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Morning markets: soybeans suffer again, as Asia takes fright

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Concerns for demand for raw materials reasserted themselves on Thursday, as fears for eurozone and US economies snowballed, and potentially making US export data due later all the more important.

The day was stamped as of 07:50 GMT (08:50 UK time) with that "risk-off" feel, with

shares

falling – Tokyo stocks ended down 0.9% and Sydney shares down 1.6% - while the safe haven of the

dollar

added 0.3% against a basket of currencies.

And a firmer greenback of course makes headwinds for dollar-denominated assets such as many commodities by making them less appealing to buyers in other currencies.

Asian fallout

But funnily enough it was commodities traded in other currencies, albeit one linked to the dollar, which saw particularly notable losses, certainly giving the appearance that Western difficulties are growing larger as emerging market problems too.

Copper

futures locked down the 6.0% maximum fall allowed in Shanghai, while

rubber

tumbled the full 20.0 yen, or 6.6%, to 281.50 yen a kilogramme in Tokyo, the lowest for a benchmark contract since August last year.

Food commodities did better. But performances were, nonetheless, not wholly reassuring.

Dalian

soybeans

for May, the best traded contract, dropped 1.8% to 4,212 yuan a tonne, while

sugar

for May slumped 4.8% to 6,504 yuan a tonne on the Zhenghou exchange.

Lower losses

Against that background, the falls suffered by Chicago crops were small beer, although they have already got plenty of liquidation out of the way, last month and, for soybeans especially, this week too.

Chicago

wheat

for December was 0.4% lower at $6.17 a bushel, while

corn

for the same month dropped 0.4% to $6.47 ¼ a bushel, defending its unusual (although not this year) premium over its fellow grain.

Corn prices continue to gain support from US supplies expected to remain tight in 2011-12, if not as tight as had been expected, US Department of Agriculture data last week showed.

World stocks of wheat are forecast at a 10-year high at the close of the marketing year.

Soybeans were, again, the worst performer, losing 0.9% to $12.13 ¾ a bushel for November delivery, and having lost about half of their gains of last week's bull run.

'Fixated on cancellations'

Which is where the US export data due later come in. One of the reasons, besides harvest pressure, for soybeans' decline this week is the idea that China, talk of whose purchases spurred last week's rally, may have ditched some cargos.

The market appeared "fixated on China soybean cancellations", Kim Rugel at Benson Quinn Commodities said.

This may appear at odds with some upbeat estimates for Chinese imports in 2011-12, with Oil World this week floating a 58.5m tonne figure, 2.0m tonnes above the USDA's forecast. Noble Group, the Singapore-listed trading house, has pegged them at 60m tonnes.

But it "appears right now, that if China does increase demand US may not benefit as we have already lost our regular October/November/December business to cheaper South American supplies", Rugel said.

And demand from China, the top importer, would anyway turn to South America around March, as supplies from Argentine and Brazilian harvests come onstream in earnest.

Data later

There are theories that more than price may be involved in China's disregard for US soybeans, with some seeing the lack of business as a result of a Senate rebuke of Beijing over its currency policy.

And they are making an impact on trade estimates, with some analysts cutting export estimates by 100m bushels, and raising forecasts for year-end soybean stocks to 250m bushels or more.

Whatever, US weekly export sales data may throw more light on shipment dynamics.

They are expected to come in at 850,000-1.0m tonnes for soybeans, up from 672,000 tonnes a week before.

The data are important for corn too, being seen boosted to 2.0m-2.5m tonnes, from 1.3m tonnes, by confirmed Chinese purchases. Wheat's are seen at 450,000-600.000 tonnes, in line with those last time.

Technical factors

There are some key technical factors are work too. December corn, for instance, fell to $6.32 a bushel, in line with its nine-day moving average, a significant breach of which risks further selling.

Its 20-day moving average stands at about $6.26 ½ a bushel, and 30-day at about $6.35 ½ a bushel.

And Mike Mawdsley at Market 1 noted a potential influence on soybeans from the expiry of November options on Friday.

"Most calls are worthless under $13.00 a bushel. Most puts are toast over $12.00 a bushel," Mr Mawdsley said.

By Agrimoney.com

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