PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:22 GMT, Friday, 14th Jul 2017, by Mike Verdin
PM markets: dollar weakness, US weather spur ag price gains

A firmer finish to the week by grains was made a whole lot easier by currency moves.

The dollar eased by 0.6% against a basket of currencies to a nine-month low, boosting the value of dollar-denominated exports, such as many commodities, by making them more affordable.

The greenback's weakness reflected a somewhat risk-on attitude after this week's cautious comments by Janet Yellen, the Federal Reserve chair, on US monetary policy normalisation.

Wall Street's S&P 500 share index hit all-time intraday high.

And the CRB commodities index stood up 1.8% in late deals, poised to close above its 40-day moving average for the first time since May.

Real help

As an extra help for soft commodities, the Brazilian real rose at the dollar fell adding 1.0% against the greenback, and boosting the value in dollar terms of assets in which the South American country has a big say, such as coffee and sugar.

Arabica coffee futures for September gained 1.9% to 133.70 cents a pound in New York, their highest finish since May, in a rally seen fuelled too by covering by hedge funds of some of their near-record net short in the bean.

Raw sugar for October gained 1.1% to 14.30 cents a pound, gaining support too from further reaction to Petrobras's increase in gasoline prices earlier in the week.

The move by the Brazilian fuel monopoly, in boosting values of gasoline rivals such as bioethanol, underpinned values of sugar, which competes with ethanol for cane.

'Above-average temperatures'

Another ag commodity linked to the real, soybeans, gained too, adding 1.5% to $10.01 a bushel, although other factors were in play here too notably the US Corn Belt weather outlook.

"The six-to-10 day temperature forecast is showing above-average temperatures across all of the Corn Belt and northern Plains," said CHS Hedging.

WxRisk.com said that the one-to-five-day forecast showed conditions "mostly dry all of the Midwest central and upper Plains" and "hot over all of the Plains.

"All models are hotter for western Iowa and all of Missouri."

Benson Quinn Commodities said that "the shift in the forecast puts more focus on the potential for corn and possibly soybeans yields to be more in line with the trade expectations", than lower forecasts from the Department of Agriculture.

'Not obligations'

An announcement by the US Department of Agriculture of US export sales of 1.3m tonnes to China was met with less interest, being seen as part of the so-called "frame contract" for 12.53m tonnes of the oilseed signed with China on Thursday.

"However, frame contracts are not obligations, but merely intention to buy," CHS Hedging noted.

Whatever, Chinese buyers, who import more than 90m tonnes of the oilseed a year, will see their purchases of US soybeans exceed 12.5m tonnes, whatever.

Yield downgrade

Corn took heart from the US weather outlook too, adding 1.8% to $3.89 a bushel for December, returning back above its 200-day moving average (but not quite above its 100-day line).

And commentators continue to factor in a lower US yield than the 170.7 bushels per acre that the USDA stuck with on Wednesday in its monthly Wasde crop report.

Planalytics, for instance, cut its projected US corn yield to 165.3 bushels per acre, from 166.6 bushels per acre.

'Plenty of ammunition'

Spring wheat gained too, by 1.1% to $7.58 a bushel for the September contract in Minneapolis, with further poor weather expected for much of the northern US Plains.

"The Canadian Prairies look to be rather warm and dry for at least the next week," said Benson Quinn Commodities.

And there were the calculations from Tregg Cronin at Halo Commodity Company earlier to factor in, that "a closer look at the by-class balance sheet leads on to believe inter-market relationships have a good deal further to go.

Wednesday's Wasde showed US hard red spring wheat stocks as a percentage of all-wheat stocks at the close of 2017-18 "at just 12.99% versus the previous record low of 19.84% set last year.

In 2007-08, when grain prices soared, "that ratio was 22.2%," Mr Cronin added.

"There would appear to be plenty of ammunition left for spring wheat [appreciation] whether on a flat price or inter-market basis."

'Snaps winning streak'

However, playing its part in this dynamic, Chicago winter wheat for September eased by 0.2% to $5.10 a bushel.

In London, feed wheat for November eased, marginally, too, by £0.10 a tonne to £149.00 a tonne,

Indeed, the contract "snapped a 5-week winning streak amid ample supplies of grains and a rebound in sterling", said CRM Commodities.

The fall in London futures belied an estimate of a 3% drop in British wheat seedings for the 2017 harvest to levels typically only seen in periods of weather-hampered autumn planting periods.

This time, anti-black grass strategies seem to be playing a strong role.

 

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