RSS
Twitter
Linked In
News In
Markets
Linked In
RSS
https://twitter.com/Agrimoney
http://www.newsnow.co.uk/h/Industry+Sectors/Agriculture

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

Morning markets: farm commodity futures down, but not out

Twitter Linkedin

The question was not whether agricultural commodities were going to fall on Monday. All risk assets looked in for a pounding after Standard & Poor's downgrade of America's sovereign credit rating.

The real question was by how much the decline would be.

And some markets indeed showed notable drops. Tokyo shares closed down 2.2% at its lowest level since the aftermath of the tsunami, while Shanghai stocks stood 3.8% lower in late deals.

Oil

dipped 2.8% to $84.44 a barrel as of 07:15 GMT (08:15 UK time) – if failing yet to crack its lowest point reached Friday, before the late recovery.

Copper

fell 2.0% in Shanghai.

"No one is sure what the week will bring, but if funds/traders/investors decide to continue to liquidate, this action could come over into the grains pits as well," Mike Mawdsley at Market 1 said.

Grains vs energy

But farm commodities showed some composure, and proved better able to draw some support from a

dollar

which dipped 0.8% against a basket of currencies, improving the competitiveness of dollar-denominated assets on export markets.

OK, that did not mean that many were in positive ground, although sugar and corn were showing small gains on the Dalian exchange in China.

Crops' - relative – strength "may be a sign of traders finding value in these markets regardless of what is happening to the outside markets what is happening to the outside markets", Brian Henry at Benson Quinn Commodities said.

"It may also be a case of traditional commodity funds not having to raise capital by selling net long positions.

"One could make the case that funds heavily involved in energies are reallocating capital from those markets to the grains given the concerns about the economy."

Report worries

There were also ideas of a reluctance to sell ahead of a US Department of Agriculture monthly Wasde report due on Thursday which looks like being one of the most important of the year, among a series which is always closely watched by crop traders anyway.

The estimates for the US

corn

yield, following the July heatwave, and acreage, tested by a poor sowing season and spring floods, will be most closely watched.

Investors appear "unwilling to give up too much of the additional risk premium" added into corn last week "on ideas that the upcoming USDA report could see the corn crop production being reduced", Jon Michalscheck at Benson Quinn said.

Nonetheless, analysis of trading positions released by US watchdogs late on Friday showed that there was space for fast money to move back into corn, if the USDA data indeed prove bullish.

"Net longs in corn are still a long way below the highs seen over the last 12 months, leaving plenty of room for speculators to jump back into corn over the next week if we get a shock from the report," Paul Deane at Australia & New Zealand Bank said.

Chicago corn for December delivery, the best traded contract, fell 0.8% to $6.87 ½ a bushel.

Lots of shorts already

The limited drop was some help to other grains, with

wheat

also getting fundamental support from the dryness and heat which looks set to continue to dog southern US winter wheat regions, posing a challenge to sowings.

In the 11-to-15 day outlook "the Lower Plains and deep South regions looks above normal with respect to temperatures", WxRisk.com, although other areas look less threatened.

"Some models show some heat -91-95 degrees Fahrenheit - getting into Kansas, Nebraska, Missouri southern Illinois and Indiana and Kentucky, but not all the data agrees with this."

Furthermore, as far as fund positions go, they have already got a net short of 53,200 positions in Chicago wheat, according to the latest regulatory data, meaning there may be some reluctance to add too many more.

Indeed, this position is the biggest since July 2010, just as Russia's drought sent prices soaring and caught many funds out.

Chicago wheat for September fell 0.9% to $6.73 a bushel, with its Kansas hard red winter wheat equivalent falling 0.7% to $7.74 ¾ a bushel and Minneapolis spring wheat down 0.4% at $8.24 a bushel.

Worst headlines

The worst headlines were posted in the oilseeds complex, where

soybeans

dropped to a one-month low, but here again the declines were not so dreadful (yet), considering that weather forecasts for this month, crucial for the crop in the US, are looking better as well.

The November contract fell 1.0% to $13.23 a bushel, after touching $13.16 a bushel earlier.

That said, technically, "the longer we stay under $13.50 a bushel, the more $12.90, $13.00 a bushel is likely," Mr Mawdsley said.

In Kuala Lumpur,

palm oil

fell 1.2% to 3,015 ringgit a tonne, the lowest since October, with a lift to exchange margin requirements added to investor caution.

By Agrimoney.com

Twitter Linkedin
Related Stories

Abares lifts hopes for sugar futures, but cuts its cotton price forecast

A downgrade to Australia curtails an upgrade in world sugar output expectations. But for cotton, Abares ditches ideas of a global production deficit

Evening markets: Ags poop party lifting other commodities, shares

Wheat futures set another contract low, while arabica coffee hits its weakest close but one in 19 months, despite buying in other asset classes

Australia cuts wheat export hopes, pegs canola shipments at 7-year low

The country’s Abares bureau sees a dent to wheat shipment prospects from a smaller harvest, but lifts expectations for coarse grain exports

Hedge funds turn net bullish on ags - ahead of price drop to historic low

Speculators are wrong-footed in soymeal, in which they hike bullish bets just before a price tumble. But they fare better in cotton and cocoa
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© Agrimoney.com 2017

Agrimoney.com and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of the Briefing Media group
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069