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Evening markets: China purchase lifts corn. US stocks data boost coffee

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Sometimes, although not always, the rumour mill proves on the money.

 

And the ideas around earlier about China buying a large amount of US corn proved to be spot on.

 

Chinese buyers purchased 1.16m tonnes of US supplies of the grain for 2020-21, the US Department of Agriculture said – in only its second announcement since February 12 through its alerts system for large orders of US ags.

 

(The previous month saw 14 such announcements.)

 

Whether this was the same corn that China was said to have purchased last week, only for no announcement to be forthcoming, raising speculation of whether the deal had got lost in the apparent vagaries over when such deals have to be reported (eg when booked, loaded, etc).

 

‘Reassuring’

Whatever, it was “reassuring to finally hear of a confirmation”, said Richard Feltes at RJ O’Brien, underlining that “some believe purchase is a goodwill gesture ahead of tomorrow’s US/China summit in Alaska”.

 

And it helped corn futures for May end up 0.9% at $5.54 ½ a bushel, supported too by continued cheer at strong US export data for last week, as revealed on Monday.

 

Terry Reilly at Futures International noted “follow-through buying after export inspections topped 2.2m tonnes on Monday”.

 

“Big export inspections yesterday indicate a need to maintain a full pipeline in order to implement the current sales programme,” said Benson Quinn Commodities.

 

‘Ethanol plants coming back online’

The broker noted too that “domestic markets also supportive as feed margins appear good,” noting ideas too of widened ethanol production margins, which would marry with improvements in energy prices.

 

There is “more talk of ethanol plants coming back online in April, a harbinger of an uptick in domestic demand as well”.

 

Meanwhile, Mr Reilly flagged too “ongoing planting delays in Brazil” for safrinha corn,

Top growing state “Mato Grosso still has 25%+ of safrinha to plant,” Mr Reilly said, citing RJ O’Brien intelligence, although the figure is twice that quoted by state research institute Imea.

 

‘Slow fieldwork’

Whatever, sowings look like continuing to be hindered by rains, with Maxar noting that heavier rainfall in Mato Grosso over the next week will slow remaining fieldwork”, which includes the remains of the soybean harvest.

 

“Mato Grosso will continue to see widespread rain delaying soybean harvesting and corn plantings,” Mr Reilly said.

 

Chicago soybean futures for May managed a gain of 0.3% to $14.23 ¼ a bushel, despite some softness in the products.

 

“High vegetable oil prices and attractive margins are promoting soybean crushings and soymeal production in South America, resulting in ample export supplies and price pressure,” Oil World said.

 

Soymeal for May indeed ended 0.3% lower at $406.10 a short ton, while soyoil held at 55.09 cents a pound for May (although later contracts eased).

 

This even after rival palm oil for June tumbled by 3.1% to 3,897 ringgit a tonne in Kuala Lumpur, on profit-taking after prices soared close to record highs.

 

Vegoil “pack leader Malaysian palm ended the session lower, after a string of nine new highs”, Benson Quinn Commodities noted.

 

Russian move?

Wheat came under pressure too for much the session, on improving US winter wheat ratings, and Russian talk that it could end its export tax regime.

 

Agriculture Minister Dmitry Patrushev told the Duma that "as soon as the situation stabilises, we will be ready to consider various other approaches to regulating this market, including the exclusion of any interference at all”.

 

Still, he added that “for now we must make sure that all of our grain is not exported abroad. This is extremely important”.

 

And the weakening premium of wheat over corn offered some resistance to price falls, in speaking of potential demand gains for wheat, with the gap actually setting its narrowest close in 18 months, May basis.

 

Safe reserve?

For more meaningful gains, it was necessary to head to New York, where arabica coffee futures for May gained 1.8% to 134.50 cents a pound, a two-week closing high, and the sixth winning session in seven, over which the contract has added 4.4%.

 

The gain followed the release overnight of data showing that the amount of green coffee stored in US ports fell by 52,600 bags last month to 5.79m bags, the lowest since June 2015.

 

Merchant I&M Smith took a somewhat relaxed view of the data, saying that “the current levels of coffee stocks, which include the certified coffee stocks that are held in certified warehouses and registered to the New York exchange, would equate to more than 11 weeks of roasting activity, which most would consider to be a safe reserve”.

 

Still, the market strength fed through into robusta coffee too, which gained 1.3% to $1,406 a tonne for March in London.

 

Sugar vs ethanol

Raw sugar for May gained too in New York, by 1.1% to 16.30 cents a pound.

 

ADM Investor Services noted that in Brazil’s Centre South “domestic ethanol sales during January and February were only 0.9% below last year’s total.

 

“With crude oil and gasoline prices well above the levels seen a year ago, Centre South mills are likely to increase ethanol’s share of crushing and decrease sugar’s share of crushing.

 

“As a result, 2021-22 Centre South sugar production could decline by well over 3m tonnes from this season’s output.”

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