If the first leg of agricultural commodities' statistics spree
was something of a non-event – Brazil's Conab raised its domestic corn and soybean
harvests forecast, but not by much – the second and third were far more
The second, Chinese trade data, were viewed as promising all
round as a sign of the health of the world's second-largest economy, showing
exports soaring 14.1% year on year in December, the fastest pace of growth in
seven months, and imports rising by 6%.
The Chinese trade surplus jumped to $31.6bn for the month,
from $19.6bn in November.
And a key agricultural commodity figure – soybean imports - was especially
strong, coming in at 58.4m tonnes, a rise of 11.2% on the December 2011 number
and ahead of market expectations.
Edible oil imports,
mainly palm oil, grew even faster,
by 22% to 1.1m tonnes.
The trade report boosted share markets in Asia - where Japan's Nikkei added 0.7%, Hong Kong's
Hang Seng 0.6% and Sydney stocks 0.3% - and helped an easing in the save haven
of the dollar.
It also ensured a firm start for many commodities, including
copper, a major Chinese import, and
Brent crude, which added 0.5% to
return above $112 a barrel as of 10:00 UK time (04:00 Chicago time).
But the impact on agricultural commodity markets was muted
by the third leg of the round of statistics, on Malaysian palm oil, which
showed stocks rising to a fresh record high, of 2.63m tonnes, last month rather
than easing to 2.50m tonnes as investors had expected.
While exports, unexpectedly, rose month on month, production
extended its knack of outperformance, falling only 5.8% during a seasonal
downturn, compared with the 10% drop that analysts had forecast.
Crop investors still remain most obsessed with the fifth
round of data reports, from the US Department of Agriculture, limiting their
appetite for taking heavy positions for now.
The USDA will on Friday release its latest monthly Wasde report
on world crop supply and demand, including long-awaited updates on last year's domestic
corn and soybean harvests, plus data
on US winter wheat sowings and grain
(The fourth round of the statistics spree comes later on
Thursday, when industry group Unica reveals its latest report on the sugar cane crush in Brazil's Centre
South, albeit in a quiet part of the season when data are not expected to tip
the needle much.)
And that, as in recent sessions, prevented crop prices
straying too far - at least ahead of the USDA data, which has a history of
After all, even if Friday's data do turn out positive for
the likes of soybeans, "we have difficulty imagining a sustained trend reversal
higher, in the absence of South American crop adversity", Richard Feltes at
broker RJ O'Brien said.
"It is important to note that current soybean price range is
still quite high historically," he said.
"The take home point here is that a bullish soy report on Friday
would elicit a much stronger upside response at the $9.00-a-bushel level than
at $13.86 a bushel for the March contract - especially against cushion of likely
record 2013 soybean crop."
Certainly, while soybean prices rose in China itself, by 0.2% to 4,750 a tonne on the Dalian futures
exchange for the May contract, they eased 0.2% to $13.82 ½ a bushel in Chicago,
for March delivery.
Meanwhile, Kuala Lumpur palm oil for March dropped 0.9% to
2,390 ringgit a tonne, reversing gains made ahead of the inventory data.
Grains did better, especially wheat, which reversed from the
worst performer of Chicago's big three crops to the best, helped by both supply
and demand factors.
The USDA on Wednesday reminded of the hardship facing US winter
wheat seedlings by declaring much of the central and southern US wheat belts as
a natural disaster area, because of drought, making farmers in large areas of
major growing states such as Colorado and Kansas eligible for emergency loans.
And the outlook for rains is not great. "Moisture is in the
forecast for the south east half of hard red winter wheat territory, but totals
in most of Kansas," the tyop US wheat-growing state, "aren't anticipated to put
a major dent in the drought", Jonathan Watters at Benson Quinn Commodities said.
That said, Phillip Futures analyst Joyce Liu pointed out that
"historically, bad weather conditions in winter do not necessarily mean lousy
final production figures.
"Final output of wheat can vary significantly with weather
conditions through spring."
On a more bullish note, Ms Liu said that "moving forward, we
may see greater demand for US supplies because prices have fallen significantly
from their highs and are bullish short-term for wheat", in making it more
competitive on export markets.
A test of that will come later on Thursday when Gasc, the
Egyptian grain authority, unveils the results of its latest tender, announced
(While Gasc said last week that Egypt has enough stocks to
last until June, when it can turn to the domestic harvest for replenishing
silos, the world's top wheat-importing country is obviously taking no risks.)
"French and American wheat will be in competition, with a
slight advantage for American supplies," Agritel, the Paris-based consultancy,
'Size and quality
China is also believed to be in the market for the grain,
amid ideas that domestic supplies are not nearly as comfortable as official
2012 harvest data would suggest.
There has been talk that the 2012 crop was badly damaged by
disease, while prospects for the 2013 harvest have been dented by severe winter
"While the USDA's idea of the China balance sheet seems to
indicate plenty of room, there is disagreement within the trade on the size and
quality of last year's crop," Mr Watters said.
Chicago soft red winter wheat for March rebounded 0.6% to $7.50
¼ a bushel, this time underperforming Kansas hard red winter wheat for March, which
gained 0.7% to $8.07 a bushel, as US drought conditions and index fund
rebalancing suggest should occur.
Corn vs wheat
Wheat's performance was also enough to rebuild some of the
premium against corn, which has dropped by roughly two-thirds over the last two
March corn, which showed surprising strength in the last
session, helped by strong US ethanol production data, added a further 0.3% to
$6.96 ¼ a bushel this time.
There have been signs of international demand for corn too,
at a time when US supplies have improved their competitiveness against
Brazilian ones, which suffer the handicap of infrastructure hold-ups.
That said, South Korea's Korea Corn Processing Industry
Association on Thursday rejected all offers to a tender and made no purchases.
Sugar rebounds – for
Among soft commodities, New York raw sugar got off to a firm start, adding 0.6% to 18.83 cents a pound
for March delivery, helped by a technical factor, after bouncing in the last
session off lows last seen in mid-December.
"Given this reversal, and the bullish support provided by
Index fund reweighting, we believe the market may look to test the 50-day moving
average, at 19.24 cents a pound, in the short term," Luke Mathews at
Commonwealth Bank of Australia said.
"Nonetheless, this short-term view does not alter our longer-term
negative bias toward the complex," he added.
Phillip Futures' Joyce Liu flagged talk of setbacks to China's
sugar crop prospects from the coldest winter in 28 years.
"As such, we expect sugar to end positive today, but gains
could be limited," she said.