The good news for agricultural commodity bulls was that the dollar rally quickly ran out of steam.
The greenback began to show some strength late in the last
session, after the Federal Reserve said it would consider an interest rate rise
later this year, and begin normalising a balance sheet sent ballooning by
economic revival efforts – in essence, calling an end to quantitative easing.
However, for all the media fuss surrounding the
announcement, the greenback ended the day up modest 0.7% against a basket of
And it was struggling to hold all those gains in early deals
on Thursday, easing worries for commodity bulls.
Many raw materials are denominated in dollars, meaning that
a stronger greenback makes them less affordable to buyers in other currencies.
'Limping into harvest'
Indeed, helpfully for US wheat futures, the rouble
proved a touch stronger in early trading against the dollar (avoiding a
confrontation with its 200-day moving average) so making Russia's huge
exportable supplies of the grain a little less competitive.
There was more talk around about the rising price of exports
from drought-hit Australia, putting them out of the running in Asia too,
diverting demand to other origins.
"Australia's crop is limping into harvest and this could
send more demand to US shores in the second half of the marketing year," said
Benson Quinn Commodities.
East coast Australian wheat futures for January closed up a
further 1.4% at Aus$283.00 a tonne overnight on Sydney's ASX exchange, equivalent
to $225 a tonne, or $6.12 a bushel.
The rising price "implies a good deal of worry about
Australia's wheat crop this year, and in particular how much mid protein wheat
it will yield," said Tobin Gorey at Commonwealth Bank of Australia, who
typically compares ASX values with those of Kansas City-traded hard red winter
'High rainfall in
Argentina's soon-to-be-harvested wheat crop remains a worry
too, thanks to persistent rains.
"Concerns over wetness in Argentina will likely linger
through the end of September," said CHS Hedging, flagging forecasts of a "very
mixed weather pattern across South America, with high rainfall in store for
parts of both Argentina and Paraguay".
Benson Quinn Commodities added that "with the funds still
significantly short in Chicago, there just isn't much of a reason to push
prices back to their lows".
But nor was there the impetus to extend headway, and
confront Chicago's December wheat contract with a 40-day moving average (at a
little under $4.55 a bushel) that it has not closed above in nearly two months.
Chicago wheat for December stood down 0.25 cents at $4.49 ½ a
bushel as of 09:20 UK time (03:20 Chicago time).
'Needs to stay competitive'
While terming gains in the last session "another data point
suggesting that seasonal lows are in place," CBA's Mr Gorey added that "we do
not though have a lot of optimism that prices can gain a lot more.
"Neither Chicago nor Kansas trading seemed to have the
appetite to rise beyond $4.50 a bushel.
"US pricing, more importantly, needs to stay competitive" to
More on this will be
known later, with US Department of Agriculture weekly export sales data
expected for wheat to come in at 300,000-500,000 tonnes.
Nor could corn
build on its (modest) gains of the last session, standing down 0.1% at $3.49 ½ a
bushel – a small move, but one which signally surrendered the psychologically
important $3.50-a-bushel mark.
"Corn looks to be establishing a long-fought-out sideways
trading range, where higher prices will discourage demand and increase new
producer selling, while low prices support demand and short off supply," said Benson
On the demand side, USDA data later are expected to show
corn export sales of 700,000-1.0m tonnes.
And there remains broadly positive comment on US ethanol
production data on Wednesday, despite it showing a drop of 14,000 barrels a day
to 1.03m barrels a day.
This still represented a 5.3% rise year on year, and Benson
Quinn Commodities flagged that "ethanol margins are holding positive and some
plants are looking at expansion".
Still, there is lots of talk too of pressure on corn prices from
the expanding US harvest.
Such is the case in the soybean
market too, a factor which is offsetting the support to values from worries
over dryness delaying Brazilian sowings of the oilseed, and wetness threatening
to hamper Argentine plantings of the oilseed (which start in earnest next
Furthermore, weekly US export data will also be closely
watched, after a string of recent announcements through the USDA's daily alerts
system which has given hope of catch-up after a worryingly slow pace of forward
orders for 2017-18.
Weekly US export sales are expected to come in at 1.2m-1.5m
For now, Chicago soybean futures for November stood down
0.3% at $9.66 ¾ a bushel.
Elsewhere in the oilseeds complex, palm oil for December dropped 0.6% to 2,753 ringgit a tonne, undermined
by a drop of 1.0% to 34.56 cents a pound in Chicago futures in rival soyoil.
'History ain't what
it used to be'
In New York, cotton
futures for December were lower too, down 0.4% at 68.98 cents a pound, although
remaining well within their recent trading range.
"It seems as though the market is sitting with its hands on
heads for now as the traders decide what to do with their 80,000-contract long
futures positions," said Ecom.
"Everyone is waiting for the next move and the specs are
definitely hoping that the direction is up."
Ron Lee at Georgia-based McCleskey Cotton said that "history
tells us that a 6.0m-bale carryout," as the USDA has forecast for the US this
season, excluding hurricane losses, "equals a price that begins with a 5.
"But history ain't
what it used to be these days. There is simply too much uncertainty out there -
it's around every corner."
Mr Lee added that "our prediction of a market that should
stay within the 66.00-76.00 cents a pound well-defined range is still probably
as good as any".