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Evening markets: Oilseeds buoyant, as ags stage late-week recovery

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Vegetable oils certainly are in demand.

 

OK, palm oil was not a star performer on Friday, managing only a 0.3% gain to 3,741 ringgit a tonne in Kuala Lumpur for May.

 

This after data from cargo surveyor AmSpec showed Malaysian palm oil exports continuing to struggle, falling 8.2% month on month in the first five days of March.

 

‘Not ready yet to pause’

But in Chicago, soyoil for May put in a fresh seven-year high for a nearest-but-one contract, of 51.99 cents a pound, before easing back to 51.95 cents a pound in late deals, up 2.5% on the day.

 

And oilseeds themselves were strong too, with May canola up 1.0% at Can$798.00 a tonne in late trading in Winnipeg, looking for a fresh record closing high for a nearest-but-one lot.

 

Rapeseed for May ended up 0.7% at E518.50 a tonne in Paris, up 5.5% for this week and setting a fresh eight-year high for a spot contract.

 

“Rapeseed prices continue to rally and the market does not look ready yet to mark a pause after the breach of the psychological level of E500 per tonne,” Agritel said.

 

Soybeans stood up 1.2% at $14.27 a bushel for May, on track for what

 

Oil market supports

The strength is being fuelled by the rally in energy markets, after Opec and allies decided not to release curbs on oil output as much as investors had expected.

 

Brent crude added a further 4.2% to $69.54 a barrel in late trading, hitting fresh 14-month highs.

 

This is important in determining values of ags linked to energy values – a segment which includes vegetable oils, the feedstock for biodiesel plants.

 

Gasoil, a diesel market indicator, rose by 3.1% to hit a 13-month high.

 

Government supports

Then “there are ideas of legislation towards” supporting vegoil-based diesel, Benson Quinn Commodities noted.

 

The likes of the American Soybean Association have revealed hopes that the Biden administration’s drive to cut US greenhouse gas emissions will mean increased use of biofuels.

 

There was note too of reports of a Chinese campaign to stock up on vegetable oils

 

CHS Hedging flagged that “China announced new five-year policy that includes $122.5bn yuan for stockpiling edible oils,” besides moves to encourage corn sowings and lift minimum prices paid for rice and wheat.

‘Below-normal rains’

And this before getting to the comments overnight by the Buenos Aires grains exchange that it might cut its forecast for the soybean crop in Argentine, the top soyoil exporter, if rains are not forthcoming.

 

That might not matter so much, were it not for the fact that the exchange’s forecast for the crop, at 46.0m tonnes, is already at the lower end of the range of market expectations, some of which stretch to 49m tonnes.

 

In fact, “below-normal rains are forecast in Argentina over the next 15 days, stressing second crop soybeans,” said Maxar, although adding that the conditions would “favour drydown of corn and first crop soybeans”.

 

Delayed exports?

Corn itself managed some late-week buoyancy in Chicago, where the May lot stood up 2.5% at $5.46 a bushel in late trading, also supported by the surge in oil prices, with the grain used largely in making ethanol.

 

Terry Reilly at Futures International flagged too “Brazilian production concerns”, as rains continued to hamper sowings of the country’s safrinha crop.

 

Brazil’s “corn exports may not be available until July-August”, said ADM Investor Services, with the late sowings implying a late harvest, and putting extra demand for now on origins where corn is available, ie the US, and Argentina soon too.

 

However, there is also the worry over whether the delayed sowings will mean a weaker-than-expected Brazilian safrinha harvest too, given the potential penalty to late-seeded crop.

 

‘Significant risk’

As Dr Michael Cordonnier put it, in Mato Grosso, Brazil’s top corn-growing state, “corn that is planted past the optimum window runs a significant risk of running out of moisture before it matures due to the onset of the annual dry season”.

 

After Mato Grosso’s last summer rains, usually in May, “the temperatures stay warm in the 80s Fahrenheit, but there will not be any more rain until sometime in September.

 

“If safrinha corn is planted in mid-March, it will pollinate in mid-May and mature in mid-July,” at risk of running into dry conditions which could affect either pollination and/or grainfill.

 

The ideal window in Mato Gross is typically seen as closing in late February.

 

Data from Imea on Friday showed Mato Gross safrinha corn sowings at 73% complete, up 18.4 points week on week, but well behind the average by now of 91.3%, and the figure of 97.9% for a year ago.

 

‘Most susceptible’

Wheat, meanwhile, stood up 1.0% at $6.57 ¼ a bushel, helped higher by corn, but more susceptible to the rising dollar, given the extent of competition that the US faces in the wheat export market, compared with the lesser tally of rivals for corn and soybeans,]

 

“Wheat futures are most susceptible to a firming dollar and seems range bound, but closer to the low side of the range,” Benson Quinn Commodities said.

 

The dollar gained 0.4% against a basket of currencies, after some upbeat US jobs data.

 

Kansas City hard red winter wheat did fare a bit better, in adding 1.3% to $6.28 ¾ a bushel, amid reviving dryness worries for the southern Plains crop as it emerges from dormancy and beyond, with latest USDA data showing dry conditions expanding week on week.

 

‘Widening global deficit’

In New York, raw sugar futures also found support in strong energy markets, to which the sweetener is linked via its competition with ethanol for processors’ cane in the likes of Brazil.

 

The May contract closed up 0.9% at 16.40 cents a pound.

 

The International Sugar Organization also reminded of ideas of a “widening global deficit” in sugar output in 2020-21, “driven by lower beet sugar production in Europe,” while also noting that “production in Thailand is coming to an early end, confirming a second year of lower output there”.

 

It added that the price outlook for the coming months will reflect “the impact of La Niña on agriculture”, noting that “January data for the southern oscillation index show a La Niña value of 1.9, this is a nine-year high”.

 

History lesson

Cotton for May rediscovered a bit of buyer appeal too, bouncing from its 40-day moving average, which it has closed below only twice in the past nine months, to stand up 0.6% at 87.14 cents a pound in closing deals.

 

Plexus Cotton, viewing it “likely that China will remain a strong buyer of foreign cotton and yarn” given the bans by some importers, such as the US, on garments made from cotton from Xinjiang, shrugged off the falling trend in cotton prices for most of the last seven sessions.

 

“This is still very much a correction in a bull market and until the primary uptrend line, which currently runs through 79 cents, is broken, it would be premature to give up the uptrend,” the UK--based merchant said.

 

“In the 2011 bull market we had four major corrections on the way up to a 227 cents synthetic peak.

 

“The largest one measured almost 40 cents, when the market fell from 151 to 111 cents in November 2010, while the other three amounted to at least 19 cents or more.”

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