Wednesday turned out to be one of those days when
agricultural commodities recovered a little bit of the initiative against shares.
Shares have stolen a lead, setting multi-year highs in a
range of markets, after 2013 has brought an end to the "risk-on, risk-off"
trades, in which all risk assets appeared to be moving as one.
But even while stocks gave back some gains, falling 0.8% in
New York, after minutes showed the US central bank mulling pulling back on ultra-easy
monetary policy, agricultural commodities showed gains.
That contrasted with a 0.6% drop in commodities as a whole,
as measured by the CRB index, and defied a 0.7% rise in the dollar, fuelled by the idea of lower
risk of US currency debasement.
A strong dollar makes assets denominated in it, including
many raw materials, less affordable to buyers in other currencies.
'High level of buying
Still, there was reason for firmness in many ags, including talk
in many of strong Chinese buying since the country returned from its lunar new
Cotton was one
such crop, fostering a rise of 0.4% to 84.46 cents a pound in New York's best-traded
May contract, the lot's best finish since May.
"Following China's return to the market, a high level of
buying interest is anticipated from the country," Commerzbank said, adding that
more would be known on this with weekly US export sales data, on Friday.
"Also driving the price up is the expected cut in US acreage
due to the fact that the cotton price underperformed last year as compared with
More will be known on that later this week too, when the US
Department of Agriculture unveils its first formal crop forecasts for 2013-14.
Preliminary data revealed last week showed acres falling
China is also believed to have been in the market for US wheat, notably soft red winter and hard
red spring varieties, with talk a volume of 350,000 tonnes doing the rounds.
(It has also bought an estimated 400,000 tonnes from Australia and 100,000
tonnes from Canada.)
Such purchases would lend further weight to ideas that China's
wheat harvest last year was nowhere near as large as official data show.
And "there is a lot of talk continuing about Chinese
purchases of US soybeans", Darrell Holaday at Country Futures noted.
Richard Feltes at RJ O'Brien said that the talk was of China
buying up to eight cargoes of US soybeans, to replenish port stocks which have
fallen to 4.9m tonnes from some 6m tonnes a year ago, and ideas of a drop below
4m tonnes if demand from crushers stays strong.
US Commodities said: "At this pace of US exports, the south
east US will need to rely partly on soymeal
shipments from Brazil in midsummer."
'Back-up in Brazil
This Chinese demand was, in the investor timetable, supposed
to have transferred to South America.
But a rainy early harvest, and logistical problems,
including a strike threat, have dealt a blow to that idea.
"Logistics concerns in South American continue to foster
very real ideas of additional demand for old crop US soybeans and soymeal,"
Benson Quinn Commodities said.
"The relatively slow pace of the early soybean harvest, wet
conditions at port locations and inefficient infrastructure have limited the
ability to load a vessel line up that continues to grow."
US Commodities said: "The back-up in Brazil loadings has now
bubbled to the top - 7.7m tonnes of grain is lined up to load at the ports."
'More dock worker
Even if soybeans do get to port, the perennial risk of
industrial action has risen to the fore, with port workers nationwide planning
strikes on Friday and Tuesday.
"Brazilian dock workers boarded a ship and stopped it from
unloading modernised cranes - they are concerned that modernisation of port
facilities will cost them union jobs," Paul Georgy, president of US broker Allendale,
"Brazil will likely see more dock worker problems in coming
Furthermore, Argentina suffered yet another downgrade to its
crop, this time to below 50m tonnes, with Lanworth pegging the crop at 49.6m
tonnes, 21.0m tonnes below its estimate two weeks ago, and only offset a touch
by a 700,000-tonne upgrade to 81.0m tonnes in the forecast for Brazil's
"Rapidly declining or suppressed crop vegetation density
evidenced by imagery indicates continued risk to South American soybean
production," Lanworth said.
That said, the analysis group offered bears some scraps too
by coming in with a figure for this year's US soybean harvest which, at 3.47bn
bushels, was 4% higher than the USDA's preliminary estimate last week.
This forecast depended on an estimate of a hefty 81.4m acres
Furthermore, not all the news from South America was price
positive, with RJ O'Brien's Richard Feltes noting that yields from Brazil's
early harvest "so far are tracking near average with 22% harvested, on par with
last year's brisk pace.
"Rio Grande do Sul crops benefited from widespread and
measurable weekend rains."
Chicago soybeans for March ended up 0.9% at $14.82 ¾ a
bushel, but nearly $0.10 below their intraday high.
'Needs to get its
hands on corn'
Corn managed a
third successive gain, helped up by soybeans (and wheat), but also by the firm US cash market.
"Strong corn basis levels continue to point to the market
needing to get its hands on corn," Country Futures' Darrell Holaday said.
In Decatur, Illinois, the basis "went to a record publicized
basis of +$0.40 a bushel.
"That means that the real basis to buy any quantity is
probably +$.50-0.60 a bushel, and that is
probably not going to prompt a substantial amount of cash movement."
Chicago corn for March ended up 0.8% at $7.00 ½ a bushel,
returning to finish above $7 a bushel for the first time in more than a week.
gained not just on China purchase rumours, but an actual Egyptian order, if of
a modest 60,000 tonnes.
This was purchased from Venus at $296.75 a tonne, plus
freight of $28.85 a tonne.
And signally, there were no offers of supplies from other
origin – taken as a sign of tightening supplies in other origins, certainly supplies
able to compete with US values depressed by the grain's slide to seven month
lows earlier in February.
"Egypt bought some US soft red winter wheat and that has
been very supportive," Mr Holaday said.
'Built into the
Sure, rains are proving much-needed moisture for drought hit
winter wheat areas.
"The Plains blizzard will be beneficial to wheat," Mr
"But much of that has been built into the market," he said,
adding that the GFS weather model is after the current moisture "not indicating
any significant rain in the next six-to-12 days".
Chicago wheat for March closed up 0.9% at $7.38 ½ a bushel.
Back in New York, raw
sugar for March added 0.7% to end at 18.35 cents a pound, putting a little
further distance between itself at a two-year low of 17.87 cents a pound
reached last week.
The sweetener is gain support from nerves among investors
who have a near-record net short position on the sweetener, at a time when the
low prices are raising ideas that large amounts of cane will go to producing ethanol
As Macquarie noted last week, "there is a strong chance that
funds retain their [sugar] short positions in this market," given prospects of
a large Brazilian cane crop this year.
"But this is always a risky strategy in sugar, with so many
weather and other variables."
New York arabica
coffee soared 2.3% to 141.65 cents a pound for the May contract, recovering
from its own two-year low, amid growing fears for the impact of roya fungus on
Central American supplies.