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Evening markets: Cotton jumps, bucking reversal in other ags

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March, more usually associated with coming in like a lion and out like a lamb, covered a couple of other mammals in just its first session in in grain market terms.

 

The session began in bullish terms, with the Bcom ag subindex adding 0.9% in early deals, only to turn bearish half-way through. The subindex reversed to stand down 1.1% in late trading.

 

‘Solid demand’

Not that all ags fell back to earth. New York cotton, for instance, maintained its early poise to close up 3.7% at 91.57 cents a pound for May delivery.

 

“The [US] weekly export sales report on Thursday showed solid demand for US cotton and the demand has been strong even with the coronavirus around and getting worse,” said Jack Scoville at Price Futures.

 

He also noted that “the US stockmarket has been generally firm to help support ideas of a better economy here and potentially increased demand for cotton products”, with the fibre, as an industrial commodity, tending to be more vulnerable than food ags to economic prospects.

 

Wall Street shares performed strongly on the day, with the S&P 500 index up 2.3% in late deals, after a 2.4% gain in Tokyo shares, and 1.6% increase in London stocks.

 

Still, also important is ideas of a short squeeze in the market, as Agrimoney noted earlier, and of a scramble by buyers to take advantage of prices at least below the two-year high of 95.60 cents a pound hit last week.

 

Chinese worries

However, among grains, losses were the norm, as the new month, new money trend see on early on was replaced by more profit-taking, with the extend level of fund long bets in the complex added a few nerves.

 

The reams of long positions speculators hold in grains "still offer resistance and limit the market’s ability to move higher", said Benson Quinn Commodities, with elevated net long bets raising worries of an overplayed strategy.

 

Chicago corn futures for May ended down 1.5% at $5.38 ½ a bushel, undermined by worries over fresh occurrences of African swine fever in the Chinese hog herd which, if widespread enough, threaten a dent to demand for feed grains.

 

Nor did it help that Chinese Dalian corn futures for May ended 0.4% lower at 2,789 yuan a tonne, albeit proving more resilient than fellow feed ingredient soymeal, which shed 1.5% to 3,434 yuan a tonne.

 

Still, the loss defied some positive news on the day, in terms of decent US export data for last week, of 1.63m tonnes, towards the top end of the range of market expectations of 1.15m-1.75m tonnes, and up from 1.27m tonnes the previous week.

 

‘Weather leans positive’

Furthermore, worries over South American conditions remain live, with Richard Feltes at RJ O’Brien saying that “weather leans positive” for prices, given “Argentine dry areas expanding to half of the corn/soybean belt before 11-15 day rain relief”.

 

Temperatures will be in the “high 90s-low 100s Fahrenheit next week in Argentina”.

 

Meanwhile, Brazilian safrinha corn planting “remains slow due to combination of a delayed soy harvest and 75% five-day precipitation coverage”.

 

Terry Reilly at Futures International said that “Argentina saw a lack of rain with hot temperatures over the weekend and the forecast calls for net drying over the next 10 days”.

 

‘Canada is running out’

Benson Quinn Commodities, noting that “weekend rains were mostly disappointing”, said that in soybean terms “a smaller Argentine crop is raising concerns for world vegoil supplies.

 

“Canada is running out of canola and Australia is looking for return of dry weather as La Nina eases which could further tighten world vegoil.”

 

Less helpful was that Abares raised its forecast for Australia’s canola exports this season to 2.92m tonnes, and saw them remaining pretty high in 2021-22 too, at 2.45m tonnes.

 

And with palm oil ending down 1.5% at 3,684 ringgit a tonne in Kuala Lumpur, undermined by data from cargo surveyors indicating February brought only a small underlying recovery to Malaysian exports, rival vegetable oil soyoil ended lower in Chicago, down 1.4% at 49.23 cents a pound.

 

Soybeans themselves shed 1.0% to $13.91 ¼ a bushel for May, even though US exports last week, at 879,582 tonnes, exceeded forecasts of 400,000-800,000 tonnes.

 

Australian exports

US wheat exports last week, at 272,820 tonnes, were less impressive, below the range of market forecasts of 300,000-500,000 tonnes.

 

That was one pressure on Chicago soft red winter wheat, which ended down 1.5% at $6.50 ¼ a bushel for May, with another the upgrade by Abares to 21.36m tonnes in its forecast for Australian wheat exports this season.

 

That is above, for instance, forecasts by the US Department of Agriculture and International Grains Council.

 

And while Abares too forecast a marked drop, to 25.0m tonnes, in Australian wheat output in 2021-22, well, that is a while from even being sown.

 

‘High shipment pace’

Furthermore, just as the introducing of Russia’s raised export tax was warming investors to the possibility of importers being turned to other origins, SovEcon raised by 1.2m tonnes to 39.1m tonnes its forecast for the country’s wheat exports this year.

 

“The estimate reflects [the] high shipment pace in recent months ahead of the introduction of export taxes which started from February 15,” the analysis group said.

 

“An additional factor is the official confirmation of a permanent tax from June 2 which is forcing farmers to sell more aggressively and support exports.”

 

Another pressure was a rash of deliveries against Kansas City hard red winter wheat, of a “large 1,291 contracts”, as CHS Hedging noted, plus 583 lots against Minneapolis spring wheat, suggesting potential appeal to physical sellers of using expiring March futures so to do.

 

Kansas City hard red winter wheat underperformed in shedding 1.7% to $6.23 ¼ a bushel for May, while the May Minneapolis lot ended down 0.8% at $6.33 ½ a bushel.

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