PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 21:42 GMT, Friday, 16th Nov 2012, by Agrimoney.com
Evening markets: China fears send soybeans to five-month low

A tumble by the US over a fiscal cliff of sharply higher taxes and lower government spending looked a bit further away on Friday.

Barack Obama, the US president, opened meetings with congressional leaders aimed at making a start on hammering out an alternative scenario.

And that relieved pressure on financial markets, allowing many assets to get up off the floor, with Wall Street shares, for instance, standing 0.3% higher in late deals.

The CRB commodities index added 0.3%.

China jitters 

That CRB rise might have been higher, were it not for the soft performance of some agricultural commodities, notably soybeans, which remained out of favour, despite US weekly export sales of the oilseed coming in at 585,000 tonnes for 2012-13 and 2013-14 combined.

That was above market hopes of a figure of at best 550,000 tonnes, and three times the figure the week before.

But that was overshadowed by the announcement by China's CNGOIC think tank that the country, the top soybean importer, had cancelled 600,000 tonnes of the crop reinflaming a market sore point which had appeared soothed in the last session when Chinese buyers was revealed to have purchased 120,000 tonnes.

No matter that the data may have been included in last week's US export sales data, which showed decreases for soybean sales to unknown destinations of 545,600 tonnes, as Benson Quinn Commodities noted.

Nor that actual US soybean exports in the latest week topped 1.8m tonnes, mainly to China, which took 1.28m tonnes.

The data fuelled fears that negative crush margins in China will prompt a slowdown in imports.

'Panic get me out'

As an extra weight to prices, weather in Brazil remains benign for sowings, and weather in Argentina less so, with rains proving dogged.

This could boost soybean Argentine soybean seedings even further than the large increase already planned, if farmers switch out of corn, which is earlier planted.

"The prospect for a large South American crop continues to weigh on prices," US Commodities said.

Indeed, Chicago soybeans for November closed down 1.3% at $13.83 a bushel, the weakest finish for a spot contract in nigh on five months.

"Accelerated selling pressure since opening smells like 'panic get me out' selling budged along by fiscal cliff uncertainty and more talk of the US slipping back into recession," Richard Feltes at RJ O'Brien said.

'Very parochial view'

Was there a touch of that in wheat too?

Certainly, dealers at a major European commodities house accused US investors of taking a "very parochial view" in losing confidence in America's ability to pick up wheat trade once supplies from elsewhere run dry.

"Many traders taking a wider view have believed for some time that US corn and wheat will be in demand, but not yet," the dealers said.

"First we saw a rush to ship wheat from Russia and the Ukraine but that has now dried up. Now, the EU is getting the lion's share of the business.

"It is widely believed that once the EU surplus begins to dry up, US exports will take over. However, in the meantime traders in the US are getting jittery and wondering if that day will ever come."

Soft data

Jitters were hardly eased by US weekly export sales data which, at 314,000 tonnes, were at the lower end of the range of market expectations, if well up week on week.

And while weather forecasts for the US hard red winter wheat areas still suggested further dryness, for which read more deterioration in a crop already suffering its worst start on record, bears got the upper hand.

Enough of an advantage, in fact, to send Chicago's December lot below the bottom of a trading range that had held for four months. The contract closed down 0.9% at $8.53 a bushel, its weakest finish since mid-July.

European contracts did a little bit better, helped by confirmed export demand, with the Paris January contract ending down 0.3% at E267.00 a tonne.

London wheat for May closed down 0.5% at £220.75 a tonne.

Logistical issues

Wheat's performance lost it further ground in Chicago against corn, which closed up 0.8% at $7.27 a bushel for December delivery.

The Argentine sowings delays were positive for the crop, which looks set to be less affected too by the US logistics hiccups caused by low Mississippi river levels given that US corn exports are running slow, meaning less crop to delay and potentially back-up into extra stocks.

Indeed, it is Brazil's logistics which are more of an issue, potentially to America's benefit.

Benson Quinn Commodities flagged talk of Japan and Taiwan raising "demand for US corn to replace purchases that are being delayed in Brazil due to port congestion".

And US corn export sales are showing some signs of life, reaching 312,000 tonnes in the latest week, old crop and new, a relatively firm figure by recent standards.

But also a big help was the decision by the US Environmental  Protection Agency not to alter the US ethanol mandate, despite pleas from livestock producers to free up more corn for feed.

"This was expected, but it did lift a cloud of uncertainty," Darrell Holaday at Country Futures said.

Mixed softs

Could soft commodities rise too?

Well, not cocoa, which for March delivery dropped 3.4% to $2,938 a tonne in New York, amid waning concerns that the unexpected dissolution of Ivory Coast's cabinet hailed something more worrying in a country which is the top producer of the bean.

(Marex Spectron on Thursday urged investors not to get too bullish on cocoa, which proved the right call on Friday at least.)

Arabica coffee struggled too, closing down 1,0% at 152,50 cents a pound for March, weighed by Brazilian stocks boosted by a sizeable harvest, and with rain raising hopes for the 2013 crop too.

But raw sugar added 0.6% to 19.15 cents a pound for March, shaking off the small upgrade late on Thursday by the International Sugar Organization to its hopes for the world surplus in 2012-13.

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