Obama's State of the Union address isn't the only factor on Tuesday potentially
of significance to world financial markets.
The Reserve Bank of
India, for instance, is to hold a policy meeting later, which will be of
unusually large significance given the jitters over emerging market currencies.
Wednesday, of course,
brings the later decision from the Federal Reserve on whether to further reduce
its stimulus measures.
'Risk has eased'
For now, in fact,
world markets appeared a bit less nervy, with many emerging market currencies
at least stabilising, and some showing small gains.
"This doesn't mean
that we are out of the woods, of course," said Scotia Bank Asia currency
strategist Sacha Tihanyi.
"However, the risk
that the weakness seen in global assets spirals into a short-term asset
meltdown has eased somewhat."
And that was
evident in the markets for industrial ags - more attuned to world economic sentiment
than food crops, for which demand is more stable – which made early headway.
Cotton for March bounced 0.5% to 84.64 cents a pound in New York as of 09:30
UK time (04:30 New York time, 03:30 Chicago time), despite some residual
negative sentiment in some quarters.
global cotton inventories and a change in China's cotton stockpile policy means
there is no real reason for prices to be above 85 cents," said Luke Mathews at
Commonwealth Bank of Australia.
In Tokyo, rubber for July, the benchmark
contract, soared 1.8% to 232.20 yen a kilogramme, looking for its first
positive close in nine sessions, which had cost it more than 10%, and taken
prices to a seven-month low.
are especially exposed to emerging markets too, with China the top importer of
both, and biggest producer of cotton.
Thailand, which has
seen violent clashes ahead of a planned national vote next week, is the biggest
However, it was not
apparent yet that investors are sowilling
to bet on a recovery in Brazil's real
which would support prices of agricultural commodities in which it is a major
player, and which have suffered on concerns that the Argentine peso debacle could cause some tremors
Raw sugar for March (Brazil is the top sugar producer and exporter) was 0.1%
higher at 14.82 cents a pound New York, but only after to falling earlier to
14.7o cents a pound in, hitting a fresh lowest-for-a-spot-contract in three and
a half years.
"As this soft
commodity is dollar-denominated, weakness in domestic currencies would spur
farmers to sell more as it meant more profit for them," said Vanessa Tan at
Phillip Futures, adding that "the market is already dealing with an abundance
While Brazil output
is at a seasonal low, "harvesting of cane in other producers like Thailand and
India is picking up and keeping prices pressured," Ms Tan said.
"In light of these
fundamentals, we remain bearish on raw sugar prices."
Arabica coffee, of which Brazil is also the top sugar
producer and exporter, eased 0.3% to 113.50 cents a pound for March delivery.
'Harshly cold temperatures'
Gains were easier
to find in Chicago, where a somewhat Turnaround Tuesday feel greeted investors
in wheat, which added 0.7% to $5.67 ½
a bushel for March, bringing the contract into collision with its 10-day moving
Sentiment is being
underpinned in part by concerns over the impact of US cold weather, at a time
when some winter wheat seedlings are lacking snow cover.
"Even though snow
is covering most of the soft red winter wheat crop in the US Midwest, harshly
cold temperatures could still pose as a threat," Ms Tan said.
Weather Service's office in Des Moine, Iowa is expecting wind chill readings of
minus 20-40 degrees Fahrenheit (minus 29-40 Celsius).
But will the gains
stick this time, unlike in the last session, when a boost to prices from concerns
over the US freeze was undermined by poor export data?
Brian Henry at
Benson Quinn Commodities noted that the
emergence of late sellers "has become a daily occurrence" in US wheat markets.
"Right now a
session that didn't end with a significant offer in the wheat markets would be
a positive, he said.
"I am not convinced
the wheat market needs to be cheaper, but I have a hard time believing new
ownership is going to be rewarded in the near future."
'We remain bearish'
However, in wheat's
favour this session is yet another sign of demand from importers keen to
exploit prices among their lowest in more than three years.
Egypt's Gasc grain
authority announced a tender later on Monday, its fourth of the month, and
following high profile purchases last week from Algeria and Iraq.
Not that this has
turned everyone supportive on wheat.
"Recent tenders in
wheat show how competitive the wheat export market is as tenders were for wheat
of multiple origins," Phillip Futures' Vanessa Tan said.
"With the highly
competitive export market and a persistent global surplus of wheat, we remain
bearish on US wheat."
'Crop damage quantified'
Corn managed smaller gains, receiving less support from firmer wheat now
that the corn-wheat spread has closed dramatically, from levels above $2 a
bushel late last year to less than $1.40 a bushel now.
That is a
reflection of the US inventory report on January 10 which implied large amounts
of switching by livestock feeders from wheat to corn, encouraged by the price
Still, the grain is
finding some buyers thanks to ideas of heat undermining Argentine yield
"Crop damage that
resulted from hot and dry conditions earlier this month in Argentina had been
quantified such that the worst-hit areas could lose 50% of production," Ms Tan
said, terming this a price-supportive factor.
'Modest upward price movement'
has been resilient.
"US corn exports
this marketing year continue strong, despite recent controversy over shipments
to China," noted Mark Welch at Texas A&M University.
numbers reported over the Christmas holidays, export sales the last two
reporting periods are averaging 30m bushels a week," well ahead of the 8m
bushels a week needed to meet the US Department of Agriculture forecast of
1.45bn bushels of shipments in 2013-14.
continue to look strong. This should provide modest upward price movement into
spring," Dr Welch said, in unusual bullish comment on the grain.
'A mostly reluctant seller'
consumption is coming against a background of weak US farmer selling,
underpinning the cash market.
remains a mostly reluctant seller," Benson Quinn Commodities said.
markets should continue to offer some underlying support," if adding that "with
producer selling likely to pick up on any subsequent rallies and managed money's
short position at a very manageable level I would expect the market to continue
to move sideways".
Corn for March in
fact stood 0.1% higher at $4.32 ¼ a bushel.
Corn vs soybeans
As for soybeans,
one factor increasingly coming into view is the prospect of the US battle for
acres in the spring, and the price signals being sent to growers by corn and
soybean futures prices.
In fact, "December
corn prices are at or below the cost of production for many producers in the
Midwest," according to one broker.
This factor would
appear to question the degree of downside remaining for prices, given that the
US is the top producer and exporter of the grain, whose growing dynamics really
matter to the global market.
In fact, the ratio
of November soybean: December corn futures prices has fallen to 2.44, from
levels of close to 2.60 last month, but still historically high.
"We believe the
November soybean contract looks overpriced to December corn. The ratio could get back to 2.35 before US
planting begins," the broker said.
However, on old
crop, corn failed to make ground against soybeans as concerns that China will
switch orders of the oilseed en masse from the US to South America fail, yet,
to be realised.
Strong US export
data on Monday "helped to alleviate concerns that China would not purchase US
soybeans but soybeans of other origins instead", Ms Tan said.
In fact, weekly US
export inspections were, at 73.8m bushels, record large for a fourth week of
January, according to Benson Quinn Commodities.
"Talk remains of Chinese
cancellations but so far there has been little in way of confirmation and
Chinese continues to buy new crop US soybeans," the broker said.
Soybeans for March
stood 0.2% higher at $12.90 a bushel.