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|Evening markets: strong dollar crushes corn, soybean futures
By Agrimoney.com - Published 02/11/2012
OK, it hardly looked like Chicago was in for a stonking session anyway, even before the US jobs data, with thoughts turning to field sports rather than fields.
"It's hard to believe, but it feels like fewer and fewer normal participants are paying attention to price action," Benson Quinn Commodities said.
"Producers are concentrating on fall field work in many areas, and this weekend marks the opener for deer hunting in Minnesota."
But the jobs data snuffed out any hope of rising prices.
'Very little relief'
The problem wasn't that they were bad.
Quite the contrary. Non-farm payrolls were up by 171,000 last month, more than the market had expected, with an upgrade to the September figure too.
But in raising hopes for US economic strength, the statistics were viewed, in market logic, as having a big downside, in lowering the chances of the US Federal Reserve continuing for long easy monetary policy.
"That prompted a rally in the US dollar, which started the sell-off in energy, metals and grains and there has been very little relief in the sell-off today," Darrell Holaday at Country Futures noted.
A strong dollar tends to depress prices of dollar-denominated exports such as many commodities by making them less affordable as exports.
Some (perhaps diehard Republican) commentators also said that the data, in raising the chances of Barack Obama returning as president, were weak for markets too.
Whatever, gold dropped, some \$30 to \$1,684 an ounce, on ideas that less easy monetary policy meant less risk of currency debasement.
And commodities, as measured by the CRB index, overall tumbled 1.6%, including a drop of more than 2.1% in Brent crude.
Against that background, the losses in Chicago were not so dismal, although soybeans did defy some more positive aspects in leading the decline.
The November lot fell 2.0% to \$15.27 a bushel, with the better-traded January lot showing a 2.2% fall to \$15.26 ¾ a bushel.
'Quite good data'
After all, soybean export sales data came in at 741,000 tonnes, a number deemed "very strong" by Mr Holaday, being being above expectations of at best 700,000 tonnes.
"Weekly exports sales for soybeans were quite good once again," Benson Quinn Commodities said.
And Informa Economics did allow the oilseed to, temporarily, pare losses thanks to its latest estimates for the US crop, ahead of revisions to official figures in the US Department of Agriculture's Wasde report next week.
Informa raised its estimates for the soybean yield , by 0.8 bushels per acre to 37.8 bushels per acre, and output, by 65m bushels to 2.93bn bushels.
But the figures, while above current USDA estimates, were lower than many in the trade had expected, besides falling below FCStone numbers on Thursday.
'Weather is improving'
However, many investors braced nonetheless for a bearish Wasde.
"Historically when soybean yields increase from September to October Wasde reports, they again increase from October to November," US Commodities noted, and against the background of US elections and a Chinese handover of power, many investors are taking a cautious stance.
Furthermore, ideas for rain improved in areas of Brazil where dryness is slowing plantings.
"Northern and central Brazil weather is improving. Moisture will arrive in the next 10 days," US Commodities said.
Technically, the picture worsened too, with both the November and January lots falling below their 20-day moving averages.
'No sign of competitiveness yet'
For corn, export data was less impressive, at 168,000 tonnes, termed "anaemic" by Darrell Holaday, if coming within the range of market estimates.
Richard Feltes at RJ O'Brien said: "Trade remains optimistic that US grains will soon be competitive with other origins, but there is no sign of that as yet on today's export sales report."
Weak oil prices are bad news for the grain too, given its large use in ethanol production.
Furthermore on the bearish site, USDA staff in Argentina sounded a relatively upbeat note over the country's crop, saying that the wet weather which was slowing sowings was at least building up soil moisture reserves.
However, the grain was given some support nonetheless by resilient hopes that US export data will indeed pick-up, now that it is more competitive with rival supplies.
"Brazil corn is now 20 cents-a-bushel over, and the Ukraine corn is on par with, the US values," US Commodities said.
Furthermore, Informa surprised many investors by cutting its US corn production estimate by some 450m bushels to 10.738bn bushels, on a yield trimmed to 122.4 bushels per acre, even if these figures remained slightly above current USDA figures.
December corn fell, but by 1.4% to 7.39 ½ a bushel.
'No significant rain of any kind'
Still, it was wheat which did best in Chicago, continuing to gain support from fears for newly-planted seedlings in dry areas of the US, besides a cut by USDA staff to estimate for the Argentine harvest.
"The crop obviously needs some rain. This is why the wheat market has been supported today compared to the other grains," Mr Holaday said.
Indeed, seedlings do not look like getting rain for now.
"The overall weather pattern remains rather quiet for the Midwest and the Plains states with no significant rain of any kind over the next five-to-seven days seen on any of the weather models whatsoever," weather service WxRisk.com said.
While US wheat exports sales were, at 362,000 tonnes, at the low end of expectations, Chicago's December lot limited losses to 0.2%, to \$8.64 ½ a bushel.
Paris wheat for November, helped by a weaker euro, gained 0.6% to E269.25 a tonne, with London's best-traded lot on the day, for May 2013, adding 0.5% to £219.35 a tonne, also boosted by currency moves.
The November lot closed up £2.00 at £212.00, the fourth highest close ever for a spot contract, although without trading volume the finish needs to be taken with some care.
'Coffee bucked the trend'
Among soft commodities, New York's December arabica coffee contract managed to pull out of its nose dive, helped by the news late on Thursday that one warehouse holding certified stocks for delivery against Ice contracts had suffered some Hurricane Sandy storm damage.
"Surprisingly," despite the broader market weakness, "coffee bucked the trend and held itself up, resisting the temptation to break and hold back below the 153.70-cents-a-pound support", Sucden Financial said.
The December lot ended 0.8% higher at 154.70 cents a pound.
Raw sugar for March edged 0.4% higher to 19.45 cents a pound.
'Expect this to support prices'
However, New York cocoa did better, added 1.1% to \$2,447 a tonne for December delivery, boosted in part by technical factors, having retaken its 200-day moving average, besides now standing above 10-, 20- and 100-day lines too.
Fundamentally, the bean gained support from data showing purchases by Ghana's Cocobod regulator, which handles marketing of the crop in the second-biggest producing country, down 42% at 86,000 tonnes, so far in 2012-13, albeit still early in the season.
Also speaking of constrained supplies was a 7% drop to 25,500 in Cameroon exports in September.
"We forecast a 98,000-tonne deficit in the cocoa market as key producers suffer from production setbacks, and expect this to support prices," Barclays Capital said.
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