The dollar keeps
The dollar index, a measure of the greenback against a
basket of other currencies, fell a further 0.6% in early deals on Friday to
91.011, its weakest level since January 2015.
Besides market unease over the performance of the
administration of US President Donald Trump, the latest dollar dip reflects the
increased appeal of the euro, after
the European Central Bank said on Thursday it will reveal plans on winding down
its quantitative easing economic support programme.
Such an event would be of huge significance, in marking
something of an end (in the eurozone at least) to the hangover from the world
Whatever, the euro dug in above the psychologically important
mark of E1.20 to $1 secured in the last session, standing at E1.2046 in early
deals, a gain of 0.2% on the day.
The currency moves are hardly going unnoticed on agricultural
commodity markets, where eurozone traders are bemoaning the resultant lack of
competitiveness of eurozone exports, including those of grains.
Data on Thursday underlined this dynamic, in showing EU soft
wheat exports so far in 2017-18 (beginning
in July) down 48% at 5.25m tonnes, and barley
shipments down 54% at 543,000 tonnes.
That said, there appears to be more than currency involved
in the wheat decline, with the disappointing harvest in Germany, typically a
key producer of higher protein wheat, a factor too.
Indeed, Agritel said that "France seems to have exported
greatly," although especially to other European countries rather than outside
the EU, "benefiting from a poor harvest and bad quality in Germany".
Russian rail subsidy?
If it is any consolation to eurozone merchants, at least the
euro, up 2.5% against the dollar over the past month, has been appreciating
more slowly against the dollar that the rouble,
up nearly 5% against the greenback.
The rouble - which is being helped by firmness in oil
markets, with Brent crude at its
highest levels since April - is being closely watched in grain markets thanks to
Russia's huge grain harvest, much of which is expected to make it on to export
While Russian infrastructure problems are an issue, Benson
Quinn Commodities flagged a meeting of the Russian Grain Union industry group
which "should shed some light on an apparent plan to subsidise rail transport
"If it turns out the subsidy is wheat specific, wheat export
capacity will expand at the expense of corn
Furthermore, the Canadian
dollar - a key currency for trade in spring wheat, of which the country is
a major grower - has been appreciating strongly too, fuelled by an unexpected
interest rate rise earlier this week.
That is not the only reason, but it is a key one, behind a
recovery in spring wheat prices,
which added 0.1% in Minneapolis to $6.50 ½ a bushel as of 10:00 UK time (04:00
Chicago time), retaking the psychologically-important $6.50-a-bushel mark, and taking
three-day gains to 3.4%.
All this has put increased focus on how US exports respond
to the weaker dollar, which should be a boost, making dollar-denominated assets
that much more affordable.
The subject will be a key focus on Friday with the release
of weekly US export sales data for last week, expected for all wheat to come in
at 350,000-550,000 tonnes.
For corn, sales are expected at 650,000-950,000 tonnes (plus
up to 250,000 tonnes for 2016-17, which ended last week).
And for soybeans,
export sales for the new season are seen coming in at 700,000-1.0m tonnes,
plkus up to 100,000 tonnes for 2016-17.
Wheat prices gain
Chicago winter wheat
for December stood up 0.4% at $4.39 a bushel in early deals, shying away from a
return back to the contract low of $4.22 ½ a bushel reached last week.
"Prices remain somewhat above season lows," said Tobin Gorey
at Commonwealth Bank of Australia.
"We think the dollar's continued weakness will help them
"Nonetheless, the US's competitiveness needs to translate
into more exports for prices to remain here."
In Australia itself, a strong week for east coast wheat
futures ended on a soft note, with the January contract easing by 0.6% to Aus$266.00
a tonne, but still up 6.2% this week.
While weather forecasters "are not expecting any significant
rainfall in eastern crop regions for another week or so… worrisome cold snaps
are forecast to stop by early next week," Mr Gorey said.
For corn and soybean markets, there are more complex
dynamics in play, through the factor that US crops are still in the field, and
yield estimates very much in play, a factor which will come to a head with the release
of the US Department of Agriculture's monthly Wasde crop report.
Reuters poll data overnight show that analysts expect some
cut in the Wasde to US yield forecasts, but not big ones, with the corn figure
seen coming in at 168.2 bushels per acre.
That compares with a current figure of 169.5 bushels per
For soybeans, the Wasde is seen reducing the yield forecast
to 48.8 bushels per acre, from 79.4 bushels per acre.
And there remain worries, thanks to Midwest dryness, with
Benson Quinn Commodities noting that "dry
conditions are expected to continue through the Corn Belt for the next couple
At futures International, Terry Reilly said that "for the US
corn production areas, 10% of the crop is within an area experiencing drought,
unchanged from the previous week and down from 15% a month ago, but well up
from 3% at this time last year".
Meanwhile, in China, cool temperatures are growing as a
worry, although Dalian corn futures for January, having gained for five successive
session, gave back most of those gains on Friday in dropping 1.2% to $1,699 a
In Chicago, corn futures for December added 0.4% to $3.56 ½ a
bushel, although still remain a little down for the week.
November gained 0.3% to $9.72 a bushel in Chicago, with actually focus in the
oilseeds complex more on the canola-rapeseed side, after the European Union
decision to slash import duties on imports of Argentina biodiesel from
With biodiesel made from vegetable oils, the move is seen as
meaning a dent to EU demand for rapeseed, and indeed imports of the oilseed.
In the last session, "the reaction on the rapeseed futures market
was immediate with a registered downturn of E5 a tonne on Euronext yesterday",
Winnipeg canola futures for November stood a 0.2% lower at
Can$490.90 a tonne in early deals, taking the two-session decline to 1.3%, with the stronger Canadian dollar hardly helping either.
meanwhile, added all of 0.1% to 2,785 ringgit a tonne in Kuala Lumpur, Malaysia.
While the EU has also slapped large tariffs on import of
Indonesian biodiesel, over the antidumping claims it applied to Argentina, only
Argentina has had the levies condemned by the WTO.