China-US trade tensions took a turn for the more relaxed as Beijing appeared to take a more conciliatory tone.
“The most important thing at the moment is to create necessary conditions for both sides to continue negotiations,” said Gao Feng, China’s commerce ministry spokesman.
Terry Reilly at Futures International noted that “China extended an olive branch by stating they will delay imposing some import tariff increases against US goods”.
Still, while that was enough to bolster shares on many markets, with Wall Street shares up 1.4% in late deals, while the renminbi, something of a barometer of US-China tensions, regained 0.3% against the dollar, a decent move in currency terms, agricultural commodities struggled for anything dramatic.
Prices nudge higher
Soybeans, usually a big US export to China, closed up 0.3% at $8.68 ½ a bushel in Chicago for November delivery.
In New York, cotton another big US export to China in normal times, added 0.5% to 59.00 cents a pound for December.
And this was support too from worries over Hurricane Dorian potentially damaging some south east US cotton crops, after landing in Florida early next week, as currently looks likely.
(That said it was New York orange juice which took most support from Dorian worries, soaring 3.0% to 108.00 cents a pound for November delivery, amid ideas that perhaps one-quarter or more of Florida citrus areas could be affected, as estimated by World Weather.)
One issue for ag investors is that there have been many upswings in China-US relations before over the last year, only for hopes of accord to turn sour, burning bulls.
And without Chinese custom, for both cotton and soybeans, worries remain over demand for US supplies – jitters underlined by official US export sales data on Thursday.
These showed US export sales of cotton last week at just 146,048 running bales for upland, with actual exports, of 171,016 running bales, the weakest of 2019.
“We think that the latest figures are bearish at current trading levels,” said Louis Rose at Rose Commodity Group.
“Weak sales at current price levels does not speak well for world demand.”
‘Continue to disappoint’
For soybeans, the US Department of Agriculture unveiled US sales of 95,174 tonnes of old crop last week, and 353,103 tonnes for next season (which starts on Sunday), again hardly a bravura performance.
“Soybean new crop sales and pace of sales to date continue to disappoint,” said Benson Quinn Commodities, while Terry Reilly at Futures International simply termed the data “poor”.
At least for corn, the data were better, at 858,896 tonnes of US export sales for new crop (with marginal net cancellations for 2018-19 – not a concern when the season ends on Saturday).
The new crop figure, which exceeded market expectations, was termed a “nice surprise” by Benson Quinn Commodities, although it added that “given current values, shouldn’t have been” so unexpected.
As an extra bullish point, the International Grains Council came in with a figure for the US corn crop some 400m bushels shy of the USDA’s, adding to thought that officials are being too generous in their production hopes.
Meanwhile, Commerzbank saw scope for corn price improvement.
Not that corn managed to take too much advantage of such ideas, with the Chicago December contract closing just 0.25 cents higher, at $3.71 ¼ a bushel.
Worries remain over another demand source, from US ethanol plants, despite talk that US President Donald Trump is poised to announce support measures for US biofuels.
One idea, as Mr Reilly noted, is that “the Trump administration may roll out a higher blend rate for 2020.
“E12 was speculated,” ie a 12% blend of ethanol in gasoline.
‘Margins under pressure’
MaxYield Cooperative noted that “at least 15 ethanol plants nationwide have been idled or shut down completely in recent months,” according to the Renewable Fuels Association, and that “experts predict that number will continue to climb if changes aren’t made”.
CHS Hedging said that “ethanol margins remain under pressure, despite weakness in corn prices”.
As an extra weight, the September expiry effect seemed to kick in – ie the idea that the prospect of the expiry of the last Chicago old crop lot encourages 11th-hour selling of stored US crop.
The September corn contract, for which first notice day is on Friday, ended down 1.3% at $3.59 ¾ a bushel, dragging on near-term lots, while 2020 and 2021 contracts managed more notable gains of 0.4% and more.
Furthermore, values of rival grain wheat were lower too, with the Chicago December wheat contract shedding 0.5% to $4.72 ¾ a bushel, dropping back below its 10-day moving average.
And this despite some decent US export sales data for last week, at 661,676 tonnes – a five-month high.
Hard red spring wheat sales were particularly strong, at an 11 month high of 235,921 tonnes, although Minneapolis spring wheat futures for December ended down 0.8% at $5.01 ½ a bushel anyway.
Weighing on the complex are concerns over whether the US can keep up its export performance,
“USDA export sales were good but large crop prospects for Germany and Ukraine are weighing on US futures,” Mr Reilly said.
Furthermore, the sinking Argentine peso has boosted the competitiveness of the South American country’s exports, with a record crop seen in the offing (if a current dry spell ends).
‘Priced very competitively’
CRM AgriCommodities noted that Continental European and UK “wheat values have priced themselves very competitively relative to world wheat values.
“The question is whether they will start to find enough consumer traction to maintain values at current levels.”
“Europe will require a robust export campaign in order to avoid high carryover stocks at the end of the season,” CRM added, echoing thoughts of Agritel on Wednesday.
Paris wheat futures for December ended down 0.6% at E169.00 a tonne, a contract closing low.
London wheat for November also recorded a fresh contract closing low, of £131.85 a tonne, easing by 0.1%, despite weakness in sterling on the latest enhanced no deal Brexit worries.
Back in New York, raw sugar futures for October fell by 1.4% to 11.21 cents a pound, a fresh 11-month closing low for a spot contract, as the market struggles to decide what India’s announcement of export subsidy for 6m tonnes of sugar will really mean.
Sucden Financial noted that “at current exchange rates, it seems the India export breakeven would be around 13 to 13.5 cents New Yotk futures equivalent, similar to last year,” when the country achieved exports “estimated at around 3.8m tonnes, out of the 5m tonnes set as a minimum by the authorities”.
Still, there is a lot of sugar around, with Platts suggesting that India sugar stocks will reach 15m tonnes by the end of the current season.
Removing the 4m tonnes in mandated exports still leaves 11m tonnes for shipment.
‘Weighing on prices’
A weaker real, close to 11-month (and record) lows against the dollar has also undermined values of sugar, as well as coffee too.
Arabica coffee futures for December closed down 2.4% at 95.25 cents a pound.
“High supply and the weak real are… weighing on coffee prices,” Commerzbank said.
“However, we also envisage a recovery here, based on the currently low price level, thanks to the prospect of a slight tightening of the supply situation.”