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|Morning markets: firm China data inject mojo into ag prices
By Agrimoney.com - Published 01/11/2012
New month, new money, the saying goes on agricultural commodities markets.
But would it work this time, after the bounce in the last session, which ran against the usual calendar script?
Data from China, a huge buyer of commodities, helped get raw materials off to a broadly firm start.
An official Chinese purchasing managers' index for manufacturing showed a reading of 50.2, indicating growth (ie above 50.0) for the first time since July, and recovering from a figure of 49.8 in September.
A survey from HSBC came in with a reading of 49.5 which, while indicating contraction, was still better than the 47.9 in September.
OK, that was not enough to get all markets off to a flying start.
While shares soared 1.7% in Shanghai, and recovered to close up 0.2% in Tokyo after a profit warning from Panasonic rocked markets, equities are expected to ease at opening on Wall Street later, depressed by uncertainties stoked by the prospect of US elections and a handover of power in China starting two days later.
"The presidential election is less than a week away which will keep traders nervous and quiet," Paul Georgy, president of broker Allendale, said.
And certainly, if corn bulls were expecting another tearaway performance, after the 2% gain in the last session, then they would have been disappointed by early deals.
'Premiums continue to narrow'
Chicago's December corn lot gained, but by a modest 0.4% to \$7.59 a bushel as of 09:30 GMT/UK time (04:30 Chicago time), as traders awaited further evidence that the demand story behind the last session's gains had legs.
One of the supports is the idea that the US is about to gain a stack of exports, as South American supplies run low.
"Although South Korea was able to secure corn out of South America on Tuesday at \$ 30-40 cheaper than US offers, those premiums do continue to narrow and there are concerns that South American supplies could be exhausted in the New Year forcing world buyers to the US," Brian Henry at Benson Quinn Commodities said.
"Our current pace of export suggests we will not meet the 1.15bn bushels of corn projected for export in 2012-13" by the US Department of Agriculture.
'Demand seems very weak'
However, there are sceptics, such as Ted Seifried at Zaner.
"Fundamentally it is hard for me to wrap my head around the bullish argument," Mr Seifried said.
"Demand seems very weak from all sides. Supply is tighter than in years past but that has been known now for some time and that story might be old news.
"Before we can get re-excited about a tight supply situation we may need to go down and buy some demand back first."
More will be known on the demand side later with weekly US ethanol production data.
These will come against a background of renewed talk of plant closures, after Bunge's reannouncement this week that it was to idle a plant in Mississippi, with annual capacity for 54m gallons, by the end of the month because of poor margins.
(Plants outside the core Corn Belt areas tend to be more prone to closures given the extra cost of corn there.)
Still, what was in corn's favour was the technical picture, with the December lot remaining ahead of its 100-day moving average, which it flirted with closing below on Monday for the first time since mid-June.
The lot also regained its 10- and 20-day moving averages in the last session, with the 50-day, at \$7.63 a bushel, the next upside test.
Wheat at least managed to keep up this time, adding 0.4% to \$8.68 ¼ a bushel in Chicago for December delivery.
There is at least real evidence of the competitiveness of US supplies, which were the cheapest in Egyptian tender results revealed on Wednesday if, thanks to freight costs, still too high to win trade from the North African importer.
Furthermore, data overnight confirmed the poor start that US winter wheat is making, with just 40% rated "good" or "excellent" in the first full USDA reading of the year, compared with 46% a year ago.
At least, on emergence, the crop played catch-up, with 63% out of the ground as of Sunday, only four points behind the average.
'Talk of new export demand'
Still, it was soybeans which proved Chicago's strongest starter, continuing to be boosted by talk of Chinese buyers on the warpath, against a backdrop of doubts over ideas that the domestic crop was as high as Beijing, and Washington, officials believe.
And a lagging pace of South American sowings is prompting some injection of risk premium too, although there are ideas of rain for parched Brazilian areas, besides dryness for waterlogged areas of Argentina.
"There's been talk of new export demand along with more concerns about South American planting conditions," Ker Chung Yang at Phillip Futures said.
Mr Seifried said: "Soybeans might have the best fundamental story right now as the US is the only real supplier at the moment.
"Slower planting progress in South America could mean that the US will have to carry world demand further" through 2012-13.
The November contract added 1.0% to \$15.61 ¾ a bushel.
'Highest this year'
For once, of late, that was not enough to keep up, elsewhere in the complex, with palm oil, which added 1.6% to 2,536 ringgit a tonne in Kuala Lumpur on ideas for Chinese demand fuelled by Thursday's manufacturing data.
This followed on from ideas that Malaysia's October exports were strong too, following the collapse of futures to a three-year low.
"Cargo surveyor data showed that Malaysian palm oil shipments in October climbed to about 1.6m tonnes - the highest this year," Mr Ker said.
Nonetheless, Malaysian palm oil inventories "are set to hit another record beyond 2.48m tonnes".
In New York another big Chinese import, cotton, gained too, rebounding 0.7% to 70.57 cents a pound.
In the last session, the lot sank 1.2%, depressed by data showing a sharp rebuild, to 10,641 bales, in stocks certified for delivery against New York contracts, from less than 8,000 bales earlier last month.
The US harvest, after all, was 50% complete as of Sunday, running slightly ahead of the average of 47% by then, overnight USDA data showed.
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