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Evening markets: Cotton, soyoil lead ags higher, as 'one wave floats all boats'

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Ag prices joined other risk assets in a turnaround Tuesday rebound, as a retreat in concerns over coronavirus spurred a round of bargain hunting.

 

“One wave floats all boats,” said Benson Quinn Commodities.

 

While that adage didn’t prove totally watertight – New York raw sugar futures for March, for instance, traded 1.5% lower in late deals, after Green Pool forecast a relatively modest world production shortfall in 2020-21 – the default direction was definitely upwards.

 

In outside markets, Wall Street shares stood up 1.7% in lunchtime trade, after a 1.6% gain in London shares, and the overnight recovery in Chinese stocks after their biggest sell-off in more than four years.

 

China’s renminbi gained 0.3%, while Brent crude stood 0.8% higher at $54.90 a barrel.

 

At RJ O’Brien, Richard Feltes flagged a markets boost from “stepped-up Chinese efforts to control cornonavirus.

 

“The published cases and death toll are still rising, but at a slower rate than last week.”

 

‘Prices should make modest gains’

Among ags, notable winners included cotton, which recovered 1.4% to 67.74 cents a pound in New York for March delivery, more than regaining losses of the last session, although struggling to get back above its 100-day moving average, at 68.04 cents a pound.

 

The International Cotton Advisory Committee helped by saying that “at current estimates of production and consumption, cotton prices should make modest gains through the end of the season”, in July.

 

It revised to 80 cents a pound its forecast for the average cotton price in 2019-20, as measured by the Cotlook A index of physical prices, which stood on Monday at 76.65 cents a pound.

 

Ideas of end-users being ready to step in at lower price levels also helped, with Louis Rose at Rose Commodity Group noting that “internationally, Brazil is fast running low on available cotton to ship abroad”, while the “African franc zone has cotton on hand, but quotes are pricey.

 

“Hence, demand should remain relatively strong for US cotton over the near- to medium-term.”

 

‘Will keep prices at high levels’

In Chicago, soyoil, which started the day strongly, retained its vim into late trade, when the March lot stood up 1.6% at 30.76 cents a pound, back above its 200-day moving average.

 

The gain followed a 2.1% gain overnight to 2,668 ringgit a tonne in values of rival palm oil in Kuala Lumpur, helped by talk of increased demand from Pakistan from Malaysian supplies, which may come under pressure from output setbacks too.

 

“One trader estimates production to fall 4-17% as dry weather and lower fertilizer use reduces output from last year,” said Benson Quinn Commodities.

 

Terry Reilly at Futures International, meanwhile, noted that “Malaysia issued a statement that the cut back on palm oil buying from India is temporary”, adding that “the implementation of B20 starting this month will keep crude palm oil prices at high levels”.

 

(B20 is a 20% blend in transport diesel of biodiesel, which is made from vegetable oils - in Malaysia meaning palm oil.)

 

South America hopes

Soyoil’s firmness supported too values of soybeans themselves, which gained 0.5% to $8.81 a bushel for March delivery, looking for a second successive positive session (after nine negative ones).

 

This despite growing expectations for South American harvests, the latest from INTL FCStone (for Brazil) and Imea (for the key Brazilian state of Mato Grosso), besides from Dr Michael Cordonnier, who raised hits forecast for Argentine soy output too.

 

In fact, “given the backdrop of improving South American crop potential along with coronavirus uncertainty, we have no interest in chasing rallies”, Mr Feltes said.

 

“Whether or not reported stepped up commercial pricing at current levels can stabiliwe markets remains to be seen.”

Still, with an encouraging pace of US exports, and hopes that the phase one China-US trade deal will bring considerably more, many investors forecast that the next US Department of Agriculture Wasde briefing will cut the forecast for the country’s soybean stocks at the close of 2019-20.

 

‘Concerns over winterkill’

Corn futures, meanwhile, for March added 1.0% to $3.82 ¼ a bushel for March, with Mr Reilly noting support from “technical buying and stronger crude oil”, key for values of a grain used largely in making ethanol.

 

Chicago wheat for March gained 0.9% to $5.60 ½ a bushel, helped, as mentioned earlier, by headway in Paris values, which ended up 0.7% at E190.75 a tonne for March delivery, and worries over a turn chilly in Russian weather.

 

“Russia will see a cold spell this work week, and lack of snow coverage in some areas are creating concerns over winterkill,” M Reilly said.

 

“It should start today and spread south throughout the week.”

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