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Evening markets: Grains defy strong US export data to close lower

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Just as investors were getting a bit more relaxed about the coronavirus outbreak, along came another US case.

 

US officials said that the virus had been diagnosed in a woman in her 60s living in Chicago, who had travelled from Wuhan, the Chinese city where the outbreak started.

 

The impact was to send Wall Street shares, which had been trading in positive territory, into the red, with the S&P 500 index down 0.8% in late deals.

 

Brent crude traded down 2.3% at $60.64 a barrel, while for ags, the news was hardly positive either, adding to the China demand worries that have been gripping investors.

 

Corn in demand

Not that US export sales data for last week was bad at all, coming in for corn at 1.01m tonnes, well ahead of market expectations of a figure of 500,000-950,000 tonnes, and the second best performance in four months.

 

And the US Department of Agriculture announced on top, through its daily alert system, a further sale, of 142,428 tonnes of corn to an “unknown” import destination.

 

This following the 143,948 tonnes announced on Thursday to Guatemala, and 141,000 tonnes to unknown.

 

For soybeans, sales of 790,000 tonnes were the highest in five weeks, and around the centre of the range of market forecasts, while for wheat sales of 696,000 tonnes were a four-week high and at the top end of range of estimates.

 

Quality factor

“Weekly export sales for just about everything came in strong,” said Mike Zuzolo, although noting that “especially noteworthy was the corn” figure, which follows a weak start to 2019-20, and concerns over the quality of US supplies too.

 

Still even here, Terry Reilly at Futures International, terming the corn export sales figure “robust”, said that “US Pacific North West exporters are still able to reach number 3 yellow corn minimum requirements”, although acknowledging that it is “difficult for number 2.”

 

Still, “remember, exporters can always still sell corn at a discount, and when the US is one of the last options to source spot corn in the world, when prices are competitive, importers will continue to take it”.

 

Benson Quinn Commodities, noting too reports that “find US corn making number 2 without issue”, added that “I’m thinking West Coast players will struggle while the Gulf may have a better shot managing the blend”.

 

Key word

Whatever, there was one word which was largely missing from the weekly USDA export report, and that was “China”.

 

OK, China did take a net 226,000 tonnes of soybeans.

 

But that is small beer when they are expected to buy $80bn of US ags over two years, and when further purchases look unlikely for now, given that China is now amid its new year celebrations, which last more than a week.

 

And this before any loss of demand, or logistical difficulties, stemming from coronavirus are factored in.

 

‘All hope is lost’

“All hope is lost on China buying US products ahead of their Lunar New Year as that has started,” said Benson Quinn Commodities.

 

“Basically, the Chinese are out for the next week.”

 

“Every passing day makes the market anxious that China isn’t in the market for our soybeans,” said CHS Hedging.

 

And not only that, where China has been buying appears largely to have been from rival origins.

 

‘Wait for it…’

Karl Setzer at Agrivisor said that “the market is growing concerned over the lack of Chinese business following the phase one signing a week ago.

 

“While immediate sales were unlikely, the fact China has been actively booking South American soybeans rather than those from the US is a concern.

 

“Not only is China booking Brazilian soybeans for 2020 but also 2021 as well.”

 

Furthermore, there has been talk that China has been buying wheat from a non-US origin too.

 

“Talk of Australia picking-up several loads of wheat to export to, wait for it, China” has had investors “really scratching their heads… given our recent phase one trade deal and the Australian price,” Mr Zuzolo said.

 

In fact, the rumour, concerning eight cargos, sounds so outlandish that it is being doubted, with “traders sceptical as Australian wheat is the most expensive on the world market and quality is of concern”, CHS Hedging said.

 

US wheat worries

 

Nonetheless, such talk, along with Chinese new year factor, and the potential for negative surprises emerging over coronavirus, put sellers in the driving seat in ags, despite, in wheat say, some other more positive factors.

 

Terry Reilly at Futures International said, for instance, that “we are hearing some wheat across western one-third of Kansas south to Amarillo is in poor to worse shape”.

 

“The southern US Plains have switched back to a dry pattern and some concern over moisture deficiency in parts, especially Kansas,” said CHS Hedging.

 

Nonetheless, Chicago soft red winter wheat for March closed down 1.3% at $5.73 ½ a bushel, although still a touch higher for the week.

 

Kansas City hard red winter wheat for March ended down 1.3% at $4.86 a bushel.

 

Row crops down

Chicago corn for March, meanwhile, ended 1.7% lower at $3.87 ¼ a bushel, although staying just ahead of its 100-day moving average.

 

And Chicago soybeans for March settled down 0.8% at $9.02 a bushel, a seven-week closing low.

 

In New York, cotton futures for March ended down too, by 0.8% at 69.40 cents a pound, despite some not-bad US export sales data, at 307,800 running bales for upland cotton, and a further 20,200 running bales for pima.

 

“We think that the latest figures are supportive to bullish at current trading levels,” said Louis Rose at Rose Commodity Group.

 

However, including no big fresh sales to China, they were insufficient to keep the bears from the door.

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