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Evening markets: Oilseeds fly high, despite losing energy

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The oilseeds rally flew on, even after losing power in one engine.

 

The lost motor was the crude oil one, with energy markets retreating after it emerged that attacks by Houthi rebels on Saudi infrastructure had not caused loss of life or property.

 

Brent crude, having hit a 14-month high of $71.38 a barrel earlier, stood at $68.12 in late deals, down 1.8% on the day.

 

Energy prices influence oilseeds, thanks to the use of vegetable oils largely for making biodiesel.

 

Price gains

Still, Chicago soyoil futures for May maintained decent altitude nonetheless, ending 1.3% higher at 52.46 cents a pound, an eight-year closing high for a nearest-but-one contract.

 

This after rival palm oil for May closed up 3.7% at 3,878 ringgit a tonne in Kuala Lumpur, a 10-year closing high for a spot contract.

 

Oil-heavy oilseed rapeseed closed in Paris up 1.4% at E525.75 a tonne for May, setting a record-high close for a spot contract.

 

And futures in Winnipeg canola looked to be heading for a record high for a nearest-but-one lot, with the May contract up 1.1% at Can$794.30 a tonne in late deals.

 

Chicago soybeans, meanwhile, added 0.3% to $14.33 ¾ a bushel to record a six-year closing high for a nearest-but-one contract.

 

‘It’s a demand thing’

One factor that kept oilseed prices flying was data showing Chinese edible oil imports soared 48% year on year to 2.04m tonnes in the January-to-February period.

 

(January and February data were released together to avoid the risk of differing timings of China’s new year holidays, the data for which shifts according to the lunar timetable, skewing readings for the individual months.)

 

“It’s a demand thing as internal prices remain high,” said Benson Quinn Commodities.

 

It was also helpful that Strategie Grains lowered its forecast for EU plus UK rapeseed stocks at the close of this season by 180,000 tonnes to 1.1m tonnes, expanding to 800,000 tonnes the drop expected year on year.

 

The forecast for EU rapeseed output this year was trimmed too, by 90,000 tonnes to 17.05m tonnes, although representing an 800,000-tonne increase year on year.

 

‘Problematic weather’

And then there are the worries over soybean output in South American, including in Argentina, the top soyoil exporting country.

 

“Weather in South America remains problematic,” said Benson Quinn Commodities, with rains hampering the soybean harvest in central Brazil, while dryness continues to undermined yield hopes for Argentina’s crop.

 

In Argentina, “dry weather will continue in most areas this week… maintaining stress on late crop growth,” said Maxar, although adding that “rainfall is expected to increase across the region during the 6-10 day period, which should ease dryness some”.

 

Corn gains

There was enough there to help corn futures for May close higher too, by 0.3% at $5.47 ½ a bushel.

 

Besides the threat to Argentine corn yields from dryness, Brazil’s slow soybean harvest has meant a laggardly pace of follow-on safrinha corn plantings, which much left to plant and the ideal planting window now closed.

 

US corn export data for last week was OK too, at 1.54m tonnes, within the range of market expectations of 1.20m-1.80m tonnes, if below the record 2.05m tonnes of the previous week.

 

(US soybean exports last week, at 587,594 tonnes, were also within the range of forecasts of 400,000-800,000 tonnes, but down from 1.00m tonnes the previous week.)

 

Wheat eases

But wheat struggled, closing down 1.0% at $6.46 ½ a bushel for May, feeling most pressure from a dollar which added 0.4% against a basket of currencies to hit its highest level since November, making dollar-denominated exports less affordable.

 

Prices of wheat, a crop for which the US faces more competitors than corn or soybeans, tend to be particularly responsive to moves in the greenback.

 

Wheat is also one crop which investors expect to show a small upgrade, of 3m bushels to 839m bushels, in the USDA forecast for carryout stocks from 2020-21, when the department on Tuesday releases its monthly Wasde briefing.

 

This after a somewhat underwhelming US export performance.

 

Still, shipments last week, at 482,130 tonnes, came in towards the top end of market expectations of 250,000-500,000 tonnes, besides beating the 341,000 tonnes shipped the week before.

 

‘Sharply lower crop’

In New York, cotton futures sided with those of fellow top crops corn and soybeans to end higher, by 0.6% to 88.32 cents a pound for May.

 

The Wasde is expected to cut by 240,000 bales, to 4.06m bales, the USDA’s forecast for US cotton stocks at the close of 2020-21, with a similar downgrade, to 95.50m bales, expected for the world inventory figure.

 

And arabica coffee futures for May, after six negative sessions, rediscovered winning ways, if closing just 0.2% higher at 129.15 cents a pound.

 

“Coffee has found support since the start of this year from the prospect of a sharply lower 2021-22 Brazilian crop, and from the likelihood that global demand should improve,” said ADM Investor Services.

 

Still, supportive on the day was data showing a continued decline by commercial investors, such as roasters, in their long bets on arabica coffee futures and options, suggesting, as Marex Spectron said, weak coverage and that they may be keen buyers when lower prices present themselves.

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