Some have attributed the renewed popularity of agricultural commodities
this month in part to the poor start that shares made to the year, encouraging
investors to seek alternatives.
Whatever, shares made a bit of comeback on Friday in Asian
markets, with Sydney stocks rising by 0.5%, Hong Kong shares by 0.8% and Tokyo
stocks by 2.9%.
European share markets opened firm too.
But grains and oilseeds found headway tricky, even in Kuala
Lumpur, where palm oil retreated
from its 17-month high by 0.2% to 2,749 ringgit a tonne as of 09:45 UK time
(03:45 Chicago time), on end-of-week profit taking.
Indeed, the fall defied some further bullish talk on the
dent to production in Indonesia and Malaysia, responsible for some 80% of world
production of the vegetable oil, from dry weather.
"Drought will weaken tree structures, resulting in lower
production of fresh fruit bunches," Phillip Futures said, noting that Indonesia
had kept its export tax at 10.5% despite the prospect of a hit to production,
at a time of growing domestic demand for palm oil for making biodiesel.
The move was "likely implemented to match Malaysia's
unchanged March export tax at 5%, to maintain export competitiveness", the
Meanwhile, Chinese January import data for palm oil appeared
supportive too, in rising 17.8% to 556,523 tonnes year on year (with most of
the increase in purchases from Malaysia).
'Crush margins are
Chinese import data appeared decent too, at 5.91m tonnes, up 24% year on year with
increases in purchases from Canada as well as the US.
Indeed, China's imports of Canadian soybeans, at 314,337
tonnes, exceeded those from Brazil, at 116,065 tonnes, although that dynamic
will of course reverse as Brazil's harvest brings a surge of fresh supplies
However, not all the news from China was so supportive, with
the downside of huge imports is that it may mean a, temporary, surplus of
"Chinese port supplies are ample, crush margins are not good
and the health of their economy remains in question," Brian Henry at Benson Quinn
Commodities said, noting Thursday's soft reading to an HSBC purchasing manager'
index for China.
Certainly, price movements in China itself, the top soybean
importer, on Friday did little to improve crush margins.
Prices of soybeans themselves nudged higher, by 0.1% to 4,712
yuan a tonne for May delivery, and by all of 2 yuan to 4,509 yuan a tonne for the
better-traded September contract.
But May soymeal fell
by 0.7% to 3,402 yuan a tonne, more than offsetting a 0.1% increase to 6,790 yuan
a tonne in May soyoil.
In fact, there is talk of difficult times among Chinese
poultry producers, with reports of losses of 10bn yuan ($1.65bn) in the industry,
and growing by 1bn yuan a month, thanks to the dent to demand and prices from
the H7N9 bird flu outbreak.
Guangdong, the top Chinese producing province, is seen as
particularly badly hit, and there is talk of one large producer being brought
to the verge of bankruptcy.
'Serious rainfall deficit
Such considerations are balancing out the boost to soybeans
from Brazil's adverse weather, which actually includes excessive rains in parts
of Mato Grosso as well as the much-proclaimed dryness further east.
"As we move into this last portion of the critical growing
season in South America, we continue to have serious rainfall [deficit] problems
over much of central and east central Brazil, and increasingly excessive
rainfall problems over south eastern Brazil, Paraguay and the northern third of
Argentina," WxRisk.com said.
"This pattern is likely to continue."
'Pattern does not
Indeed, next week, "rainfall amounts over Mato Grosso south
eastward into Mato Grosso do Sul and into all of northern Paraguay and western
Brazil will continue to run above normal," the weather service said, foreseeing
rains of up to 5 inches.
But further east, "once again, most of Minas Gerais and
Bahia stay completely dry for this seven day interval".
And the "pattern does not change much" for the first week of
March either, weather models show.
The weather concerns have reached the extent that Oil World
has, reportedly, cut its estimate for the Brazilian crop to 85m tonnes from
89.5m tonnes, and below the downgraded by AgRural to 87m tonnes which garnered
attention early in the week.
Even so, that is still a large crop, and with soybeans already
having priced in considerable risk premium of late, March soybeans eased 0.2%
to $13.55 ½ a bushel in Chicago, where May soybeans dropped the same to $13.44 ½
Corn imports rise
Grains eased too, particularly oats, which slumped 1.6% on profit-taking to $4.61 a bushel for
March delivery although this was just enough to keep a premium over corn, which for March eased 0.2% to
$4.55 a bushel.
Chinese corn import data for January appeared pretty good,
at 650,904 tonnes, up 64% year on year, and all by 9,000 tonnes coming from the
This, remember, in a month busy with concerns over rejections
by China of US corn cargos containing a Syngenta GM variety unapproved by
Still it was tempting for investors to take profits, with
prices among their highest in five months, and with ideas of large potential
selling by US farmers still to come.
Furthermore, grain and oilseed markets face trial later by
data, with the US Department of Agriculture to reveal further forecasts for
domestic balance sheets in 2014-15.
(Thursday's sowing data was actually deemed largely bullish,
showing lower-than-expected numbers for both corn and soybeans.)
And there are weekly export data to factor in too,
particularly important when investors are seeking any evidence of Chinese cancellations
of orders of US soybeans, in a switch to Brazil, and of a tail-off in grain
exports which the USDA sees shrinking domestic stocks.
Weekly corn export sales are expected at 700,000-1.25m
tonnes, and soybean export sales at 150,000-500,000 tonnes.
Chinese imports soar
Wheat export sales
are seen at 400,000-700,000 tonnes.
"The export sales report will be a chance to see how higher
prices have impacted export demand, though the real slow down may not show up
for another week," Benson Quinn Commodities said.
Separately on the trade front, actually Chinese wheat
imports were particularly strong, soaring 305% to 725,942 tonnes.
This included 256,935 tonnes of US wheat, although Australia
was the biggest origin, at 327,076 tonnes.
Still, investors were happy to let Chicago wheat ease 0.3%
to $6.14 ¼ a bushel for March, and by 0.4% to $6.11 ¼ a bushel for May, in the
absence of any further ideas over the return of cold US weather expected next
"There isn't a particularly compelling story for either side
of the wheat market right now," Benson Quinn said.
Soft commodities started stronger, with raw sugar for May up 1.0% at 16.49 cents a pound, helped by data
showing a rise of 18.8% to 288,679 tonnes in Chinese imports, besides of course
the lingering ideas of dryness in some areas of Brazil, as highlighted by
revived too, soaring 1.5% to 172.00 cents a pound for May, if still remaining
below the last session's intraday top which represented the highest price since
started firm too, up 1.3% at 88.79 cents a pound.
This despite Chinese imports tumbling 36% last month to
292,485 tonnes, although a decline had been expected.