PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 19:03 GMT, Monday, 17th Feb 2014, by Agrimoney.com
Evening markets: sugar makes headway, but wheat struggles

Agricultural commodity investors were not expecting fireworks on Monday, with US markets closed for the President's Day holiday.

And they were not disappointed.

The general markets background was actually helpful, with Chinese lending data deemed supportive, in showing aggregate financing, the broadest measure of credit available, rising to 2,580bn remninbi last month from 1,200bn remninbi in December, and showing a small year-on-year rise.

The data eased concerns over authorities clamping down hard on lending.

"The January credit numbers show that the firming-up of the monetary stance is a gradual, balanced exercise, not an aggressive one," said Louis Kuijs, chief China economist at the Royal Bank of Scotland.

Dollar factor

Share markets were, broadly, firm, with London stocks soaring 1.1%, after decent rises in Asia too, where Shanghai shares rose 0.9%, Sydney stocks 0.5% and Tokyo shares 0.6%.

And as an extra help to dollar-denominated commodities, the greenback remains amongst its lowest levels of 2014 against a basket of currencies, and down more than 5% from highs in July last year.

A weaker dollar underpins prices of dollar-denominated exports, such as many commodities, by making them more affordable to buyers in other currencies.

Cane damage

But if the background to commodities was broadly helpful, sugar got an extra boost from further comments on the damage to the cane crop in Brazil's main producing region, the Centre South, from the recent dry spell.

Unica, the cane industry group, said that the 2014-15 Centre South cane harvest, which begins in April, now looked like showing no growth from last season's 596m tonnes.

The dryness had likely damaged 35m-40m tonnes of cane, Unica said.

With analysts have expected a harvest of at least 600m tonnes, that helped white sugar for May end 0.6% higher at $442.20 a tonne in London.

May signal nearby demand'

At broker Sucden Financial, Nick Penney also highlighted signs of potential demand in a "stable" white sugar market at the end of last week, noting that its premium over raw sugar "remained firm" at nearly $90 a tonne.

"This may signal nearby demand," he said, with white sugar often more sensitive to immediate consumption, being capable of filling an immediate gap in demand, with raw sugar needing processing first.

Other soft commodities were firm too, with robusta coffee for May gaining 0.7% to $1,818 a tonne in London, boosted by the firm finish to the last session for its New York peer, arabica coffee.

Cocoa for May ended up 0.2% at 1,858 a tonne, underpinned by ideas of firm demand.

German exports

Grain markets were more mixed, with wheat easing 0.1% to E198.25 a tonne in Paris for March delivery.

FranceAgriMer removed a little bit of reason for risk premium late on Friday by pegging the French winter wheat crop at 75% "good" or "excellent", up from 66% a year ago.

Meanwhile, it was Germany, rather than France, which won plaudits as regards exports with talk that it will ship 195,000 tonnes of wheat to Iran this month, up from 119,000 tonnes in February last year, and some 250,000 tonnes believed to have been traded last month.

'Struggle to go much higher'

London wheat for May at least managed to hold its ground in closing at 154.25 a tonne, as traders continued to ruminate on last week's unexpectedly strong UK import data.

Traders at one major European commodities house, talking of milling wheat, said that "it's not so much that the imports are actually cheaper than UK wheat, or better quality - with a tighter supply the mills are finding it difficult to buy UK wheat in quantity without pushing up prices considerably.

"On the other hand, they can buy a 5,000-10,000 tonne cargo of imported wheat without the market reacting at all."

This does imply that "UK milling wheat prices will struggle to go much higher from here, in spite of the seemingly tighter supply", the traders added.

Rapeseed rises

Among oilseeds, rapeseed, an oil-heavy crop, took heart from the best close for palm oil in Kuala Lumpur in 16 months, up 0.7% at 2,682 ringgit a tonne.

Paris rapeseed for May gained 1.4% to E388.25 a tonne, also gaining technical support, having closed the last session above its 200-day moving average for the first time in a year.

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