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|Morning markets: commodities get more into the QE3 mood
By Agrimoney.com - Published 14/09/2012
Risk assets generally staged something of a "Bernanke bounce" on Friday, showing gains on hopes the Federal Reserve's latest economic stimulus efforts will bear fruit.
Mr (Ben) Bernanke, the Fed chairman, on Thursday unveiled a fresh round of monetary stimulus, which will see the US central bank inject \$40bn a month into the domestic economy through purchases of mortgage-backed securities.
With the European Central Bank also having unveiled a willingness to snap up eurozone bonds, "the European and US policy actions have helped to reduce global market tail risks," Barclays Capital said.
And share markets, in particular, continued to celebrate, with Tokyo stocks adding 1.8%, and Seoul stocks 2.9%, after gains of 1.6% on Wall Street overnight.
'Outlook for prices is subdued'
Many commodities too showed gains, helped by a further decline in the dollar, by 0.3% to a four-month low against a basket of currencies, making dollar-denominated assets more competitive as exports.
Copper, after a muted response in the last session, soared 3.5% on Friday to a four-month high of \$8,355 a tonne in London, while gold added \$8 a tonne to a six-month high of \$1,775 an ounce.
And among agricultural commodities, cotton, which as an industrial raw material is more vulnerable to the economic mood than the average food crop, added 0.5% to 73.97 cents a pound as of 09:20 UK time (03:20 Chicago time, 04:20 New York time), even amid some doubts over its ability to extend its gains.
"Despite the higher close in the cotton market last night, the outlook for prices is subdued because of weak demand and record-large global cotton inventories," Luke Mathews at Commonwealth Bank of Australia said.
Late monsoon rains are reviving hopes for Indian production further too, although decent US weekly cotton export sales data on Thursday has eased some of the gloom in the US industry.
'Funds are loaded up'
But the winning mood was muted by the time it got to Kuala Lumpur where, ringgit-denominated, palm oil added 7 ringgit to 2,919 ringgit a tonne, depressed by large Malaysian inventories, seen as requiring competitive prices to whittle down, especially at time of seasonally-high production.
And even in Chicago, the market response remained muted among crops already at historically high levels.
Still, soybeans set course for a third successive day of gains, adding 0.3% to \$17.53 a bushel for November delivery, despite pressure from the accelerating harvest in the US, and the large position that speculators already have in the oilseed.
"Funds are loaded up while trade knows that soybean flow into US crusher/exporter pipelines will accelerate markedly over the next several weeks," Richard Feltes at RJ O'Brien said.
'Blowing around really bad'
However, the oilseed is also getting support from a too-dry start to the Brazilian soybean sowing season, which officially begins on Saturday in the important central belt, after a legally-enforced 90-day soybean-free period.
The oilseeds complex is also getting support from continued concerns over the damage caused by winds, reported gusting at 100km an hour, to the Canadian canola crop, causing pods to shatter and seed to be lost.
"About half of my crop is blowing around really bad," one Saskatchewan farmer, Ed Fielder, told CBC News.
"As soon as it blows out of the swath and spreads out, it shells-out. Once it shells-out, it's gone."
Canada's canola prospects are especially sensitive this year given its status as a potential replacement oilseed for soybeans, whose supplies have been diminished so heavily by drought in the US and South America.
China, for instance, is expected to lift canola imports (largely from Canada) over the next few months while cutting back on soybeans.
More will be known about the domestic US soybean use later, when the US National Oilseed Processors Association reveals monthly crush data, expected to come in at 128.3m bushels.
"This would be down on the month," reflecting seasonal downtime among US crushing plants, "but up on the year," Ker Chung Yang at Phillip Futures noted.
Canola itself retreated a touch from the last session's contract closing high, easing 0.2% to Can\$645.00 a tonne in early deals in Winnipeg.
'Critically-tight European crop'
Chicago corn felt harvest pressure, besides weakness in the charts too, remaining below its 50-day moving average for a third session.
However, besides the broader market gains, the grain gained support from the weakening European crop prospects, which have put imports of 8m tonnes on the agenda in 2012-13, according to Strategie Grains.
"We hear talk that critically-tight European grain crop [supplies] will eventually spark a rebound in US corn export sales early next year," Mr Feltes said.
Chicago corn added a modest 0.3% to \$7.76 a bushel for December delivery.
Wheat was, in fact, again the best performer among Chicago's big-three crops, adding 0.6% to \$9.07 ¾ a bushel for December delivery, gaining support from signs of stockpiling by North Africa and the Middle East, at a time when competitively-priced Russian supplies are running low.
Besides purchases by Egypt and Syria on Thursday, Tunisia tendered for 50,000 tonnes of durum.
Egypt, the top wheat importer, "has secured decent coverage, if recent purchases get executed, but I wouldn't be surprised to see them buy first-half December delivery, if the wheat market remains at or near these levels next week", Brian Henry at Benson Quinn Commodities said.
Furthermore, prospects for Australia's crop continue to decrease, following dryness, with ANZ cutting its forecast for the harvest to well below estimates from domestic and US officials.
With soybean prices "to remain supported by solid demand", wheat may "post an upside breakout, if given another opportunity", Mr Henry said.
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