PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 09:30 GMT, Wednesday, 17th May 2017, by Mike Verdin
AM markets: bulls dine on dollar weakness. Even wheat gains

However many people James Comy, the former FBI director, has annoyed, he looks a friend to agricultural commodity bulls.

At least, the rumpus following his dismissal by Donald Trump, the US president, has done damage to the dollar which has boosted the appeal of exports denominated in the currency, making them more affordable to foreign buyers.

The greenback fell below 98 against a basket of currencies at one point in early deals on Wednesday, its lowest since Mr Trump's election six months ago, and down more than 5% from "Trump bump" highs reached early in 2017.

The dollar's depreciation fuelled a firm start for US-traded agricultural commodity futures, which showed widespread gains.

'Slowed the flow'

OK, for soybeans, the currency has been higher profile - or at least, the strength of the Brazilian real against the dollar has.

This cuts the value in Brazil of assets traded in dollars, and has dissuaded many producers in the South American from selling crop, in hope of a currency reversal, and higher soy values ahead.

"The Brazilian real's rise has, by cutting domestic prices, slowed the flow of Brazilian soybeans to the market," said Tobin Gorey at Commonwealth Bank of Australia.

"Just for good measure, Brazil's customs officers are on strike for the next few days" too, in another small plus for bulls.

'Lacking in sellers'

Benson Quinn Commodities said: "The market seems to be lacking in sellers, with commercial owning most of the soybeans in the US while the Brazilian farmer sits on the sidelines."

Meanwhile, on the demand side, the broker flagged "talk about new sales to China this week" speculation which gained some support when the US Department of Agriculture on Tuesday unveiled the sales of 132,000 tonnes of soybeans to an unknown import destination.

Soybean futures for July edged 0.2% higher to $9.78 a bushel as of 09:20 UK time (03:20 Chicago time), crossing back above their 50-day moving average for only a second session in the past two months.

Soyoil for July added 0.6% to 33.20 cents a pound, helped by continued anticipation of the US imposing stiff duties on imports of biodiesel (which is made from vegetable oils) from Argentina and Indonesia.

The gains helped palm oil too return to winning ways, with the August contract adding 0.4% to 2,621 ringgit a tonne in Kuala Lumpur.

Vegetable oil values were firm overnight on China's Dalian exchange too, with palm oil for September edging 0.4% higher to 5,514 yuan a tonne.

Argentine rains return

Back in Chicago, corn managed a 0.2% gain to $3.68 a bushel for July delivery, before hitting turbulence as it tried to head above a cluster of moving averages, including the 40-day and 200-day.

Weather seems OK but not great for the last chapters of spring sowings, with Benson Quinn Commodities flagging forecast in the eastern Corn Belt "for a warmer drier week that should allow for planting progress", but noting showers north and west.

"This weekend looks to offer below-normal temperatures with 50s to 60s Fahrenheit for a high," the broker added.

Meanwhile, rain has reemerged as an issue in Argentina too, with the potential for heavy rains where on Thursday and Friday, disrupting harvesting and perhaps damaging ripe crops.

"This should be monitored," advised Terry Reilly at Futures International, especially given that "several private entities have recently upward revised Argentina's soybean, corn crops".

Michael Cordonnier earlier this week raised his forecasts for the Argentine corn crop by 2.0m tonnes to 39.0m tonnes.

Data later

Still, it was wheat which performed best of Chicago's big three, for once, adding 0.5% in Chicago to $4.26 a bushel.

The grain was helped, on the demand side, by a tender for wheat by Egypt's Gasc grain authority, which many observers thought had done its purchases for 2016-17, and was now to rely on stocks and supplies from the domestic harvest for a while.

Results of the tender will be known later, offering an interesting insight into the state of cash markets, and the relative competitiveness of different origins.

Premature relief?

Meanwhile, there remains some concern that investors may be underestimating the damage done to US winter wheat from the snows and winds a couple of weeks ago.

OK, the weekly USDA crop progress data on Monday did not show a big drop in ratings, including in Kansas, the top wheat-growing state, which bore the brunt of the weather.

"Traders may have seen this as a positive sign there was little damage done to the winter wheat crop in western Kansas," said Terry Reilly at Futures International.

 "But we think it will take a little more time for the damage to surface.

'Sets the stage for surprises'

At RJ O'Brien, Richard Feltes said that weaker-than-expected yields "won't be apparent until mid-June", ie when harvest is ramping up.

"The unusual nature of the hard red winter wheat growing season - dry early, mid-winter soaker, above-normal spring temperatures, heavy early-May snow, ample late-May precipitation, elevated foliar disease - heightens uncertainty over final yields," he said

 In so doing, it "sets the stage for surprises as harvest accelerates mid-June".

'Treacherous price spikes'

Price rises were also evident in New York cotton, which for July rebounded 0.4% to 81.64 cents a pound despite closing the last session limit-down, implying unfulfilled selling, after the surge of the previous three session.

Tuesday's tumble "might signal that the squeeze has been somehow resolved. Or it might not," said CBA's Tobin Gorey.

"Spikes of this type are made treacherous because they do not always happen in a straight sequence of days they are plenty volatile."

PM markets: cotton slumps, amid export fears. But soy gains
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