Thursday started with one big test for financial markets – Chinese
In fact, the statistics showed annual growth the world's
second largest economy slowing for a seventh successive quarter. It was down
from 7.6% the previous quarter, and a figure of 9.3% last year.
But, at 7.4%, the pace in the latest quarter met
expectations, and eased fears of a so-called hard landing in Chinese economic
growth after a decade growing at an annual pace of 10% or so.
Indeed, coupled with US statistics on Wednesday showing the
fastest growth in housing starts in four years, the data were met with some
relief by investors, and fostered some rebound on markets.
More cotton headway –
instance, rose 1.2% in Shanghai and 2.0% in Tokyo, making smaller gains in the
likes of Seoul, Singapore and Sydney.
made early progress too, looking for a third day of gains.
And modest buying was the story in agricultural commodity
markets too, enabling New York cotton,
which in the last session rose the maximum allowed by the exchange, to add a
further 1.0% to 78.60 cents a pound, a five-month high.
The fibre is being boosted by a late harvest and, in
particular, quality fears which have cut the stocks certified for delivery
against New York futures to a decade low.
However, there are some doubts about the longevity of the
rebound, given ample cotton inventories elsewhere.
"We don't expect these gains in the Ice futures market to
endure past December, nor do we expect a significant impact on global physical
prices," Luke Mathews at Commonwealth Bank of Australia said.
"This is primarily because global inventories are still
forecast at record high levels this year."
Crops gained in Chicago too, supporting ideas that the
seasonal low in prices, fostered by harvest, might have been passed.
Harvest time tends to depress prices by bringing a spike in
supplies, and so easing pressure on buyers for a while, with the impact this
year potentially greater than normal thanks to quality fears, especially in corn, which are dissuading farmers to
boost harvest-time sales rather than take a risk with storing crop likely to
"Many think we are making seasonal harvest lows now, as most
of the corn and much of the soybeans
have been harvested," Mike Mawdsley at Market 1 said.
Many investors are now looking for signals to cash markets,
which are supportive at the moment of firmer prices.
"Basis levels are incredibly strong for corn for this time of
year and at this price level," Mr Mawdsley said.
Selling by farmers is widely reported as light.
Still, if supplies are drying up a bit, is the demand there
to drive prices higher?
For corn, ethanol data on Wednesday was mixed, showing
production of the corn-based biofuel easing last week, but not disastrously so
by 3,000 barrels a day to 800,000 barrels a day.
And more on demand will be imminently revealed, with the US
Department of Agriculture later on Thursday to reveal weekly US export sales
This is expected to show soybean export sales at
650,000-850,000 tonnes, ahead of the previous week's 524,000 tonnes, and wheat's
at 250,000-400,000 tonnes, compared with 229,000 tonnes last time.
For corn, sales of 200,000-300,000 tonnes are forecast, up from
the mere 14,200 tonnes the week before.
'Still fighting technical
Meanwhile, Friday will bring cattle on feed data,
illustrating demand from that sector, with an expectation that placements on
feedlots tumbled 14.9% last month.
And then there are chart signals to factor in.
"Price action in the ag sector indicates that the institutional
investor has slowed, if not halted the recent pattern of selling, but these
markets are still fighting some technical headwinds," Brian Henry at Benson
Quinn Commodities said.
"The trade should view two straight days of higher price
action as supportive, but it indicates little more than that."
In fact, December corn, in rising 0.8% to $7.51 ½ a bushel
as of 09:30 UK time (03:30 Chicago time) broke back up through both 10-day and
20-day moving averages.
Soybeans for November, up 1.2% at $15.27 a bushel, were just
about at their 10-day moving average line.
of EU supplies'
December was 0.9% higher at $8.63 ¾ a bushel, continuing to gain fresh support
from setbacks to Australia's crop, where a new round of downgrades may be in
the offing thanks to the drought-tested Western Australia harvest.
"Wheat production in Australia is expected to be reduced by
yet another 1m tonnes to about 21m tonnes," Lynette Tan at Phillip Futures
And then there is what RJ O'Brien's Richard Feltes termed
the "inevitable depletion of European Union supplies that will eventually channel
export business to the US", even after a slowish performance so far.
"There are precedents for an increase in the second half of the
marketing year, December to May, in US wheat
exports--specifically 2010-11 and 2006-07."