A bit of a negative day for equities contrasted, as so often happens, with a firm day for agricultural commodities - especially sugar.
Stock markets succumbed to a little selling pressure after
the HSBC-Markit "flash" Chinese purchasing managers' index came in at 48.3 for
April – up from 48.0 last month but still below the 50.0 neutral level.
Falls were not heavy, but widespread, with Paris stocks
among the worst performers, shedding 0.7%, while the Nasdaq was down 0.8%.
'More problems with
Among agricultural commodities, soybeans, of which China is the top importer, proved soft too, falling
0.4% to 14.64 ¾ a bushel for July delivery, a fourth successive negative close.
Concerns over Chinese defaults and cancellations of soybean
import orders, amid waning margins and clampdown on a credit wheeze for which merchants
have been using the oilseed and other commodities, have been a growing concern
Such concerns have been supported by reports that two
Marubeni cargos bound for China have been diverted instead to the US, whose
tight balance sheet requires imports to resolve.
"More problems with China and more imports into the US are
breaking down the front end of this market," Darrell Holaday broker Country
Old crop vs new
Furthermore, the Rosario Grain Exchange raised its forecast for
the Argentine soybean crop to 54.9m tonnes, a rise of just 200,000 tonnes but
notable that many other forecasters have been cutting harvest expectations
following recent rains.
The US Department of Agriculture has forecast a 54.0m-tonne
crop, as has the Argentine farm ministry and the USDA's attaché in Buenos Aires
in a report overnight, which also highlighted growing farm stocks in the South American
Still, bulls had some compensation in that the technical structure
of the market, while damage, is not destroyed yet, with the July contract, for
instance, finding support at its 20-day moving average.
"It may take a sharp drop in weekly exports, yet to be seen,
or more news about large US imports before there can be any significant sell-off
in this market," Jefferies Bache said, if taking a rather bearish view on the
Signally too, new crop November soybeans rose 1.0% to $12.27
½ a bushel, rising back above their 10-day moving average.
But was this down just to long old crop- short new crop
spreads being unwound (or bets on the reverse being put in?)
"Profit taking in the old/new calendar spreads has been a
feature again in today's trade," Benson Quinn Commodities said.
Soybeans vs corn
Another prop for the
contract was a rise in new crop December corn.
The November soybeans vs December corn is a much-watched
spread at this time of year, viewed as a sign of the relationship between the
two crops in growers' spring sowing plans.
And, indeed, corn for December enjoyed a strong session,
adding 1.7% to $5.04 ½ a bushel, retaking its 10-day and 20-day moving
That shifted the soybean:corn ratio back a notch to 2.43:1,
still tilted towards the oilseed but well below levels approaching 2.60 it has
Change in the
And as to why there should be buyers of new crop corn,
concerns over the prospects for US plantings shifted up a gear, despite brokers'
reluctance to put their fingers anywhere near the panic button.
The latest run of the GFS weather model "is supporting the
corn market", in saying that rain scheduled for the weekend through the Midwest
is now expected to "hang around the central part of the Corn Belt through
Wednesday of next week", Mr Holaday said.
That would slow sowings, which are already running behind
"Keep in mind that there are private reports of a lot of
corn going into the ground this week in large parts of Illinois, Missouri and
Indiana," he added, on a more bearish note.
'Planting delays may
MDA said that while only "limited" rainfall so far this week
have allowed sowings "to progress well" in the Midwest and Delta, "rains should
build across these areas later this week and over the weekend, which will slow
The biggest delays will be seen in the west central Midwest,
with eastern areas seen as proving less sodden.
Gail Martell at Martell Crop Projections cautioned that "Midwest
corn planting delays may be unavoidable this spring, as cold spring temperatures
are due to be followed by excessively heavy rainfall next week.
"The GFS forecast is extremely wet in the Midwest, calling
for 2-4 inches of rainfall with a slow moving storm.
"Some farms in Missouri, Illinois and Wisconsin could
receive 4-6 inches of rain… the equivalent to a month's worth of May rainfall,"
Ms Martell added.
"Significant corn planting delays would result from
excessively wet field conditions."
The news on corn was not all so bullish, with US weekly ethanol data far less encouraging than
Production tumbled 29,000 barrels a day last week to 910,000
barrels a day, while stocks rose by 566,000 barrels to 16.52m barrels.
Still, ethanol itself gained, adding 0.7% to $2.119 a gallon
in Chicago for July delivery, apparently more fixed on production, as it was
last week, than inventories.
And old crop corn felt some boost too from spreads against
"Spread unwinding is the feature as traders wait for news,"
Paul Georgy at Allendale said.
"The long soybean-short corn spreads have been a feature the
last few months.
"In this position traders are short two or three contracts
of corn for every one long contract of soybeans.
"The news of China's soybean purchases or cancellations will
impact spreaders biases."
Corn for July closed up 1.5% at $5.09 ½ a bushel,
That was a prop to wheat
too, as were continuing tensions in Ukraine.
"Ukraine has announced that they have the US backing to take
back control of Russian occupied government buildings in eastern Ukraine," CHS
Hedging noted, hardly a dynamic likely to warm Kiev-Moscow relations.
Still, wheat did not have the weather forecast to match corn's
gains, with some forecasts seeing rains bound for the drought-hit southern
Plains, although not all commentators agreed.
"We feel the GFS is not as promising as it was for the hard
red winter wheat Plains areas, but there are certainly mixed signals. But that
is one of the factors supporting wheat today," Country Futures' Darrell Holaday
Chicago wheat for July added 0.5% to $6.82 ¾ a bushel.
'Row back dryness
In Europe too, many dry areas are receiving rain relief.
At INTL FCStone, Jaime Nolan Miralles said that France, the
top EU wheat producing country, "can expect some good rains, particularly in
the north east.
"Poland also, which will row back dryness concerns there
further," although Germany and Hungary "still see some areas holding a drier
Paris wheat for May ended unchanged at E214.75 a tonne, with
the November contract edging 0.4% lower to E202.50 a tonne.
The standout performer among agricultural commodities was
actually among the softs, and raw sugar,
after Unica forecast a drop in Brazilian Centre South sugar production in
2014-15 beyond that expected by many commentators given the region's drought.
Signally, rather than seeing the revival in sugar prices swinging
more cane back to making the sweetener, rather than ethanol, mills will
actually raise their focus on the biofuel, Unica said.
Raw sugar for July soared 2.0% to 17.98 cents a pound.
also being supported by concerns for the impact of Brazilian drought, couldn't match
that, but managed gains nonetheless, adding 0.3% to 213.95 cent a pound, and
earlier setting a two-year high for a nearest-but-one contract of 219.00 cents a
Cotton faced the
contrasting forces over concerns over dryness in Texas, the top US producing
state, a bullish factor, but the bearish dynamic of fears over China's economy.
China is the top cotton producer, consumer and importer.
In the end, July cotton dropped 0.7% to end at 92.64 cents a