Did they forget to tell commodity investors about the strong dollar?

The firmness of the greenback, at its highest levels since August against a basket of currencies, has been seen as one of the main pressures on commodities, along with, of course, the talk of investor money flowing into equities.

But raw materials were able to deal with both forces on Friday.

Share markets rose, doing little to dent their renewed appeal, while and the dollar appreciated 0.8%, making dollar-denominated assets that much less affordable to buyers in other currencies.

Especially Japanese purchasers (huge importers of the likes of corn) with the yen hitting its highest against the greenback in more than three years.

Bouncing beans

Yet the CRB commodities index added 0.6% too.

It may be that all markets managed to gain something from the strong US jobs data, showing a bigger-than-expected 236,000 posts created last month, and so stoking ideas of recovery in the world's biggest economy.

Certainly, in the agricultural space, cocoa managed to fly whatever the dollar, soaring 2.8% to $2,120 a tonne in New York for May delivery.

Indeed, it nearly kept up with London cocoa for May, which ended up 2.9% at £1,441 a tonne, despite the currency disadvantage (sterling lost some 0.5% against the dollar, which might have been expected to tip a bigger advantage to London prices).

Uncomfortable shorts?

Cocoa's jump was put down to ideas that investors had risked being overly bearish in driving prices to multi-month lows on both sides of the Atlantic.

Rabobank put the case for a recovery in values, noting a potential depressant to the Ivory Coast from dry conditions, besides a longer-term threat from low prices cutting farmers' enthusiasm for forking out on fertilizers and pesticides.

Furthermore, the extent of investor short positions in New York has raised some concerns should a rash of short-covering occur, so lifting prices.

Gross short positions were more than 36,000 lots last week, before yet further selling, the highest since April last year.

Cotton gets vertigo

Other soft commodities showed far smaller movements, even cotton, which had the support of a further downgrade, by 300,000 bales to 4.20m bales, in the US Department of Agriculture's estimate for domestic stocks at the close of 2012-13.

The revision was largely down to a bigger idea of exports, "raised 250,000 bales based on strong sales and shipments in recent weeks," the USDA said.

However, this had been to a large extent expected by investors, who left New York's May contract a modest 0.5% higher at 86.88 cents a pound at the close, well below an intraday high of 88.78 cents a pound, the contract's highest price in 10 months.

'Mildly supportive'

The USDA crop estimate revisions, in its monthly Wasde report, had a biggest impact on corn, which closed 1.8% higher at $7.03 ½ a bushel for Chicago's May contract, with the close-to-expiry March lot adding 1.9% to $7.25 ¼ a bushel.

The USDA surprised investors by leaving its estimate for domestic corn stocks at the close of 2012-13 unchanged at 632, bushels.

"That was seen as mildly supportive as many within the industry felt it would be adjusted up slightly," Darrell Holaday at Country Futures said.  

Chicken feed

Mr Holday added: "Those thinking that ending stocks would go up were betting on a decrease in exports."

Which the USDA did, but more than offset that gain with a 100m-bushel increase in the feed numbers, reflecting larger the unexpectedly strong demand from poultry producers.

(Indeed, the USDA also raised its estimate for domestic chicken production, an upgrade coming too after data showed US chicken exports in January rising 4.1% year on year to 230,194 tonnes.

"The increase was due entirely due to a big jump in exports to Russia, which were 11,777 tonnes or 109%, higher than a year ago," analysts at Paragon Economics and Steiner Consulting said.)

Fapri forecast

The USDA in fact needed extra domestic imports to balance the books on corn – more than 3m tonnes of them, and enough to make the US a bigger buyer than China in 2012-13.

And to make imports, including extra transport costs, work into a big exporting country like the US would appear to suggest an environment of high prices.

Furthermore, Fapri, the food research body, added extra bullishness to corn by forecasting domestic stocks of the grain ending 2013-14 at less than 1.7bn bushels, well below the figures of 2bn bushels and more which have been floated by the likes of the USDA, with weaker stocks implying supported prices.

Fapri forecast a strong yield, at 161.8 bushels per acre, and sowings in line with the USDA's estimate, but had a more generous estimate for use, notably in ethanol manufacture.

On soybeans, Fapri was less generous too for 2013-14, foreseeing year-end inventories of 191m bushels, compared with the USDA's figure of 250m bushels.

But while that may have helped limit the decline in soybean futures, it could not stop Chicago's May contract easing 0.2% to $14.71 a bushel.

Going back to 2012-13, the USDA's Wasde report itself provided a negative for values in keeping the estimate for US stocks at 125m bushels – and indeed the whole balance sheet the same, defying expectations of an upgrade to the estimate for exports.

"The Wasde was bearish for soybeans as US stocks were left unchanged and South American production as reduced by less than the average trade estimates," Rabobank said.

'Most bearish number in the report'

The bank also termed the report "bearish" for wheat, in raising the forecast for domestic stocks at the close of 2012-13 by 25m bushels, and for world inventories by 1.5m tonnes.

"The most bearish number in the report was the decrease in US wheat exports to 1.025bn bushels," Country Futures' Darrell Holaday said.

However, wheat had two reasons for support – one the extent of its declines heading into the report, meaning a stack of negative sentiment had already been factored in.

Rain backs off

The second the waning of hopes for more rain to refresh the drought-hit US Plains.

"The GFS weather model continues to decrease the weekend rainfall, and it is warm and dry in the next 10 days," Mr Holaday said.

"If the moisture does not develop this weekend and temperatures warm as expected, you will see an increase in dry weather discussion next week."

Chicago wheat for May managed to close 0.2% higher at $6.95 ½ a bushel, although a dip into negative territory earlier left its mark on Chicago contracts.

Paris wheat for May closed down 0.3% at E230.25 a tonne, while London's May contract ended up only 0.1% at £199.50 a tonne, despite the release of data showing that English winter wheat sowings had fallen even more than the market had thought.