PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 19:59 GMT, Friday, 22nd Sept 2017, by Mike Verdin
PM markets: corn, soy gain, amid talk of shift in money flow

Are commodities, including agricultural ones, getting back into investors' good books?

That was one idea floating around on grain markets on Friday to explain a firm performance by the likes of corn and soybean futures on what might have been expected to be a downbeat day, with harvest pressure and talk of mildly better-than-expected US harvest yields still floating around.

"Money could be shifting to commodities looking for value," said Benson Quinn Commodities.

"Geopolitical tensions with North Korea," while undermining Wall Street stock prices in late deals, "could also be shifting money to the commodity markets," the broker said.

Investors often see, after all, changes in money flows as behind opposite moves in share markets and commodity markets.

Shipping rates rebound

As for any other support for such a theory, well, some have pointed to the recovery in freight markets as evidence of greater demand for stuff including raw materials.

The Baltic Dry index on Friday topped 1,500 points for the first time since March 2014, with stronger shipping rates highlighted in results of an Egyptian wheat tender earlier this week too.

Strong shipping markets mean that "economists are therefore suggesting the world is about to show strong commodities growth going forward", Sucden Financial said.

Export demand

Still, there were other reasons proffered for the market strength which saw soybean futures for November close up 1.5% at $9.84 a bushel, including strong demand, with the US Department of Agriculture announcing yet another export sale of US crop.

This time it was for 190,000 tonnes purchase by Mexico.

Richard Feltes at RJ O'Brien noted that "the sale announced marks the fourth in five days, but today's is to Mexico, not China," the top soybean importer.

That said there is still talk of Chinese buyers being in the market, he added.

'Spurred additional buying'

Chart factors were viewed as helpful too.

Darrell Holaday at Country Futures said that the session was marked by "generally a technical trade in the soybean complex, as the support in the $9.60-a-bushel area held yesterday.

"That has spurred buying at the bottom of the sideways trading range."

Furthermore, Friday's price gain pushed the November contract back above its 200-day moving average, above which it had not finished since July, and a factor "which has spurred some additional technical buying", Mr Holaday said.

Corn vs wheat

Corn futures gained too, by 0.9% to $3.53 a bushel for December delivery helping their technical credentials a bit by managing to match their contract closing low on a weekly chart, rather than setting it alone as had appeared likely for much of the week.

Unusually, for recent sessions, it was wheat which underperformed in Chicago, closing down 0.7% at $4.49 a bushel for December delivery, although still closing marginally higher for the week.

The reversal took the wheat premium of wheat over corn, December basis, back below the key $1.00-a-bushel mark, which the gap had closed above in the last session for the first time since early August.

Indeed, there was more than a hint of spreading around in wheat, both against other crops and against Minneapolis-traded spring wheats, which jumped 1.8% to $6.35 a bushel, continuing to strength on ideas of a disappointing-quality Canadian crop, which may only be helping the signs of buying for higher protein wheat.

Worries over southern hemisphere wheat crops remain live, with CHS Hedging noting that "Argentina remains wet. Australia remains dry.

"Concerns of crop losses in both areas provide underlying support to the wheat market."

'Negative week'

Among soft commodities, New York-traded arabica coffee futures eased 0.4% to 134.45 cents a pound for December, extending a retreat from Monday's highs.

The market has had "a negative week," said Brazil's Conselho Nacional do Café producers' group, saying that price falls "were driven by assessments of weather Brazilian monitoring in Brazil, where there is possibility of return of rains in September", which would be a boost to 2018 yield prospects.

Raw sugar futures for March settled down 0.6%, at 14.64 cents per pound, hurt by expectations of imminent Brazil Centre South crush data from industry group Unica showing a revival in production in the first half of this month.

Drier weather is seen having allowed the cane crush to reach 45.98m tonnes in the period, up 18% from volumes in the second half of August, and a rise of 21% year on year, according to an S&P Global Platts survey of analysts.

Sugar output is seen at 3.08m tonnes, up from 2.54m tonnes in the second half of August, and up 27% year on year.

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