Did they forget to tell commodity investors about the strong
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
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
Especially Japanese purchasers (huge importers of the likes
of corn) with the yen hitting its highest against the greenback in more than
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).
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
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
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
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.
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
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.)
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
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
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
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
"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
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.