Linked In
News In
Linked In

You are viewing your 1 complimentary article.

Register now to receive full access.

Already registered?

Login | Join us now

Morning markets: dollar spike nails down ag commodity prices

Twitter Linkedin eCard

Just when investors thought it was safe to get back into farm commodities…

Speculators have turned back towards raising net long positions in agricultural commodities, with the net long in corn up 18% in a week, latest US regulatory data showed.

And there is talk of more money waiting in the wings. "Many in the trade believe new capital is going to be put to work," Brian Henry at Benson Quinn Commodities said.

Dollar spike

But not on Monday, in early deals at least.

The date mitigated against big purchases, it being the last trading day of October. End-of-month periods are, by repute, times when funds tidy up portfolios, meaning position closures, ahead of potential buying, which month beginnings are known for.

And if that sounds too wishy washy a reason to sell up, a 1.3% spike in the


, as of 08:30 GMT, was not.

The greenback, which last week fell to its lowest since early September, on sales by Japanese authorities of the yen, whose rise of some 40% against the dollar since the start of 2008 is seen as hitting hard the competitiveness of Japanese exports.

And, in reverse, a stronger dollar reduces the appeal of dollar-denominated assets, such as many farm commodities, to buyers in other currencies.

Cotton drops

Losses were widely felt. In New York,


fell 0.8% to 103.58 cents a pound for December delivery after gaining 8% last week on strong US export data and improved hopes for the world economy, after last week's eurozone deal.

Cotton, as a non-food commodity, is viewed as more prone to macroeconomic vagaries.

Furthermore, a weak performance by cotton on the Zhengzhou exchange in China, the top producer, importer and consumer of the fibre, didn't help, with the May lot down 1.2% at 20,255 yuan a tonne.

In Chicago, rough


for November managed to hold just in positive ground, up 0.01 cents at $16.75 a hundredweight, as flooding continued in Thailand, the top rice exporting country.

But futures in the big crops faltered, notably in


, which dropped 1.4% to $6.46 a bushel for December delivery.

Export battles

OK, there are growing expectations for corn imports by Mexico, the second-ranked buyer of the grain after Japan, following what looks has been the smallest domestic crop in six years.

But set against that is the growing competitiveness of Ukraine as an exporter, with the country believed to have added Taiwan to Japan on its customer list, with trade at $280-290 a tonne, some $35-40 a tonne below US values.

Brazilian supplies are reported in the trade at $5-10 a tonne cheaper than US too.

And that's ahead of a South American crop early in 2011 which is expected to be a big one, although Argentine corn seedings as of late last week were 56% complete, lagging last year's progress by nine points because of dryness in some areas.

Price break-out on its way?

Technically, December corn faced a setback in falling short of beating a key level in the last session.

"Futures still need a close over $6.55 a bushel," Mike Mawdsley at Market 1 said, having closed "right on $6.55 a bushel" last time.

And all this may bode ill if Lynette Tan at Phillip Futures is right that the grain looks like making a trend-setting move.

"Looking at the 14-period Bollinger band, we see the upper and lower bound converging to a squeeze and a breakout looks likely. A break-out in either direction could signify a new price direction for the week if there is follow-through buying or selling," she said.

She noted that the grain was "trading below the key moving averages, signalling downside pressure", moving back on Monday below its 200-day moving average.

Rains stop play

Fellow grain


fell less hard, by 1.0% to $6.38 a bushel for December in Chicago, but fell all the same.

Its drop was limited in part by its continuing, but atypical, discount to corn, which usually gains a discount for its lower protein levels.

But wheat also had some farmer unfriendly fundamental news to offset another loss over the weekend of US wheat in an Egyptian tender, with Ukraine picking up the spoils of a 120,000-tonne order.

(The order was the first since Egypt, the world's top wheat buyer, three years ago dropped Ukraine from its list of approved suppliers.)

The more bullish news was that rain in Australia is causing troubles for a second season, this time in Western Australia.

"Up to 50mm (2 inches) of rain fell across the majority of the Western Australia grain belt over the past week, disrupting harvest progress in the north," Luke Mathews at Commonwealth Bank of Australia said.

"Conditions need to dry out to allow harvest to resume and to preserve grain quality. However, more rain is forecast for the next eight days."

Volume puzzle


, the most rangebound of Chicago's big three crops this year, maintained that performance, falling a more modest 0.9% to $12.06 ¬ľ a bushel for November delivery.

The oilseed continues to feel some pressure from poor weekly US export sales, and a good start to Brazilian sowings.

Kim Rugel at Benson Quinn also made a noteworthy observation, if failing to say what it might mean.

"The one thing that continues to stand out from the night sessions is that soybean volume has risen sharply in comparison to corn," Rugel said.

"Typically corn volume is double soybean volume on any given night but of late, the last two weeks or so, soybean volume has been nearly double that of corn."


Twitter Linkedin eCard
Related Stories

Evening markets: Soybean futures gain, cotton prices jump on US data

Initial USDA forecasts for crop supply and demand for 2018-19 lift soy and cotton prices, but are not so well received in the cotton market

Weekly grain market view from Europe, February 23

EU cold snap could damage crops... UK market prices in closure of Vivergo ethanol plant... Rising Russian wheat prices...

Evening markets: Argentine moisture slips up soymeal rally. But weather revives wheat

Meal futures dip, a little, for the first time in 12 sessions. But wheat futures gain, as drought spreads in Kansas, and cold reaches Europe

Morning markets: Ag futures ease, as traders await key 2018 forecasts

US officials will later on Thursday issue the first of a series of forecasts for US crops in 2018-19. Markets are cautious in the mean time
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© 2017 and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of AgriBriefing Ltd
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069