Commodities found Friday heavy going, as the impact of China's
poor manufacturing data hit home.
China's official purchasing managers' index dipped to 50.1,
from 50.4 in January, a weaker figure than expected, and curbing some of the more
bullish thoughts on demand for raw materials from a huge commodity importing
Indeed, the data, and the 0.4% rise in the safe have of the dollar that it fostered, were blamed
for a decline of 0.9% in the CRB commodities index.
A firm dollar reduces the affordability to buyers in other
currencies of dollar-denominated exports such as many commodities.
Struggle for gains
So it was little surprise that some of the agricultural commodities
more heavily dependent on Chinese purchasing found headway difficult.
New York cotton for
May wavered before posting a marginally positive close, up 0.1% at 85.40 cents
a pound, the December contract showed a small decline, by 0.1% to 85.12 cents a
pound, while the December contract showed a small decline, by 0.1% to 85.14
cents a pound.
And in Chicago, it was soybeans,
of which China is responsible for nearly two-thirds of world imports, which
fared worst among the big crops, standing 0.8% lower at $14.64 a bushel with
some half an hour of trading to go.
May soybeans dropped 0.6% to $14.43 ½ a bushel, with the March
lot ending down 0.7% at $14.64 ½ a bushel.
'Generally in a good
Soybeans were little helped by revised data from Informa Economics which raised the estimate for the Brazilian crop by 1.3m tonnes to
70.6m tonnes, while keeping the estimate for Argentina's harvest at 51.0m tonnes.
That is a more bearish figure than it might appear, given the
US Department of Agriculture figure of 53.0m tonnes, with many other observers,
such as Lanworth, and the Buenos Aires and Rosario grain exchanges, dropping
their estimates below 50m tonnes.
But the Argentine government provided extra reassurance,
saying that soybean crops in parts of Buenos Aires province, for instance, were
"generally in a good condition since the rains arrived", easing the fears over
drought which peak in early-mid February.
There also appeared to be some profit-taking on spreads
going on too, with Chicago soymeal,
which has also been strong of late, falling 1.7% to $427.30 a tonne, while laggard
soyoil jumped 1.3% to 49.47 cents a
pound for March delivery.
This despite an eighth successive negative close by rival
vegetable oil palm oil in Kuala
Lumpur, down 1.2% at 2,367 ringgit a tonne, facing the extra pressure from
ideas of huge inventories at ports in China, naturally a major importer.
And as an extra negative it looks like US farmers may have a
slightly bigger incentive to plant soybeans this year, with Richard Feltes at
RJ O'Brien noting talk that crop insurance prices, a big influence in farm
sowing decisions, will be $5.65 a bushel for 2013 corn, and $12.87 a bushel for
That would imply a ratio of 2.3:1 in soybeans' favour,
compared with 2.2:1 last year.
'Short squeeze in play'
However, grains did better, with much attention yet again on
Chicago's March corn contract, in
which there are ideas of holders of short positions being left in the lurch by
the lack of grain up for delivery against the close-to-expiring lot.
"The March/May inversion in corn continues to build, pushing
the $0.18-a-bushel level at one time today," Darrell Holaday at Country Futures
"The short squeeze is clearly in play."
Again, there were no deliveries against the March lot (nor,
for that matter, in soybeans or soymeal either).
Cash vs futures
Grain Analyst, part of the Daniels Trading brokerage empire,
said that corn market conditions could justify investors with long holdings in March
futures maintaining their positions, despite the risk of being assigned
delivery now that the lot is in the expiry process.
With cash market offering $0.32 a bushel more in Decatur,
and $0.55 a bushel more in Gulf ports, farmers are unlikely to turn to futures
"The closer we get to March expiration, the closer the
nearby March contract should get to the cash price," Grain Analyst said.
Added to all this "is an impressive week of export sales in
corn for the US, with over 500,000 being confirmed" on Thursday, FC Stone
Corn for March finished 0.7% higher at $7.24 ¼ a bushel in
closing deals, with the May lot catching up in the end to add 0.7% to $7.08 ½ a
'China is looking for
And this time, wheat
kept up, proving one crop in which China looks increasingly interested in
importing (although there is talk of the country lining up 2013-14 US corn
OK, industry portal China Cereal said the group was looking
at selling 1.29m tonnes of wheat from state reserves between March 6 and 8, to
ease a tight market ( which has supported ideas that last year's crop was
nowhere near as high as official data show).
But thoughts of a sale have not significantly undermined
prices, which have remained near record highs, prompting talk of more imports.
"I hear more chatter that China is looking for offers on US wheat
and new crop corn," RJ O'Brien's Richard Feltes said.
Nor is it the only purchaser in the market.
Jaime Nolan-Miralles at broker FCStone noted "buying
interest picking up, with Saudi, South Korea and Bangladesh back in, with
Tunisia also seeking 50,000 tonnes of optional origin wheat for April shipment".
Tunisia actually bought 50,000 tonnes of soft wheat from
Glencore and Casillo at some $348 a tonne, including freight, and 25,000 tonnes
of barley from Bunge at a little under $320 a tonne including freight.
And, on the production side, the outlook is not so
favourable for drought-hit US winter wheat getting more rain, with weather
service MDA noting in its latest 16-to-30 day forecast that "the precipitation
outlook has trended drier across the south eastern Plains, northern Delta, and Midwest.
"Drier weather across the Plains and western Midwest will
allow moisture to decline once again."
Chicago wheat for March closed up 0.8% at $7.13 ¼ a bushel,
with the May lot up 0.9% at $7.20 ½ a bushel.
Back in New York, arabica
coffee managed to end a sideways week on a somewhat sideways note, adding 0.5%
to 143.95 cents a pound for May delivery.
"On the negative side, there are still players speculating about
an offer by Brazil of coffee in volume," Silas Brasileiro, executive president
at the Conselho Nacional do Café said.
"However, many agents believe the market has taken account
of this issue, and that the producers' strike in Colombia and the incidence of
rust in many crops in Central America should support prices."