There was caution around at the end of the last session that
the revival in crop prices could not last, with high prices likely to attract
US farmer selling off the combine, and with some funds in a nervy mood.
And crops on Thursday indeed opened softer, if only thanks
in fact to renewed risk-off mood on financial markets. Data from China, a major
consumer of raw materials, showed manufacturing activity, while improving a
touch, remaining weak.
A purchasing managers' index compiled by HSBC came in at
47.8, a rise of 0.2% from the August figure but well below the level of 50
above which indicates expansion.
It certainly did little to cheer financial markets. Shanghai
shares tumbled 2% to its lowest
level since February 2009, with stocks weak on other Asian markets too, falling
1.6% in Tokyo.
And, in further evidence of the downbeat sentiment, the safe
haven of the dollar jumped 0.6%,
adding further pressure to prices of dollar-denominated exports, such as many
commodities, making them less affordable to buyers in other currencies.
Against that background, it was little surprise that
agricultural commodities traded lower, especially given concerns that the rise
in the last session might not be sustainable, at least while row crop harvests
are swelling silos' inventories.
In corn, there
are lingering concerns over demand too, despite upbeat ethanol production data on Wednesday indicating that on this score,
at least, demand may beat US Department of Agriculture forecasts.
The latest weekly output "represents a yearly corn use
number of 4.625bn bushels", Darrell Holaday at Country Futures noted, ahead of
the USDA forecast of 4.5bn bushels.
Exports have sagged, although more known later when the USDA
unveils US weekly export sales data expected to come in at 300,000-400,000
Indeed, Brazil has been putting in competitive offers –
taken up even by some US corn users.
'We don't think corn
can hold rallies'
And while more on feed use of the grain will be revealed with
grain stocks data next week, there is some evidence of corn rationing kicking
in here too, with huge liquidation of hog herds – if not so much of sows.
At RJ O'Brien, Richard Feltes said: "Corn has already lost
export demand and some domestic feed off-take as well with south east US poultry
interests importing South American corn, feeding of broilers to lighter weights."
Sure the broker was hearing "some credible talk that final
corn yield could slip closer to 115 bushels per acre", from the current official
estimate of 122.8 bushels per acre.
However, until the USDA's October Wasde report, which will
give a better-researched idea of the corn yield "we don't think corn can hold
rallies without a pick-up in export demand, which appears unlikely short term
given the steep discounts offered by South America".
As a further uncertainty for the market, Informa Economics
will later unveil acreage estimates in which they will adjust for the latest
data from the Farm Service Agency, which handles farm support programmes.
FSA figures, gleaned from farm returns, and which were raised by more than 800,000 acres for both crops earlier this week, appear to indicate
that sowings of corn and soybeans were higher than USDA data suggest.
"This could be an additional 900,000 soybean acres and
500,000 corn acres," US Commodities said, adding that the USDA's figures faced
adjustment in the October Wasde.
And there is a case for even higher upward adjustments, when
comparing this year's FSA and USDA data with last year's.
Corn for December dropped 0.9% to $7.49 ¾ a bushel in
Chicago as of 09:10 UK time (03:10 Chicago time), with soybeans themselves not
far behind, shedding 0.7% to $16.57 ½ a bushel for the benchmark November
On the export front, soybeans' own export sales data later
are expected to show them picking up 600,000-800,000 tonnes, from 628,000
tonnes last time.
That said, the market will be keen for confirmation of the
talk of Chinese purchases of US soybeans on the break in prices this week.
And as an extra headwind for the oilseed, Benson Quinn
Commodities noted that "one seasonal trade says to sell November beans this
week and buy back the first week of October".
Wheat showed the most
resilience to the market jitters, dropping a more modest 0.5% to $8.77 ¼ a
bushel for Chicago's December lot.
But then, an Iraq tender result on Wednesday, while going to
Russia, appears to have offered further evidence of the growing erosion of the
country's competitive price advantage, leaving it to rely on freight charge
advantage for victory, as in an Egyptian tender last week.
Indeed, the Russian prices, including freight, "are only
just below US and Australian offers, supporting the idea that tight domestic
supplies will soon force Russia out of the export market", Luke Mathews at
Commonwealth Bank of Australia said.
For gains, it was necessary to turn to New York, where raw sugar, staged an attempt to put
distance between itself and two-year lows it approached in the last session, adding
0.4% to 19.03 cents a pound.
"Sound production prospects in key exporting countries
including Brazil, Australia and Thailand, combined with expectations of another
Indian surplus," are weighing on prices, Mr Mathews said.
"Reports that Nigeria, the world's fourth largest sugar
importer, plans to become self sufficient in sugar production within 10 years
added to the bearish tone."
Still, Datagro on Thursday offered some support by raising
its estimate for the important Brazil Centre South cane harvest, but cutting
its estimate for sugar output nonetheless, citing lower concentrations of the
In Kuala Lumpur, palm
oil for December dropped 0.8% to 2,836 ringgit a tonne. A close at this
level would be the lowest since October last year, and within sight of a
Sentiment remains cautious after palm oil futures lost as
much as 5.3% on Tuesday on reports that the US Midwest soybean crop was not as
badly damaged by drought as initially feared, and that the harvest was
progressing fast," Ker Chung Yang at Phillip Futures said.
With China a major palm oil importer, prices are also vulnerable
to news on the Chinese economy.