Monday had enough on the newswires to give markets a soft
start, with a poor reading on a monthly measure of the health of China's
HSBC's "flash" purchasing managers' index (PMI) for March
indicated that the country's manufacturing sector slowed for a third successive
month, falling to an index reading of 48.1, below forecasts of 48.7 and the
48.5 figure for February.
"Weakness is broadly based with domestic demand softening
further," said Qu Hongbin, economist at HSBC.
At Singapore broker Phillip Futures, Vanessa Tan said that figure,
"severely short" of expectations, "reflects a worsening contraction in China's
manufacturing sector, in particular the small- and medium-sized enterprises.
"We expect the continued worries regarding the world's top
importer of soybeans to linger over
the market and dampen sentiment for the week ahead."
Furthermore, there are still some concerns over Ukraine,
with a warning from Nato to Russian troops massing on the border.
And another negative for wheat market was rainfall in eastern Australia, where dryness ahead
of the sowings period for winter grains had raised concerns not just for the
planting window but the whole growing season, with east coast drought a symptom
of the El Nino weather pattern.
"Favourable rain fell across much of north New South Wales
over the weekend, of 5mm-30m, taking the weekly rainfall totals to 30mm-40mm in
many locations," said Luke Mathews at Commonwealth Bank of Australia.
"Soaking follow-up rains, of 25mm-100mm, are forecast for
most of New South Wales and Queensland this week. If realised, winter crop seeding prospects
will continue to improve for much of eastern Australia."
'Relieve tree stress'
As an extra sign that El Nino may not be a threat for now at
least, dryness usually associated with the weather pattern has eased in palm oil-producing areas of South East
"More rains after earlier droughts will relieve tree stress,
helping palm production to recover," Phillip Futures said.
"Expectation of output expansion has caused palm oil prices
to face some downward pressure."
And palm oil itself put in a weak performance, easing 0.7%
to 2,704 ringgit a tonne as of 09:45 UK time (04:45 Chicago time), off a low of
2,698 ringgit a tonne earlier which was the weakest in more than a month.
But other markets managed a stronger performance, with shares faring OK in Asian markets, if a
touch lower in Europe in early deals, and corn,
soybeans and wheat getting off to strong starts in Chicago.
It helps that El Nino is not all negative for crop
production, and therefore positive for prices, with the weather pattern being
deemed supportive for the US row crop harvest.
"If El Nino develops early this summer, central US weather
tends to be wet and mild which sets up bearish new crop outlook," Kim Rugel at
Benson Quinn Commodities said.
However, "till then, cold temperatures and a late spring are
supportive" for prices, in speaking of late plantings and a poor start for the
crop, although the summer weather is deemed more important for yields.
In fact, the US weather outlook has some positive aspects,
with MDA saying that the "forecast has trended warmer in the central Plains and
Midwest", helpful in terms of getting frozen ground thawed.
But the forecast has some negatives too.
"The precipitation outlook is drier in the southern Midwest,"
MDA said, adding that "moisture shortages will continue" in this area.
In the southern and central Plains, "drier weather will
cause moisture stress on wheat as spring growth resumes", while in the western
Delta, "below-normal precipitation in the western Mississippi Delta will cause
moisture to decline even further".
Commodity Weather Group has forecast a low chance of rains
in the south western Plains, major US hard red winter wheat country, for the
next two weeks.
As an extra boost to wheat, there are signs that the Ukraine
crisis is having an impact on Russian supplies, with the weakness of the rouble
prompted by the turmoil encouraging farmers to hoard crops rather than sell, as
already seen in Ukraine (and in Argentina, where growers view soybeans as a
hedge against a softening peso).
"Farmers continue to limit sales despite their
increasing need for working capital ahead of spring sowing," said SovEcon,
the Moscow-based analysis group noting a rise of $10 a tonne to $293 a tonne in
the export price of 11.5%-protein wheat last week.
"The conflict between Russia and Ukraine is also adding
pressure on the rouble."
SovEcon also highlighted concerns over exports from grain
terminals in Crimea, with a capacity of 4m-4.5m tonnes a year, and over Mariupol
and Berdyansk ports in eastern Ukraine.
Ships heading to these ports, in the Azov Sea, must pass through
the Kerch Strait between the Russia mainland and Crimea.
Wheat for May gained 1.3% to $7.02 ½ a bushel in Chicago.
It was 2.0% higher at $7.58 a bushel in Minneapolis, which
trades spring wheat, which could face a tricky sowing season, given the
prospect of cold ground in the northern US and large amounts of snow to melt
and cause flooding.
Corn was 1.4% up at $4.85 ¾ a bushel, climbing back above
its 10-day moving average on the continuous chart.
'Export sales pace rather
Corn has also been helped by ideas of strong demand for US
shipments, with Egypt buying 340,000 tonnes on Friday the icing on the cake of
a strong export pace revealed from other data.
"Our export sales pace has remained rather strong for corn
and probably makes up for the expected decline in feed/residual from the
current lofty US Department of Agriculture demand estimates," one US broker
Furthermore, the grain was supported by data late on Friday
showing a faster-than-expected rise in the number of cattle placed on US feedlots last month, by 15% year on year. The
market had forecast a rise of 9%.
"A negative cattle on feed report [for cattle futures] should
mean more corn used," CHS Hedging said.
It also implies more soymeal
used too, with the protein feed ingredient gaining 1.9% to $464.50 a short ton in
Chicago for May delivery.
It was a help that the September contract on China's Dalian
exchange gained, if only by 1 yuan to 3,329 yuan a tonne, but easing some of the
concerns over reports of collapsing crush margins in the country and mega
supplies of soybeans backing up.
Indeed, there was a meeting this weekend of Chinese soybean
processors, to discuss revising terms on import pricings, although Agrimoney.com
has yet to discover any results of the session.
themselves for May rose 1.3% to $14.26 ½ a bushel in Chicago.
Soft commodities, however, had a more negative start, with cane
and coffee showing parts of Brazil receiving rains over the weekend.
MDA noted "scattered showers" this weekend in states
including Sao Paulo, the top cane growing state, and in the south part of Minas
Gerais, the top coffee grower.
Sao Paulo in particular looks set for further rainfall.
Raw sugar futures
for May fell 0.3% to 16.78 cents a pound in New York, where arabica coffee futures for May dropped
0.9% to 169.70 cents a pound.
"Subdued demand, evidenced by a further slowing in Chinese
sugar imports, is weighing on global sugar prices," CBA's Luke Mathews said.
Cotton futures for
May gained, matching a contract high of 93.75 cents a pound earlier, despite
news that China is to lower to 17,250 yuan a tonne, from 18,000 yuan a tonne,
the price of the fibre sold from state reserves.
And this when China's cotton imports so far this year are
already running 36% lower.
"With local officials moving away from their domestic
stockpile policy, it is unlikely that imports will pick up noticeably over the
remainder of the season," Mr Mathews said.
The May lot was 0.3% up at 93.55 cents a pound.