It was not the promising day for commodities, with confidence once again fading in China's economy
after data showed the country's services sector expanding at its slowest pace
in five months.
Furthermore, Beijing tightened rules on mortgages in the
latest effort to slow the Chinese housing market.
"It is increasingly
clear that Chinese growth will slow from the second quarter onwards, and this
will limit potential for recovery in Asia," Crédit Agricole said in words which
would appear to bode ill for commodities, in that the country is a huge
importer of many of them.
in China took a tumble, closing down 3.7%, while shedding 1.5% in Hong Kong
Meanwhile, the dollar
rose 0.3%, making dollar-denominated exports such as many commodities less
appealing to buyers in other currencies.
So it was hardly so surprising that there was a little bit
of weaker tone to early deals on Monday, including in some commodities of which
China is a large importer.
New York cotton
for May eased 0.1% to 85.30 cents a pound as of 09:20 UK time (04:20 New York
time, 03:20 Chicago time), with the Chinese news overshadowing a somewhat
bullish monthly report from the International Cotton Advisory Committee.
The committee reduced its global cotton production forecast for
2012-13 by nearly 3% to 22.6m tonnes, while trimming its estimate for year-end inventories
by 0.8% to 15.8m tonnes.
'Demand returning to
Soybeans, of which
China is the top importer, eased a little too, by 0.3% to $14.39 a bushel in
Chicago for May delivery.
Bulls gained some solace in a downgrade of 2.4m tonnes by
Safras e Mercado to its estimate for the Brazilian soybean crop, citing excessive
rain in Mato Grosso last month, and taking the crop figure to 82.24m tonnes.
While still a record, the downgrade took some of the shine
off a 500,000-tonne upgrade to 84.5m tonnes in Informa's estimate for the crop,
while AgRural lifted its forecast by 900,000 tonnes to 82.1m tonnes.
"Brazil is on track to produce a bumper soybean crop and
global export demand is returning to Brazil again as exports in February jumped,"
Joyce Liu at Phillip Futures said.
"At current high price levels, further weakness in soybean
contracts can be expected [in Chicago]."
Wheat was down
too, by 0.7% to $7.15 ¾ a bushel for Chicago's May contract, on track for its first
negative close in five sessions, after a bounce from eight-month lows reached early
OK, Luke Mathews at Commonwealth Bank of Australia noted
that "the market continues to talk about the improvement in demand for US
supplies given the February price slide".
Saudi Arabia announced a large wheat purchase over the
weekend, of 465,000 tonnes of hard wheat and 110,000 tonnes of soft, although
origin was not specified.
Prices for the two soft wheat cargoes were $326.28 and $330
a tonne, with the hard wheat loads priced from $317.13 to $361.63 a tonne.
However, on the negative side, the hopes for US exports come
against a backdrop of ideas that Ukraine could return to shipments, with
potentially 2m tonnes to sell.
And the weekend brought more precipitation for dry US Plains
areas where seedlings have been struggling with drought.
"Weekend precipitation was near expectations," MDA said,
adding that "considerable snow melt is helping to improve soil moisture".
And looking ahead in the six-to-10-day timescale, the
US-based weather service said that "an upturn in precipitation in the central Plains
will further improve moisture for wheat.
"The same is true for the Midwest wheat belt."
'Slow farm selling'
It was left to corn
to hold up bulls' hopes in Chicago, adding 0.3% to $7.10 ¼ a bushel for May delivery,
helped by ideas of firm demand for limited US supplies
"Slow farm selling and improving demand from ethanol plants
and end-users are causing the strong cash market and we are seeing some
commercial traders trying their luck for potential delivery in the futures markets,"
Ms Liu said.
"But so far no delivery against the [expiring] March
contract was reported by the Chicago Board of Trade."
At Benson Quinn Commodities, Ben Bradbury said: "Domestic
basis levels remain firm along with spreads as movement on the producer level
continues to be slow.
"I would anticipate further appreciation in board prices
will attract better sales, but for now things are quiet."
Mr Bradbury noted in particular a rise in prices of ethanol
Rins – paper credits assigned by producers to ethanol batches, that users can
be used by blenders as a substitute for the real biofuel.
Prices of Rins have risen above $0.60 a gallon – well above
their traditional price of some $0.02 a gallon, and improving the benefits to
producers of making ethanol, and taking the covers off plants mothballed last
year when corn prices hit record highs, severely squeezing margins.
And Brazil's government has confirmed that its own mandated
level of ethanol in gasoline will revert to 25%, from 20%, in May.
Meanwhile, the extent of the sell-off in corn by speculators
may have some investors thinking twice about putting on fresh short positions.
Speculators' net long position in Chicago corn futures and
options fell more than 13,000 lots in the latest week to an eight-month low of
In New York, raw
sugar also made early gains, underpinned by data showing that India's sugar
mills produced 18.8m tonnes of the sweetener in the first half of 2012-13, ie
from October to February, down 60,000 tonnes year on year.
Output in Uttar Pradesh, India's second-ranked producing
state, fell by 300,000 tonnes to 5.0m, the Indian Sugar Mills Association said
in a statement, blamed cold weather.
Raw sugar for May, now the spot contract, added 0.4% to
17.98 cents a pound.
In Kuala Lumpur, palm
oil gained too, adding 1.4% to 2,403 ringgit a tonne for May delivery, looking
for its first gain in nine sessions.
The recovery reflected in part soyoil's firm performance in
Chicago on Friday, but also the prospect of a major palm oil conference in
Malaysia, which will include price outlooks, encouraging some investors to err
on the side of caution and take profits on short positions.