For most markets, it was reduced fears of something
snapping that fostered gains.
That something being investors' patience with Spain, which
was boosted by Moody's decision to maintain the country at an investment-grade
credit rating, albeit with negative outlook.
London's FTSE 100 share
index added 0.7% to return above 5,900, around the top of its range of recent months,
with shares in Madrid itself soaring 2.4%.
The safe haven of the dollar
dropped 0.5%, boosting the appeal of dollar denominated assets such as many
Indeed, the CRB commodities index gained 0.5%, despite a
drop of $1 a barrel or so in Brent crude back below $113 a barrel.
However, there was one asset which did especially well
because of heightened concerns of snapping.
That asset was cotton,
which soared the daily limit of 3.0 cents a pound, or 4.0%, in New York for
December delivery - the contract's highest close in five months.
The problem is the poor quality of the crop, which has fostered
a rally in cotton despite what appeared a downright bearish picture last
Thursday, when the US Department of Agriculture upgraded its estimate for world
stocks to a (yet higher) record high.
High levels of so-called "micronaire", coarse fibres which carry
a higher risk of breaking during processing, in the US crop have raised
questions about just how real these huge inventories are – in America, the top
exporter, at least.
'Unlikely to prove
"The percent of cotton that can be delivered... is much lower
than I have seen in many years," Sharon Johnson, at Georgia-based broker
Knight Futures said, citing the high levels of coarse fibre as "behind the
Commerzbank analysts, saying "there appear to be problems at
present with short-term availability and quality" of US cotton, flagged the
slightly tardy pace of the American harvest, 28% completed as of Sunday,
compared with 30% typically by now.
With only 46% of that crop hitting the quality needed for
delivery against New York futures, stocks certified by the Big Apple's Ice
exchange have dropped to 7,800 bales, down from 18,500 bales a year ago.
That said, Commerzbank was, given the weak global
fundamentals, not optimistic about the rally having stamina, saying that "ewe
regard the tightening of supply as merely temporary, so the price increase it
has triggered is unlikely to prove lasting".
Quality factor in
Cotton's jump stole some of the thunder from what was a
better day in Chicago, where the main crops this time managed to hang on to
Investors are taking stock of whether the significant losses
in corn, soybeans and wheat from
summer highs have not left values below levels needed to ration thin supplies.
"The market is now at support and trying to base," US
Prices are being helped in this process by the winding down
of the US harvest, reducing the pressure from a seasonal jump in supplies.
Harvest pressure has this year, after all, been exacerbated
by the poor quality of the soybean and, in particular, corn crops, which has
made many farmers reluctant to risk storing it.
"There are definitely producers that would normally store
corn and soybeans at home that have opted to sell the lower-quality grain in
fear of quality loss in their bins," Darrell Holaday at Country Futures said.
However, with harvest pressure passing, now "the cash market
will help dictate the direction of the market, the cash market will be the
guide", US Commodities said.
And that is more positive for futures. "Basis levels are on
the rise," the broker said, with RJ O'Brien's Richard Feltes also flagging the "firm
OK, as far as exports go, US corn is still being undercut by
foreign supplies, with USDA corn export sales data on Thursday expected to come
in at 100,000-300,000 tonnes, low by historic standards (if representing a huge
rise from the 14,200 tonnes the week before).
But ethanol production eased only slightly last week, to
797,000 barrels a day, with inventories down too, by some 300,000 barrels to
"Production is still on a yearly pace that would be 3% above
the current USDA projection for the crop year," Country Futures' Darrell Holaday
"Most anticipation is that production in the current week,
as reported next week, will be higher as margins have improved slightly."
'Lack of rain in
He also flagged "some buying in the soybean complex caused
by the lack of rain in northern Brazil.
"The southern regions have received good moisture and the models
point to reasonable moisture, but the northern areas are dry and need some rain
in the next couple of weeks."
US Commodities flagged too that, in soybeans, "US crush
margins are strong as soymeal demand remains brisk", while Brazil is reported not
to be offering cargos for February, which buyers are desperate for, to refill
the pipeline sapped by weak South American and US crops.
Soybeans for November closed up 1.0% at $15.09 ¼ a bushel.
Chicago December corn rose in line to $7.45 ½ a bushel.
December achieved a 1.0% gain too, to $8.56 ¼ a bushel, helped by specific
factors besides the improved sentiment abroad in ag markets.
Benson Quinn Commodities flagged the "the prospects for US
wheat export business into North Africa continue to improve".
Even though Algeria at a tender this week bought 400,000 tonnes
of wheat likely from South America, and potentially France, the good news for
US exporters is that "little by little the European Union pipeline is being absorbed,"
bringing on the time when importers will need to turn to the US instead.
"US offers have gotten more competitive outside of the
And Australia is looking less and less likely to prove such
a strong competitor in export markets, with wheat from its main producing
state, Western Australia, becoming temporarily the world's most expensive as
harvest hopes took another knock.
Meanwhile, in Europe, customs data showed the UK, following
its dire harvest (it is still raining) entrenching its position as a net wheat importer,
in contrast with its typical position.
London wheat for November added 1.0% to £198.50 a tonne,
while Paris wheat for November eased 0.4% to E256.50 a tonne, depressed by a