|Agrimoney.com - http://www.agrimoney.com/features/marketreport.php?id=1846|
|Evening markets: ags sidestep sell-off in other commodities
By Agrimoney.com - Published 24/10/2012
Agricultural commodities showed a bit of an independent streak even as other commodities fell, as weak data from the eurozone eroded the early support from China.
While China's purchasing managers' index showed the downturn easing in manufacturing in the world's second largest economy, European data were a different kettle of fish.
A eurozone composite purchasing managers' index fell to 45.8 from 46.8 last month (any figure below 50.0 indicating contraction) while German-specific data were poor too, with its influential Ifo index of business confidence dropping to its lowest level since February 2010.
And that after poor results in the US from DuPont, 3M, Google etc.
"Risks remain. A disappointing US earnings season has so far failed to confirm expectations of improving business conditions," Barclays Capital said.
Wall Street shares lost early gains, while the CRB commodities index tumbled 0.7% to its lowest since early August.
Among crops, New York cotton, which fell 2.2% to 72.67 cents a pound, did its bit as bearish cheerleader being, as an industrial commodity, more in tune with the broader market mood, and feeling pressure too from waning concerns over US inventories.
Stocks for delivery against New York futures edged higher again, to 8,446 bales, with a further 1,800 awaiting review.
And New York cocoa tumbled 4.0% to close at \$2,399 on a largely technical driven sell-off, coupled with some fundamental concerns.
"The world cocoa harvest in 2011-12 could well have produced a surplus, contrary to expectations," Commerzbank said.
"The grinding data provided by Europe and North America are not very promising, so some cocoa processors are expecting the last season to have resulted in a surplus of 10,000-40,000 tonnes."
However, many other agricultural commodities outperformed the CRB, including raw sugar, which edged 0.2% higher to 19.68 cents a pound in New York, for March delivery.
Sure, US Department of Agriculture staff came in with a hefty estimate of 2.2m tonnes for Indian sugar exports in 2012-13, when some observers such as Macquarie wonder whether the country will be able to ship much at all.
And data from cane industry group Unica showed the Brazilian Centre South sugar output hitting 2.79m tonnes in the first half of October, up from 2.20m tonnes in the second half of September and 1.78m tonnes a year ago.
But renewed rains are expected to see that pace slow down, hampering the cane harvest.
'Active buyer on breaks'
Such rains are not so supportive for soybean prices, bringing the moisture that much of Brazil needs to get its sowings of the oilseed off to a good start, after an unduly dry spell.
"Northern and central Brazil has been dry. This area is getting more moisture now and is forecasted to receive more normal moisture and precipitation," broker US Commodities said.
However, the oilseed managed gains anyway, helped by continued ideas of strong US exports, with the US Department of Agriculture confirming export sales of 105,000 tonnes of the oilseed to "unknown", presumed to be China.
It is "almost a daily occurrence", Darrell Holaday at Country Futures said.
US Commodities said: "China continues to be an active buyer of soybeans on breaks."
'Basis levels have begun to improve'
Furthermore, "commercials are also securing soybeans on breaks" too, the broker added.
Indeed, "basis levels have now begun to improve," in the eastern Corn Belt Basis "pushing to 10-20 cents a bushel over the November futures in some locations".
And as an extra sign of short-term supply tightness, Chicago witnessed some so-called bull spreading, with the November lot closing up 1.1% at \$15.70 ½ a bushel, gaining on the January lot, which added 0.9% to \$15.72 ¼ a bushel.
Such moves are seen as a sign of the market moving to encourage the release of supplies in the short-term, cutting the prize for holding on to stock.
'Speaks volume for US non-competitiveness'
That was not an issue for corn, for which demand news continues to throw up road humps, for example the decision by Mexico, revealed on Tuesday, to opt for non-US origin for a 270,000-tonne order.
"This speaks volume for the US non-competitiveness. We cannot get the business with our neighbour," US Commodities said.
Paul Georgy, at Allendale, said: "South American corn exports are picking up the slack in US supplies."
Furthermore, weekly US ethanol production data, while showing a 4,000-barrel-a-day improvement on the previous week's 797,000 barrels a day, were not as buoyant as many had expected, given apparently better margins at the time.
Still, "probably the most bearish fundamental for corn is the weakness in the bull spreads, with carry being put back in the market," Country Futures Darrell Holaday said
In fact, December corn dropped 0.3% to \$7.45 ½ a bushel, ahead of the 0.1% drop to \$7.56 a bushel in the March contract.
"That is not supportive to overall near term values. It is possibly an indication of a pick-up in cash movement."
Corn's performance was also a far cry from that of wheat, which soared 1.8% to \$8.84 a bushel in Chicago, for December delivery.
The gain was attributed largely to the Ukraine farm minister's confirmation of a wheat export ban from November 15, although some questioned that rationale.
"This has been well-known for at least two weeks," Mr Holaday said.
However, it was not the only reason to get upbeat on wheat, with China's wheat imports topping 500,000 tonnes last month, and taking its total in the first three months of 2012-13 above 1.0m tonnes.
This for a season when the USDA expects total imports to hit 1.5m tonnes – a figure looking increasingly like an underestimate, as Rabobank pointed out.
'Not very promising'
Furthermore, weather concerns are lingering in Argentina and Australia.
Benson Quinn Commodities noted that "dry conditions are reducing Australian wheat production while wet conditions in Argentina are raising quality concerns with fungus damage already being reported".
And in the US, "midday weather models not very promising for the US Plains area in the next 10 days", in terms of bringing much-wanted rain to seedlings needing to strengthen up before winter, Darrell Holaday said.
In Paris, wheat for November gained 1.3% to E266.75 a tonne, while its London peer added 0.7% to £206.25 a tonne.
|© Agrimoney 2010|