PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 09:31 GMT, Wednesday, 25th Jun 2014, by Agrimoney.com
Palm oil futures regain 2,500 ringgit. Soy, wheat gain too

Agricultural commodities awoke in better form, including palm oil, which briefly crossed back above 2,500 ringgit a tonne in Kuala Lumpur.

The September palm oil contract reached 2,511 ringgit a tonne at its high, the highest for a benchmark contract in nearly a month, and taking it over it 40-day moving average, on a continuous chart, for the first time in three months.

Some of the steam had come out of the market by 09:30 UK time (03:30 Chicago time), when the contract had retreated to 2,506 ringgit a tonne, up 1.0% on the day.

Export data

The firmness reflected hopes for export demand helped in part an easing in the Malaysian ringgit by 0.3%, against the dollar, making Malaysian exports more affordable for buyers in other currencies.

That dovetailed with data showing an actual pick-up in shipments from the country, the second-largest palm producer and exporter after Indonesia.

According to cargo surveyor Intertek, Malaysian shipments rose 3.0% to 1.13m tonnes in the first 25 days of the month - implying a marked pick-up after exports for the first 20 days of June were, at 806,303 tonnes, seen down 5.8%.

As an extra help, Oil World released a somewhat downbeat estimate for world palm oil production in 2014-15, starting in October, of 202.31m tonnes, up from the 197.01m tonnes expected this season, but the slowest growth since 2009-10.

Oil palms in Malaysia and Indonesia are showing signs of drought stress after dryness in the first three months of the year, and are a further risk of drought assuming the El Nino weather event develops later this year, as meteorologists believe, Oil World said.

Data ahead

For grain markets, the data investors are really concentrating on are due on Monday from the US Department of Agriculture, on domestic grain stocks as of June 1, and on domestic crop plantings.

Granted, there are some other data events in the calendar too.

Today will bring weekly US ethanol production data will the country improve on the record output reported last time? Ethanol markets, which tumbled on last week's data, were actually reasonably positive this time, adding 0.4% to $2.012 a gallon for August delivery.

Then there are weekly US export sales data due tomorrow and Friday sees Canadian sowing estimates actually expected to see figure of about 24.4m acres for wheat, down some 500,000 acres from the April forecast.

Inventory declines

However, it is the USDA data which are gaining the most attention, and provided cause for investors to think again about getting too bearish on crop prices for now, even if concerns over excessive US rains are waning.

"The 'too wet' argument is losing traction quickly as a batch of warmer, drier weather is on the way," said Sterling Smith at Citigroup.

"A lot of the standing water has receded," said Brian Henry at Benson Quinn Commodities.

After all, the stocks data are expected to show sharp declines in soybean and wheat inventories year on year.

Soybean stocks, as of June 1, are seen at 382m bushels, down 12.2% even on those a year before, a season which itself was, of course, a tight one for supplies.

For wheat, inventories are expected to come in at 597m bushels, down 16.9% year on year.

Free DDGs?

That said, for corn, after last year's record harvest, inventories are seen showing an increase, by 35% to 3.72bn bushels.

And the grain was indeed alone among Chicago's big three in showing losses in early deals, with the September contract down 0.3% at $4.35 a bushel, and the new crop December lot down 0.2% at $4.39 a bushel.

There are other factors weighing on the grain too, including a Chinese estimate for domestic corn production of 223m tonnes, up 2.1% year on year, and revived fears over the country's refusal to accept imports of US distillers' grains (DDGs), the feed ingredient made as a byproduct of ethanol manufacture.

"DDGs have been, and will remain, a negative input as that market broken roughly $100 a tonne since China stepped away," Benson Quinn Commodities' Brian Henry said.

"There is unconfirmed talk that the DDG back-up has some ethanol producers offering the product to anyone that will pick it up."

"New export markets for DDGs could develop at cheaper values, but right now they're a cheap alternative to corn and in most cases soymeal in the domestic market."

'Premiums are sharply higher'

Still, soymeal actually managed to perk up a bit on Wednesday, having in the last session, while closing lower, managed to avoid a multi-month low, and appearing to show some resistance to trading down towards $430 a short ton, August futures.

Soymeal futures on the Dalian exchange closed lower but not disastrously so, easing just 3 yuan to 3,695 yuan a tonne for January delivery.

While soybeans themselves did a little worse, shedding 0.2% to 4,496 yuan a tonne for January, it was not the kind of fall to underline fresh concerns over Chinese crushing margins, fears whetted by a poor result from the latest auction from state inventories, on Tuesday.

In fact, the US cash market remains firm, with CHS Hedging noting that "soybean premiums at the US Gulf are sharply higher".

In Chicago, July soybeans took on 0.4% to $14.18 a bushel, while the new crop November lot added 0.5% to $12.30 a bushel, regaining its 40-day and 50-day moving averages.

It also took the new crop soybean:corn ratio to a heady level a fraction under 2.80:1.

Price floor?

Wheat managed some kind of rebound too, adding 0.1% to $5.81 a bushel in Chicago for September delivery, and by 0.2% to $7.05 a bushel for Kansas City hard red winter wheat for September.

Pressure from the northern hemisphere harvest remains a theme.

But prices are also reaching levels so low that further losses, for now, may take quite some extra pressure, especially with key reports ahead.

"A repeat of Wednesday's lower session would result in oversold wheat markets," Mr Henry said.

"Recent wheat sellers may want to pay some respect to this as corrections have been rather violent."

Cotton recovers

Among soft commodities, the wayward course of old drop July cotton took it up 2.4% to 83.75 cents a pound, although this of course recovered only part of the near-7% losses of the last session.

The contract is in the grip of the pre-expiry process which is producing contortions as investors quit.

December cotton edged 0.2% higher to 76.64 cents a pound, gaining some support from soybeans, but with investors continuing to eye improved conditions in Texas, the top US producing state.

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