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Evening markets: crops show some mettle amid market sell-off

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On a dismal day for risk assets, farm commodities actually rated among the best of a bad bunch.

A 0.4% rise in New York raw sugar

for

October to 27.79 cents a pound, an increase attributed to a wave of late covering of short positions, may not sound much.

Nor the 0.7% lift to 104.92 cents a pound in December

cotton

, after bears failed in an attempt to keep the fibre for long below its 20-day moving average around 103 cents a pound.

But against the storm raging in external markets, as fears for eurozone debt reignited again in earnest, adding to the concerns already aflame over the health of the US economy, they looked little short of miraculous.

As Benson Quinn Commodities noted, there are "worries that the world economy will fall back into a recession with world governments having little recourse to stimulate economies as interest rates are already low and many governments are holding massive debt".

Dollar soars

In share markets, the Dow Jones industrial average was 3.0% lower in late deals, with Frankfurt, London and Paris stocks already having closed with 3%-plus losses.

OK, the

dollar

was higher, playing on its safe haven status, besides intervention to weaken the yen, to jump 1.4% against a basket of currencies.

But that should only have made the case for dollar-denominated export assets, such as many commodities, worse by making them more expensive to buyers in other currencies.

Certainly, West Texas Intermediate

crude

tumbled 5.5% below a barrel, its lowest since February.

Kansas rain

And, indeed, Egypt issued another reminder to the US, and France, over the lack of competitiveness of their

wheat

on international export markets, by, after the third tender in 10 days, awarding yet more orders to Russia, although this time with some Romanian grain thrown in too.

That was hardly encouraging to wheat, in Chicago which ended 4.1% lower at .82 ½ a bushel for September delivery.

Paris wheat for November lost 1.3% to E196.75 a tonne, and London wheat for November 1.7% to £161.25 a tonne.

"Rain in parts of Kansas has also prompted some selling in the wheat market," Darrell Holaday at Country Futures noted, relieving farmers' concerns that the dry weather which dogged the newly-harvested crop would threaten imminent plantings of the next crop too.

'Could be a lot worse'

But there was some feeling that investors were less willing to get shot of assets which, in an inflationary environment, might perform well.

Corn's

fall of 1.6% to .01 ½ a bushel for December delivery was certainly viewed by some as relatively modest.

"It could be a lot worse, given all that is going on," Jerry Gidel at North America Risk Management Services told Agrimoney.com, especially since Informa Economics came out with a corn yield estimate that, at 158.0 bushels per acre, was higher than most other recent forecasts.

"But then you are hardly going to see Informa coming out with a low number and leading a bullish charge," Mr Gidel added, noting the group's reputation for sanguine estimates.

"Their approach is to bet on technological advances coming through."

'Heat surging back'

One definite support to corn was an upgrade by Goldman Sachs to its forecast for corn prices and a yield estimate of 154.0 bushels per acre which was more in line with other brokers' thinking.

Weather was mixed, with near-term forecasts looking cooler, helpful to crops stressed by July heat.

Still, "at the end of the 10-day period about 25% of the Midwest will remain short of moisture", US Commodities said.

And the 11-to-15 day forecast "again has the heat surging back to the south west, which could bubble into Missouri and Nebraska".

'A little supportive'

That was some help to

soybeans

too, restricting their loss to 2.0% for the November contact to .45 ¼ a bushel.

Also, Informa's upgraded estimate on yields was viewed as more helpful to the oilseed, coming in at 42.5 bushels per acre,

"The soybean numbers were a little supportive, as normally Informa overestimates the US Department of Agriculture's August soybean yield figure," Mr Holaday said.

And export news was OK, with China ordering 174,000 tonnes of the oilseed, the latest in a fresh series of purchases, on top of US weekly export sales data which, at 680,000 tonnes, were just above expectations.

'Higher, with a vengeance'

It was a better performance than arabica

coffee

could manage in New York, where the September lot closed down 2.5% at 235.85 cents a pound.

The decline was in part blamed on falling through technical support levels, besides an overnight frost in the Brazilian state of Parana proving less severe than had been feared.

Not that all is lost, according to Jurgens Bauer at PitGuru, noting funds' relatively low long exposure to the bean.

"I eventually see coffee prices moving higher, and with a vengeance when they finally do, as funds are nibbling and getting positioned comfortably on the short side."

By Agrimoney.com

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