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Evening markets: Soybeans hit 8-month low, as soft US export data add to woes

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Coronavirus concerns hung around to make down the default direction for ag futures again, with worries in particular over Chinese demand.

 

The virus was on Thursday confirmed to have infected 8,100 people globally, topping the total from the Sars outbreak in 2001-03, although deaths, at 170, remain far lower than the 774 from Sars.

 

And the outbreak is having increasing knock-on effects too, with reports for instance of Russia closing its border with China, and of 300m chickens near death in Hubei, the epicentre of the virus, due to a lockdown which has said to be putting nearly 57m people in quarantine.

‘Severe economic losses’

“The full effect of this outbreak is not known, but the general feel is it will cause severe economic losses in China,” said Karl Setzer at Agrivisor.

 

“While the immediate impact on China’s commodity demand may be muted, the long-term effect will likely be negative,” with the disease putting a depressant on eating out.

 

“Tourism will also be impacted by the disease as many countries are now prohibiting travel to China.”

 

For ags specifically, Richard Feltes at RJ O’Brien said that concerns were mounting “over whether corona virus will undermine PRC’s ability to execute” commitments for US ags made in the phase one deal signed two weeks ago.

 

Benson Quinn Commodities said that “markets fear China will struggle to fulfil its phase one trade deal commitments due to the economic impact of coronavirus”.

 

‘People will have to eat’

Sure, ADM chief executive Juan Luciano had some soothing words, saying that “at this point in time, we don’t expect a significant impact in our business” from the outbreak.

 

“Of course, probably people going out, that type of entertainment and dining, will be reduced” in China.

 

“So some of the bulk products, maybe bulk consumer products, could be impacted in demand.

 

“But people will have to eat inside anyway. So in that sense, more the packaged goods will probably pick up a little bit.”

 

‘Reluctant to buy’

However, Mr Feltes added that “traders are reluctant to buy [ags on price] breaks until the extent of coronavirus is defined”.

 

Soyoil proved particularly weak in Chicago, tumbling 3.0% to 30.63 cents a pound for March, little helped by US export sales data for last week which, at 29,367 tonnes, stood down 47% from the volume the previous week.

 

Actual exports were a pitiful 1,986 tonnes, the lowest of 2019-20, while a negative close for rival palm oil, which shed 2.6% to 2,652 ringgit a tonne in Kuala Lumpur, was little help either.

 

‘Did little to boost confidence’

And soybeans themselves shed 1.0% to $8.76 ¼ a bushel for March delivery – the contract’s weakest close in eight months, feeling pressure from soft US export data, as well as from soyoil.

 

US export sales of the oilseed last week, at 469,700 tonnes, came in towards the bottom end of the range of market expectations of 400,000-1.00m tonnes, and were well down on the 790,000 tonnes the previous week.

 

“Weekly export sales did little to boost any confidence of better China demand with soybean sales below average pace needed to reach” the USDA’s forecast for the whole of 2019-20, said Benson Quinn Commodities.

 

Mr Setzer reminded of the strong reports too coming from Brazil’s harvest, saying that “so far, all we have heard is ‘better than expected’.”

 

’Continued to impress’

 

US export sales data were at least stronger for corn, at 1.24m tonnes, ahead of market expectations of 600,000-1.20m tonnes, and the 1.01m tonnes sold the previous week.

 

“Corn and wheat do continue to impress,” said Benson Quinn Commodities, although adding that the “market would like to see China buying these commodities as well”.

 

Despite some positive comments from ADM on demand for US corn, the Chicago March contract in the grain fell, albeit less than its soybean peer, ending down 1.2% at $3.79 ½ a bushel.

 

Egyptian purchase

Chicago wheat fared better still, in easing 0.4% to $5.60 ½ a bushel for March, albeit after falling harder this week.

 

US export sales of the grain last week were decent, at 646,295 tonnes, towards the top end of the range of market expectations of 300,000-700,000 tonnes.

 

But also supportive was French victory in the latest tender by Gasc, with a clean sweep of 180,000 tonnes, indicating that Black Sea supplies are not fighting too hard in export markets, and boding well for US shipments ahead.

 

The wheat was purchased at $231.10 as tonne, down some $5 a tonne from the previous tender, two weeks ago, the first such decline since November.

 

‘Considerably more supply’

Among softs, cotton also fell, despite some decent US export sales data for last week of 347,123 running bales for upland, the biggest in eight months, with a further 50,160 running bales for next season.

 

Actual exports of 327,079 running bales last week were solid too, the highest in five months.

 

Still, as large Chinese import, cotton dropped 1.4% to 69.05 cents a pound for March,

 

New York arabica coffee also extended its decline, shedding a further 0.5% to 101.50 cents a pound to set a fresh three-month low for the contract, and take 2020 losses to 22%.

 

“Considerably more supply is likely to reach the market from Brazil in the coming months,” the bank said, noting recent upbeat estimates from exporter Comexim.

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