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Evening markets: Cotton finds support in export data, but grain investors left cold

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Some markets found solace in China’s pledge to cut tariffs on many imports from the US.

 

But ags were not among them.

 

Wall Street shares notched up fresh highs, amid hopes of improved China-US relations, and the improvement to economic growth prospects that may entail.

 

And in Chicago, soybeans, on China’s tariff-reduction list, at least managed a positive close.

 

However, the March lot ended up just 0.3% to $8.81 a bushel, and was the exception in Chicago rather than the rule, amid doubts that the tariff cut – only on extra levies imposed by Beijing in September – would make that much of a difference to ag demand hopes.

 

Purchasing delays?

The focus remains on proof that China has actually begun buying US ags in earnest, as promised by the countries’ phase one trade agreement last month, but which has yet to be delivered.

 

And comments by US Agriculture Secretary Sonny Perdue, and US economic advisor Larry Kudlow, suggest that Washington is in fact open to giving China some wriggle room on its trade deal commitments.

 

“The US would tolerate if China, due to the rapid spread of the coronavirus, were unable to increase its purchases of US agriculturals as quickly as agreed in the trade deal,” said Commerzbank, summarising the US officials’ statements.

 

China purchases, but…

Nor did weekly US Department of Agriculture export sales data for last week offer much evidence of Chinese buying. (Even among the 703,800 tonnes of soybeans purchased, a figure towards the top end of market expectations of 400,000-800,000 tonnes.)

 

Sure, there is talk of Chinese importers splashing out. But not on US ags.

 

Terry Reilly at Futures International updated the talk of import orders from Brazil, saying that “we are hearing China may have bought upward to 20 cargos of soybeans from South America this week for March-to-June shipment”.

 

At AgriVisor, Karl Setzer said such purchases were “really not that surprising given the start of Brazil’s harvest and export season”, with the spike in supplies weighing on the country’s prices.

 

“Soybeans out of Brazil for spring shipment are trading from a 0.15-0.40 cent a bushel discount which will deter any buying interest” in US export supplies, with a slump of 1.1% in the real against the dollar only boosting Brazilian competitiveness.

 

Newer were rumours, as Mr Reilly noted, that “China bought wheat from France this week,” this after “picking up wheat from Australia last week”.

 

CMR AgriCommodities said that “China - which has already imported nearly 1m tonnes of EU wheat this season versus about 130,000 tonnes last season - was rumoured to have booked sizeable volumes of French wheat today.

 

Wheat prices dip

With Paris soft milling wheat for March easing 0.4% to E193.00 a tonne despite such talk, there was little hope for Chicago soft red winter wheat, which for March ended down 1.0% at $5.56 ¼ a bushel, a smidgen above its 40-day moving average.

 

A stronger dollar did not help, cutting the affordability of US exports, with the greenback adding 0.2% against a basket of currencies.

 

And US export sales of 338,600 tonnes were nothing special, down 48% from the previous week and 35% below the prior four-week average, if within the range of market expectations of 200,000-700,000 tonnes.

 

Kansas City hard red winter wheat for March underperformed further, in ending down 1.3% at $4.67 ¾ a bushel, indicating that some concerns over cold weather in the US Plains are not catching investors’ attention with so much of the growing season still to go.

 

‘No sales to China’

Corn futures, meanwhile, slid 0.1% to $3.79 ¼ a bushel for March, falling below the key $3.80 a bushel level.

 

US export sales of 1.25m tonnes of the grain last week were decent, and at the top of the range of market expectations of 600,000-1.30m tonnes.

 

“But there were no sales reported to China,” Benson Quinn Commodities highlighted.

 

Nor was there another of the sales reported through the USDA’s daily alerts system, indicating that the spree seen in late January may have come to an end.

 

‘Supportive to bullish’

Cotton futures fared better, in adding 0.6% to 67.91 cents a pound in New York for March, although finding again their 50-day moving average, at 68.17 cents a pound, a bit of a ceiling.

 

US export sales last week were good, at 332,276 running bales, indicating there are buyers around at sub-70-cent levels, even if from the likes of Turkey and Vietnam rather than China.

 

Perhaps more importantly, data on actual exports were mammoth, at 418,811 running bales, the highest in 20 months. (And including some shipments to China too.)

 

It is on the pace of exports, rather than export sales, which investors have been raising concerns that volumes are not at the rate needed to meet the USDA’s forecast for 2019-20.

 

“Sales were again ahead of the average weekly pace required to meet the USDA’s 16.5m-bale export target, while shipments finally exceeded the pace requirement,” said Louis Rose at Rose Commodity Group.

 

“We think that the latest figures are supportive to bullish at current trading levels.”

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