The simple risk-on/risk-off picture blurred, as it has a habit of doing as a markets crisis develops, insight expands and defining lines become a little clearer.
And the Vix index “gauge of fear” tumbled by 9.4% - if from its highest levels since 2008 – offering some hope of less frenetic times, if only temporarily.
Shares soared, standing 6.4% higher in late deals in Wall Street, as measured by the S&P 500 index, after gains of 2.8% in London, and 2.3% in Frankfurt, with sentiment boosted by talk of support not just for broad economies during the coronavirus crisis, but for businesses.
However, not all risk assets were so buoyant.
Brent crude stood 4.8% lower in late deals, at $28.60 a barrel, earlier touching $28.54 a barrel, its lowest since 2016, feeling Covid-19 pressures, but also worries over how the price war kicked off by Saudi Arabia (after Russia snubbed calls for output cuts) will play out.
Commodities as a whole, as measured by the Bcom, stood 0.9% down in late deals, at their weakest since the index started in 1991.
‘Sucking up all the demand’
As for ags, well, they sided broadly with their commodity peers, although were a little less enthusiastic in their decline, shedding 0.6% as measured by the Bcom ag subindex (also hitting its lowest since launch in 1991).
But then, it was hard for raw material prices to gain when so many of them are priced in dollars – and the greenback soared 1.6% against a basket of currencies, making such assets less competitive on international markets.
“There is still a tremendous amount of demand for US dollars in the financial system that is squeezing the FX markets, and we are still in early days of the shutdown of sectors of the economy around the globe,” said Brad Bechtel at Jefferies.
“We are still in a massive deleveraging of the financial system that is sucking up all the demand for dollars.”
So while there were a number of ag gainers on Tuesday, most had the head start of denomination in a non-dollar currency – such as the euro, which tumbled by 1.7% against the greenback.
Paris soft milling wheat for May jumped 2.3% to E179.25 a tonne, its best close in more than a week, helped too by a further Algeria wheat tender – OK, for durum this time – plus barley, with the North African country a key buyer of French grain.
Japan and Tunisia are also among countries seeking wheat, in a sign of demand for exporters to aim at – whether helped or hindered by currency moves.
London feed wheat added 2.4% for May to £153.00 a tonne, helped by a 1.5% drop in sterling against the dollar.
Also in Paris, rapeseed for May soared 2.6% to E344.25 a tonne, bouncing from a 22-month low for a spot contract, helped too by a revival overnight in palm oil, which gained 1.4% to 2,250 ringgit a tonne in Kuala Lumpur for June delivery.
The vegetable oil, which was supported by worries over a Malaysian anti-Covid lockdown fouling up palm oil supplies, is closely followed by investors in canola-rapeseed, an oil-heavy oilseed (rather than more meal heavy, like soybeans).
CRM AgriCommodities added that latest European Union import report for rapeseed continues to highlight the shortage of rapeseed in Europe.
“As of March 15, Europe had already imported 4.4m tonnes of rapeseed, ie up 1.3m tonnes on last year, or 40.5%.”
Winnipeg canola for May gained 1.2% to Can$453.30 a tonne, as the Canadian dollar dropped 1.4% against the greenback.
Kansas City buoyancy
However, among dollar-based grains markets, gains were less marked, although not absent, with Chicago soyoil for May, for instance, also gaining strength from palm oil to end up 0.9% at 25.24 cents a pound, recovering from its weakest close since 2006.
And Chicago soft red winter wheat crawled 0.2% up to end at $4.99 ¼ a bushel, with Terry Reilly at Futures International saying that “US wheat is mostly higher on bottom picking”.
That said, it was actually Kansas City hard red winter wheat that was picked most, ending up 2.0% at $4.32 ¼ a bushel in a standout move that looked largely down to short-closing, amid the broad withdrawal by funds from commodities – and with a short bet in wheat likely looking pretty profitable.
A similar trend was seen as helping Minneapolis spring wheat in the last session – although this time the May lot edged 0.1% lower to $5.09 ¼ a bushel.
The gain in hard red winter wheat came amid mixed readings from the US Department of Agriculture on the condition of winter wheat crops in the southern Plains.
The Texas crop was rated 36% good or excellent, up 10 points week on week, and Oklahoma one up 9 points week on week at a decent 67% good or excellent.
Still, in top growing state Kansas the rating eased by 1 point week on week to 46%,
And in Colorado, it stood at 46%, down 13 points from the previous reading, at the end of last month.
South America downgrades
Chicago soybeans, meanwhile, edged 0.4% higher to $8.24 ¼ a bushel for May, supported by soyoil, but also by worsening expectations for South American crops.
“South American crop commentators are trimming back production on recent dry weather in Argentina and southern Brazil,” said Richard Feltes at RJ O’Brien.
Dr Michael Cordonnier, for instance, cut his forecasts for the Brazilian crop by 2.0m tonnes to 123.0m tonnes, and for Argentina’s by 3.0m tonnes to 51.0m tonnes.
“Trade is starting to pay more attention to South American weather and crop forecasts,” said Karl Setzer at AgriVisor, noting that “heat and dry conditions continue to plague southern Brazil”.
‘Plants are shutting down’
However, Chicago corn futures for May plunged 3.3% to $3.44 a bushel, a six-month closing low for a spot contract, feeling increasing pressure from the dent to US ethanol production margins from the slide in energy prices.
As Terry Reilly, noted, “spot [April] ethanol traded at its lowest level on record”, falling below $1 to touch $0.945 per gallon at one point, before ending at $1.028 per gallon, down 3.7% on the day.
“We are hearing some US ethanol plants are shutting down and/or ethanol producers have been unwinding hedges in corn since Friday, another sign of slowing ethanol production down,” he added.
“Realistically we would think ethanol companies would slow at rates that coincide with the demand destruction in US gasoline demand.
“Last we heard US gasoline demand could drop 20 percent over the next month.”
And raw sugar - also linked to ethanol, via many cane mills’ ability to produce either the sweetener or the biofuel, depending on margin – was unsurprisingly also weak, ending 1.8% lower at 10.89 cents a pound in New York for May.
“Brazil’s cane fed ethanol is cost competitive with gasoline for a wide range of oil prices – but not all oil prices,” said Tobin Gorey at Commonwealth Bank of Australia.
The question is about whether Brazil’s mills can make ethanol at a price that is cost competitive for consumers, ie gasoline ethanol parity.”
If not, that would leave the sugar to a “dark place”.
The sweetener also remains overshadowed by a cut by Czarnikow to its world consumption forecast for 2019-20, citing the knock-on effects of lockdowns ordered in the battle against Covid-19.
‘Volatile price pattern’
Arabica coffee futures for May also ended lower, by 1.0% at 102.90 cents a pound in New York, “extending its penchant for decent daily moves.
Coffee prices have been unable to shake off a volatile price pattern as rising global demand concerns are combining with an uncertain global supply outlook for the 2020-21 season,” said ADM Investor Services.
“While this current ‘roller-coaster ride’ is likely to continue, there are some indications that the February and March lows will end up being a longer-term floor for coffee prices.”
The May arabica lot bottomed out at 97.40 cents a pound in early February.
New York cotton for May gave back early gains to end up 1.5% lower in New York, at 57.92 cents a pound – a six-month closing low for a spot contract.
“This ‘industrial’ agricultural commodity continues to suffer from worries about global economic growth,” Mr Gorey said.
“And, of course, a strong US dollar is not helping.”