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Evening markets: Cotton, helped by US-China deal hopes, beats ag malaise

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Cotton futures, helped by revived hopes for a US-China trade deal, took a rare turn in the limelight, proving one of the main gainers on a soft day for ags.

 

Agricultural commodities overall struggled, with the Bcom ag subindex down 0.6% in late deals.

 

However, New York December cotton futures managed to post 1.0% gains to 66.39 cents a pound, amid ideas that a meeting between presidents Donald Trump and Xi Jinping at this week’s G20 session will herald a long-awaited trade accord.

 

“US Treasury Secretary Steven Mnuchin reported the US-China trade deal is around 90% done,” said MaxYield Cooperative.

 

“In his interview with CNBC, he stated he believes progress will be made during the meeting at the G20 Summit,” although “he didn’t want to speculate a timeline” for an agreement.

 

Such ideas helped bolster Wall Street stocks, hoping to end a three-day losing streak.

 

‘Not bullish’

Cotton, as a big US export to China in normal times, is particularly attuned to China-US relations (and as an industrial commodity is viewed as sensitive to economic growth ideas too).

 

Not that Louis Rose at Rose Commodity Group was getting too carried away, saying that the cotton “market’s bullish potential is rooted in Friday’s US Department of Agriculture Acreage report and the unfolding of US-China talks at the G20 summit.

 

“We are not holding our breath with respect to either of these events.

 

“Regarding production, while the US crop is late, it still holds strong production potential, which is not bullish for prices.”

 

Wheat gains

In grain markets, wheat proved strong too, adding 1.2% to $5.46 ½ a bushel for September delivery for Chicago soft red winter wheat.

 

The gains were attributed by many to data showing that Canadian farmers intend to plant significantly less area with wheat than had been expected, with a Statistics Canada survey showing plantings 1.1m acres below that estimated from a poll in March.

 

That said, this gap was down to spring wheat (and durum) rather than winter crop, and Minneapolis spring wheat for September managed only a 0.5% gain to $5.59 ½ a bushel.

 

And Paris wheat for December ended flat at E187.25 a tonne, despite the worries over the threat to crops from European heat (although fears actually seem to be being directed more at spring-seeded crops, with winter wheat crops now largely formed).

 

‘Favourable harvest yields’

“Despite the heatwave in Western Europe and mixed yields in the Black Sea, the fast progressing harvest kept a lid on prices,” said UK-based CRM AgriCommodities.

 

“The impact of the heatwave will be more detrimental to spring crops.”

 

Maxar said that “the hottest weather is expected in Spain, central and southern France, and northern Italy, where temperatures are forecast to reach 100-107°F (38-42°C) over the next few days.

 

“Temperatures will also reach the mid to upper 90s Fahrenheit (35-38 Celsius) across portions of Germany and Poland.

 

“The hot weather in these areas will stress crops, particularly corn in France, northern Italy, and Spain.”

 

Looking further east, Richard Feltes at Chicago-based RJ O’Brien said that “concern over warm/dry Russian weather is mitigated by favourable yields on the early winter wheat harvest”.

 

Calendar factors

Non-fundamental factors were also viewed as having a large impact on grain markets as a whole, with Friday bringing two key US Department of Agriculture briefings, on sowings and grain stocks, as well as first notice day for Chicago July contracts, and the last trading session of the month.

 

Month-ends are often associated with fund position closing.

 

MaxYield Cooperative noted earlier pressure on broader grain prices as “profit taking developed ahead of month and quarter end.

 

“More positioning is expected today ahead of the USDA reports at the end of the week.”

 

‘Improving weather’

Indeed, it was evident in the corn market, where the September lot closed down 0.8% at $4.49 ½ a bushel, while the new crop December contract lost 0.7% to $4.54 ½ a bushel.

 

Mr Feltes noted “improving weather” in the US Midwest, “including above-normal temperatures needed to spur growth” of crops whose development – for that which actually made it into the ground - has been slowed by the wet and cold spring.

 

Maxar said that in the Midwest this week “drier weather in central and southern areas allows wetness to ease”, with rains in the likes of southern Minnesota, northern Iowa, southern Wisconsin seen as improving moisture, rather than in areas already sodden.

 

Terry Reilly at Futures International said that “warmer conditions should help to accelerate drying even though some showers will continue periodically”.

 

Oilseeds slip

Benson Quinn Commodities flagged a somewhat bearish cocktail, noting that “favourable weather for much of the US and most of the globe for the next two to three weeks, old crop stocks are more than ample and global demand for US grains and oilseeds is poor”.

 

Chicago soybean futures for July ended down 1.1% at $8.94 ½ a bushel, with the November contract down 0.9% at $9.18 ¼ a bushel.

 

This despite the USDA announcing the export sale of 145,000 tonnes of US soybeans, “for delivery to unknown destinations during the 2018-19 marketing year”.

 

Rival oilseed canola eased too in Winnipeg, by 0.5% to Can$453.80 a tonne for November delivery, after Statistics Canada unveiled a Canadian canola sowings figure which, while down on that forecast after a March farmer survey, was ahead of market expectations.

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