“Traders, welcome to the next era.”
So said Benson Quinn Commodities, trumpeting the change in broader market sentiment prompted by post-pandemic (or at least, post-peak-pandemic) thinking.
“Good vaccination rates in the US and UK are boosting recovery prospects, prompting sector rotation from the things that did well last year, or the ‘stay-at-home issues’, to ones that will benefit this year, or the ‘go outside stocks’,” the broker said, as the tech-heavy Nasdaq share index underperformed again.
Cotton, cocoa gain
There has been some of this evident within the agricultural commodities complex too, in terms of pandemic-vulnerable contracts such as cotton and cocoa finding buyers.
Cotton futures for May closed up 1.1% at 93.69 cents a pound in New York, a fresh two-year closing high, and getting nearer the 100-cents-a-pound mark not touched since 2011 on a nearest-but-one contract basis.
Cocoa for May soared above the psychologically key $2,500-a-tonne mark in New York, closing up 2.2% at $2,553 per tonne, a two-month closing high, and up 7.5% from a week ago.
Arabica coffee, favoured in out-of-home venues such as restaurants, has managed strong progress too of late, and is in for more according to Sucden Financial, although fell back on Wednesday from early, 14-month highs to close at 137.25 cents a pound for May, down 0.8% on the day.
‘Bitcoin or beans?’
Then again, commodities broadly are gaining kudos as hedges against inflation – in contrast to bonds, prices of which extended their retreat.
Some other assets, of course, are getting publicity too.
“Bitcoin or beans, what do [traders] choose?” Benson Quinn Commodities said.
While bitcoin in fact rose on Wednesday temporarily back above $50,000, it stood at $49,117 in late deals, up 0.5% on the day.
Soybeans won the beauty contest this time, gaining 1.2% in Chicago to close for May at $14.25 ¾ a bushel, just $0.02 from matching their seven-year closing high, as recorded six weeks ago.
The oilseed was helped in part by “follow-through buying on Brazil harvest concerns”, said Terry Reilly at Futures International, with the weather outlook doing little to inspire confidence in farmers being able to play catch up on a harvest already the slowest in a decade.
In Brazil over the next week, “rains in northern and east central areas will continue to stall soybean harvesting and safrinha corn planting,” Maxar said.
Meanwhile, in Argentina, where the soybean crop is less developed, and would welcome rains to boost yield prospects, “dry and warm weather through the weekend will allow moisture to decline again, with dryness expanding further in north/east next week,” Maxar said.
“Argentina will continue to see net drying,” Mr Reilly said.
‘Increased edible oil demand’
But a standout performance by soyoil helped too, with the Chicago May contract soaring 3.4% to 50.03 cents a pound, the highest close in nearly eight years for a second-in lot.
Argentina’s dryness is one ingredient in soyoil’s recipe for rallying, with the South American country the top exporter of the vegetable oil – shipments which could be curtailed by a dryness-hurt soybean harvest.
However, that is not all, with Benson Quinn Commodities noting too “increased edible oil demand and recovery of biodiesel usage” supporting vegetable oil markets, which as biofuel feedstocks and exposed largely to foodservice demand, were notably vulnerable to Covid setbacks.
Meanwhile, Steve Freed at ADM Investor Services noted talk of China being in the market for vegetable oil, albeit more for palm oil than soyoil.
Chicago corn futures for May closed up a respectable 0.8% at $5.57 a bushel, also finding some support from South America weather worries, with the slow Brazilian soybean harvest hampering plantings of the follow-on safrinha corn crop.
The gain, which left the lot $0.05 a bushel from its own seven-year closing high, on a nearest-but-one contract basis, defied data showing a collapse in US ethanol production last week, as cold weather hampered logistics, and indeed encouraged some plants to sell their gas back as energy prices soared.
Output plunged week on week by 253,000 barrels per day to 658,000 barrels per day, by far the biggest decline on data going back to 2010, and beating the drop of 168,000 barrels per day recorded for the week to April 3 last year, amid the height of pandemic worries.
“The US deep freeze had a very large impact on US weekly ethanol production and time will tell if the industry can recover back above 900,000 barrels per day by the end of this month,” Mr Reilly said.
Wheat futures fared better, as has been their trend of late, with the US Department of Agriculture forecasting a decline in US wheat stocks next season (unlike corn inventories).
And that does not factor in damage to the winter crop which may have been caused by last week’s cold snap.
Mr Reilly reported too that a “small, uncovered wheat portion of Russia that will see harsh cold temperatures later this week”.
Paris wheat also offered support in gaining 1.4% to E232.75 a tonne for May, a seven-year closing high for a nearest-but-one contract, helped by some European winterkill worries too, but also by a short squeeze on the March lot, which added 1.9% to $245.25 a tonne.
Wheat vs corn
Chicago soft red winter wheat for May gained 2.3% to $6.85 ½ a bushel, a six-year closing high for a second-in contract, and rebuilding its premium over corn back close to $1.30 a bushel, from a low of $0.88 a bushel touched two weeks ago.
“Concern over how much, if any, damage has been done to winter wheat crops here in the US as well as EU growing areas offering support,” Benson Quinn Commodities said.
Kansas City hard red winter wheat for May settled up 2.4% at $6.63 a bushel, also a six-year closing high.