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|Morning markets: ags fight back as harvest pressure eases
By Agrimoney.com - Published 22/10/2012
Not all markets managed a positive start.
Some disappointing earnings last week from US bellwethers such as General Electric, Google and McDonald's had investors slightly concerned about what is to follow in the US earnings season.
Meanwhile, Japanese data showed exports falling last month by more than analysts had expected, while sentiment among manufacturers dropped by its most since last year's earthquake and tsunami.
Shares opening a touch lower in Europe, and many commodities, such as London copper and Brent crude, were a little easier too
But agricultural commodities defied the malaise and posted early gains.
Not that investors didn't have reason to sell, for instance the US cattle on feed data late on Friday showed placements dropping by 19% to 2.00m head last month, the biggest drop for the month since the data were first collected in 1996.
The figure was also well below the fall of 14.9 % that analysts had expected.
The report "offered a bearish tone", Brian Henry at Benson Quinn Commodities said, showing weakness in the beef sector as well as dairy, with US milk output falling 4.5% last month, reflecting a drop of some 30,000 head, to 9.19m head, in cow numbers.
'Responding to high prices'
Meanwhile, data in Japan has shown the proportion of corn use in livestock feed dropping to a 20-year low of 42.7% in August, down 2.0 points year on year.
"The market received further confirmation that corn demand is responding to high prices," Luke Mathews at Commonwealth Bank of Australia said.
And, for soybeans, there was some continued talk over Informa Economics estimates late on Friday which pegged sowings next year at a record 79.987m acres, adding more than 100,000 acres to its previous forecast, and placing production on track for somewhere around 3.5bn bushels.
"This is not a surprise, but the numbers are bearish longer-term if normal yields come to fruition next year," Mike Mawdsley at Market 1 said.
Wheat, meanwhile, had the bearish influence of talk from Argentina's farm ministry that its crop has benefited from recent rains, although ideas from other commentators, such as the Buenos Aires grains exchange, that the precipitation has proved excessive have put a less upbeat spin on the outlook.
But the big three Chicago crops had two big factors in their favour.
The first is a continued reduction in speculators' net long positions.
Managed money has been particularly effusive at selling down soybeans, and reduced its net long position by 9,800 contracts to a seven-month low in the latest week, data late on Friday showed.
But net longs in corn and wheat were lowered again too, meaning less in the way of unfulfilled selling pressure which net long positions represent.
The second plus point for the row crops especially is the end of harvest, and with it the close of a period of easier supplies which have played a big part in depressing prices from summer highs.
US Department of Agriculture data later is expected to show the soybean harvest 80-85% finished, and corn almost all in the barn, with 95% completed.
Furthermore, technically, crops are looking more appealing too, with Chicago wheat for December and November soybeans on Monday climbing back over their 20-day moving averages.
December wheat added 0.9% to \$8.80 ½ a bushel as of 09:40 UK time (03:40 Chicago time), with November soybeans gaining 1.0% to \$15.50 ¼ a bushel.
Corn was 0.5% up at \$7.65 ½ a bushel.
'Shipments could rise'
Nonetheless, for once, Chicago crops were outperformed by Kuala Lumpur palm oil, which was a particularly poor performer in September, slumping to three-year lows on expectations of rising Malaysian inventories.
Data on Monday showed the prices having some impact, at last, in spurring demand, with Intertek Testing Services saying Malaysian palm exports have risen 14.1% so far this month, and Societe Generale de Surveillance estimating an increase of 16.7%.
"We expect shipments could rise in the next few weeks amid increased demand from India ahead of festival season," Ker Chung Yang at Singapore-based Phillip Futures said.
"Besides, demand from overseas refineries may rise following a decision by the Malaysian government to revise the current crude palm oil export tax and abolish duty-free export quotas."
Palm oil for January, the benchmark lot, added 1.4% to 2,535 ringgit a tonne.
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