The January 2012 yellow maize contract edged down R36 to R2,658, the March 2012 yellow maize retreated R33 to R2,567 per ton and the July 2012 yellow maize contract dipped R7 to R2,033 per ton.
The January wheat contract added R82 to R2,762 per ton, while the March wheat climbed R4 to R2,808 per ton, and the July 2012 wheat contract shaved off R19 to R2,850 per ton.
At 12:30 the rand was at R8.08 to the US dollar from R8.05 previously.
“What's interesting is that the market is being driven by the Argentinean weather situation. It's not raining there; the maize is in pollination - a critical stage. The weather is warm and dry, which is not a good condition and they're not predicting any rain for the week,” the trader said.
He noted that Argentina and Brazil were one of the “top” soy producers in the world.
“They are cheaper than the US. The international market has a huge demand for Argentinean and Brazilian soy and maize and if they can't produce a good harvest then this adds pressure.
“Yesterday what happened in the local market is that we had a huge jump in the July white maize. It seems the cart went before the horse - there was anxiety in the market regarding short supplies and the weather. We might continue to see some profit taking well into next week,” a trader said.
Meanwhile, Dow Jones Newswires reported that broad based buying across asset classes coupled with on-going fears of yield losses in South America propelled most US grain and soybean futures to multi-week highs on Tuesday.
Corn, wheat and soybeans each rallied to multi-week highs on weather in Argentina and southern Brazil, before light profit-taking selling trimmed advances.
After a three-day holiday break, traders returned to work on Tuesday to find weekend rains were disappointing in Argentina and southern Brazil.
That added to anxiety about South American corn and soybean crops that fuelled gains in the past two-weeks.
Forecasts remain hot and dry, particularly for Argentina, fuelling worries yields in South America could be curtailed.
Weather is first and foremost the key driver for grain prices, with traders pricing in the week's weather forecasts, said Tim Hannagan, analyst with Chicago-based brokerage PFG Best.
Traders added risk premium to prices to account for threats to Argentina and Brazil corn and soybean yields, particularly with some private forecasters beginning to lower their expectations for South American crops.
Argentina, the second largest exporter of corn behind the US, has limited chances of rain forecast for the next week, and southern Brazil's sandy soils are under stress as well, Hannagan said.
Brazil is second to US in soy production and is estimated to surpass the US in exports this year.
Broader based gains in commodities added to the supportive tone Tuesday, traders said.
In general there was commodity-wide buying, sparked by weakness in the US dollar, said Mike Zuzolo, president of Global Commodity Analytics.
Speculative fund buying was a spring board for higher prices, as the currency shift in the dollar attracted buying in energy, metals, grains and equities, said Zuzolo.
Weather remains the dominant force behind the strength in grains, but without the dollar slide, weather would not have brought speculative funds in to buy the way they did, Zuzolo added.
Meanwhile, wheat futures stumbled in late session activity, with traders taking profits on recent gains amid ample world supplies and heavy competition in global export markets.
Corn for March delivery at the Chicago Board of Trade ended up 1.9% to US$6.58 1/2 per bushel.
CBOT March wheat ended up 0.7% at $6.57 a bushel, KCBT March wheat finished down 0.6% at $7.12 1/2 and MGEX March wheat finished 0.6% lower at $8.44 1/4. - I-Net Bridge