Agricultural commodity contracts, bar cotton, found waking up a bit difficult on Friday.
Even palm oil -
which found a clear direction (upwards) in the last session, on a smaller-than-expected
Malaysian stocks number – struggled to maintain much enthusiasm.
Kuala Lumpur July contract stood down all of 0.1% at 2,669
ringgit a tonne as of 08:00 UK time (02:00 Chicago time) amid a sense of tranquillity
evident in some other markets too.
The dollar eased 0.1%
against a basket of currencies, while Brent
crude nudged 0.1% higher to $50.80 a barrel.
This after the S&P 500 share index overnight closed 0.2%
lower, in what counted as its Street's biggest one-day fall in three weeks.
Indeed, the Vix index – the share market's so-called "gauge
of fear" – this week fell below 10 for the first time in a decade.
'Kansas story is not
What a difference for ag investors from, say, the stormy conditions
of early last week, after snow, cold and high winds were feared to have cut US winter wheat production prospects by, according to some observers, up to
The point being that even as markets snoozed, commentators
cautioned that volatility may only be around the corner again, including in
wheat, for which the US cold damage story is not over, even after last week's
Wheat Quality Council tour of Kansas, the top producing state, came in with an
above-average yield estimate.
"The Kansas story is not over yet," said Peter McMeekin,
Nidera Australia origination manager
"In last year's Wheat Quality Council crop tour, the scouts
visited 655 paddocks across the state, before reporting their yield estimate.
"This year they were only able to visit 469 paddocks before
reporting to the market.
"Many stops were not made because the wheat was still under
snow, plants were laid down flat in some areas and conditions simply did not
allow an adequate inspection."
Besides, there is plenty of talk of wet conditions
encouraging disease, a threat ahead to yield prospects.
'Fat market swings'
Mr McMeekin added that "we have the critical, spring
maturity phase, of the northern hemisphere winter crop, coinciding with the
south American summer crop harvest, the US and European spring and summer crop
planting season, and the southern hemisphere winter crop planting programme.
"I am confident that there will be many more stories and
events over the next few months that will culminate in fat market swings."
At UK grain trader Gleadell, David Sheppard - referring to
the US Department of Agriculture's first full crop estimates for 2017-18,
released on Wednesday - said that while "on paper, wheat stocks still look
burdensome… tradable stocks actually show a decline".
Ie less wheat is in the hands of exporters, whose stocks levels
are particularly important to market pricing.
"Further talk of
losses will attract major bouts of short-covering."
'Prices will rise'
Indeed, at Commonwealth Bank of Australia, Tobin Gorey said:
"We expect prices will rise somewhat later in the 2017 season.
"But, there is still a lot of wheat to move so any price
rise in the interim is likely to quickly find sellers."
The opposing forces were pretty well balanced in early
deals, when Chicago wheat futures for July stood flat at $4.33 ¾ a bushel.
Minneapolis spring wheat fared worse, in easing 0.2% to $5.47
¼ a bushel, amid ideas of an acceleration in US and Canadian seedings of the
"Weather in the northern Plains will be warm and mostly
clear into early next week," said Benson Quinn Commodities.
Overnight, farm officials in Saskatchewan said that overall spring
crop sowings were 11% completed as of Monday, up 10 points week on week, if still
behind the average of 16%.
Back in Chicago, corn
futures eased 0.1% to $3.68 ¾ a bushel, bowing a little under pressure of
expectations of decent weather for Midwest sowings.
"The central Midwest is expected to be drier for the next 10
days and temperatures will be warming up to help dry out saturated soils and
get farmers back in the fields," Benson Quinn Commodities said.
"The current outlook is near ideal for corn and soybean
planting for most of the Corn Belt and as long as remains so should keep sell
pressure on the corn and bean.
"Many locations are forecast for 80+ degree Fahrenheit
temperatures. This should allow for wet areas to dry out and warm soil temperature
for fast emergence."
relatively racy in shedding 0.4% to $9.62 ½ a bushel for July, again pressed by
the hopes for rapid US seedings progress, besides fears for strong South
American harvests (with Argentina's crop receiving a series of upgrades)
implying enhanced competition on export markets.
That said, Joe Lardy, at CHS Hedging, said that the "soybean
market has been very lifeless lately.
"The market is still struggling with the weather wondering
if we are going to see more or less bean acreage." (Early spring wetness, in hampering
corn sowings, can mean some area is switched to soybeans, which have a slightly
later planting window.)
"So it appears that the market is very content to stay
rangebound until a trend emerges."
That said, the decline did take the contract below its 10-day
moving average, which may prove significant to some chart followers.
Where volatility remained at home was in cotton, which for July added a further 2.4%
to its 3.5% gains of the last session, talking the contract to 81.10 cents a
pound, a contract high.
The gain followed well-received data on Thursday for US
export sales and, in particular, actual shipments of cotton last week, of 164,000
running bales and 429,000 running bales respectively.
"Cumulative sales and shipment data for 2016-17 suggest that
final US exports for the current marketing year exhibit the potential to be
14.65m+ 480-pound bales," said Louis Rose at Rose Commodity Group.
The USDA currently forecasts them at 14.5m bales.
However, the outperformance again found a poor echo in later
contracts, with December cotton adding just 0.1% to 72.57 cents a pound.
CBA's Tobin Gorey noted how in the last session the December
contract "tried to join the party but was, with no invitation, rebuffed at the
"The US cotton market, based on the USDA's forecasts for
2017-18, is likely to be comfortably supplied by December."
He also flagged a multi-year high for the premium of July
futures over December ones, at more than 8 cents.