Ags joined in something of a risk-on rally, although it took a bit of a while for some contracts to get into the spirit of things.
An easing in coronavirus was credited for improved investors appetite for the likes of shares and commodities.
Shore Capital noted that World Health Organisation statistics show that “cumulative [coronavirus] case growth rates continue to trend down and the growth in new cases has shown a decline in four of the last six data points”.
On stockmarkets, Wall Street’s S&P 500 index touched a fresh record high, as did Europe’s Stoxx Europe 600 index.
Among commodities, Brent crude, which has been markedly sensitive to coronavirus concerns, stood up 3.5% at $55.92 a barrel in late deals, closing above its 10-day moving average on a continuous chart for the first time in more than a month.
Agriculturals also managed headway, although it was not until well into the afternoon, UK time, that gains became secure, and helped the Bcom ag subindex stand up 0.7% in late deals.
‘Tight EU markets’
Soyoil was one of the earlier gainers, after strength in rival palm oil in Kuala Lumpur, where the April lot recovered from early losses of more than 2% to end up 0.5% at 2,709 ringgit a tonne.
Chicago soyoil for March ended up 1.0% at 31.03 cents a pound, backed too by positive comments from Bunge over the state of vegetable oil markets.
And with vegetable oils gaining “after a price correction”, that helped “lift wider oilseeds markets”, said CRM AgriCommodities, noting in particular a bounce of 1.7% to E397.25 a tonne in Paris rapeseed for May, the lot’s best close of February.
Rapeseed found “support from tight EU markets as well as wider veg oil support,” the analysis group said.
Indeed, the EU market is so tight that Uruguay is sending a cargo to the UK, Agrimoney has heard.
‘As good as advertised, if not better’
Chicago soybeans, the best-traded oilseed, ended up 0.8% at $8.92 ½ a bushel for March, despite ideas of strong South American harvests.
“Anecdotal reports indicate the Brazilian production is as good as advertised, if not better,” said Benson Quinn Commodities.
“Massive amounts of cheaper Brazilian and Argentine production will be available through the spring,” including for export.
Indeed, CHS Hedging said that “the weaker Brazilian real in midst of harvest is leading to strong farmer selling and plenty of soybeans heading to ports”, adding that “the market is keeping a close eye on the Chinese purchases and Brazil’s ability to handle a record crop”.
‘Increase in risk premium’
Still, one straw for bulls to clutch at is the prospect of spring, and a shift in the market focus.
Karl Setzer at AgriVisor said that “attention over the past few months has been on demand, and while this will still remain a vital market topic, we will soon start to see more interest on production.
“This will start to evolve over the next few weeks and really change once we get to the start of the planting season.”
And it is a switch that “normally leads to an increase in risk premium in the market”, as investors factor in the risk of poor sowings weather.
That said, “given benign weather outlooks, ample old crop reserves, and the fact sizable crops were grown last year with less than optimum conditions any risk premium may be limited this year,” Mr Setzer added.
Ethanol vs export demand
Certainly, corn futures for March managed a 0.7% gain to $3.83 a bushel, despite decent South American weather for harvesting boosting ideas for Brazil’s follow-on safrinha corn crop.
The gain in corn defied some soft US ethanol production data for last week too, down 48,000 barrels a day at 1.033m barrels a day, and ahead of the 16,000-barrels-a-day figure investors had expected, according to a Bloomberg poll.
This too after the US Department of Agriculture on Tuesday upgraded its estimate for the amount of US corn used for making ethanol in 2019-20, by 50m bushels to 5.425bn bushels - taking it 49m bushels higher year on year.
Still, on the export front, Terry Reilly at Futures International noted talk that “South Korea bought at least 261,000 tonnes of corn overnight,” with one source talking of a figure of “up to 330,000 tonnes”.
(He also noted that “much of the corn was also said to be sourced from origins other than the US Pacific North West due to quality problems”, a reflection of a wet US autumn harvest, which has actually left substantial crop still in the field.)
Soft vs hard
However, it was wheat which proved the most buoyant of Chicago’s big three, adding 1.0% to $5.47 ½ a bushel for March, and reversing most of its losses of the last session – when it was the market laggard.
Reasons given for the gain included a reassessment of the Wasde, which was in fact not so downbeat after all on some analysis, given that it for instance tightened the level of carryout stocks in top exporting countries (including downgrades for Argentina, the European Union and the US).
However, ideas of a change in fund mindset gained support too, with the funds said in the last session to be concerned over the extent of speculative length in Chicago futures and options now less anxious, amid the broad risk-on move.
Indeed, hard wheat contracts less appealing to funds lagged, with Kansas City hard red winter wheat for March closing up 0.6% at $4.71 a bushel, and Minneapolis spring wheat actually falling, by 0.1% to $5.40 ½ a bushel.
(This despite spring wheat emerging relatively well from the Wasde, being the focus of a 25m-bushel downgrade to the US all-wheat stocks forecast for the close of 2019-20.)
Among soft commodities, New York raw sugar for March closed up 2.4% at 15.78 cents a pound, the highest finish for a spot contract since May 2017.
However, the gains were not replicated across all contracts, with the slightly better-traded May lot edging just 0.1% higher to 15.06 cents a pound, and later lots easing as the market incentivises supplies for immediate delivery.
“The markets have continued the upward momentum from late yesterday following a new high close and a first attempt at reaching the 15.50-cents target basis March New York,” Sucden Financial said.
“The strength was underlined by a stronger structure in both raws and whites futures markets and the continuing rally in the whites premium.”
‘Firmly in an uptrend’
The commodities house added that this week’s Dubai Conference “yielded a bullish tone tempered with caution”, given ideas of lowball Indian output this year, and continued softness in volumes from Thailand, the second-ranked exporter, besides a further dip in Europe too.
“Thailand’s production for next year is also expected to be low due to lower acreage due to lower cane prices leading farmers to plant cassava instead added to dry weather conditions this year.”
Sucden added: “We remain optimistic that prices will continue firmly in an uptrend for short/medium term though we are cognisant of potential corrections.
“We believe these will provide further buying opportunities for those who wish to increase positions or who missed the move upwards the first time around.”